What happens when a person dies intestate, and he or she owns property abroad, specifically in Spain?
House building in Spain in the 1990s and early 2000s was a boom time, and British daytime TV reflected this, with programmes highlighting the investment opportunities and the dream of the second home in a sunny climate.
Coupled with a rush of cheap flights, the Spanish second home appealed to many. It must have seemed like the ideal investment or potential retirement option. Spanish building companies jumped on the trend, with a massive construction programme and many firms were granted unsuitable mortgages by banks on the promise of quick sales.
The results of that rashness can be seen everywhere – abandoned building projects abound, and the effect on Spain’s economy has been disastrous. Spanish property prices have dropped 40 percent since 2008, although the housing market finally returned to growth in Q1, 2016 with the rise in transactions mainly coming from foreigners buying homes on the coast and in cities such as Barcelona, and on the Costa del Sol[1].
But those who bought retirement flats or villas in the 1990s and early 2000s might not have reckoned on a scenario where they died while the world was in the grips of a recession. In spite of the prices rises of 2016, nationwide house prices are still 39.4 percent below the peak levels that occurred before the global banking crisis.
When it comes to distributing an estate, lower-priced properties can leave the executors with a dilemma. Should the Spanish property be sold as quickly as possible, at a loss, or should it be held onto in the hopes of a recovery in property prices, while the property deteriorates year on year?
If you invest in something, you are expected to know or have an idea about the risks you take. The executors of a will have to juggle the risks against their duties as estate representatives when the investors die.
Personal representatives need to bring in estate assets and act quickly to administer and preserve the estate. Disposing of the property, even at a loss, might meet one such duty. Keeping the property, despite it costing money to do so, might be said to achieve a different one – the hope that the property value will improve.
Even once a decision has been made to either sell or keep the property, dealing with property in Spain can be an expensive and slow process.
The Spanish inheritance process must be adhered to, and this involves the services of a notario or notary. The Spanish notary handles drawing up deeds covering the administration of estates, and for the registration and disposal of property.
The beneficiaries will need Spanish NIE (fiscal identification) numbers – something that isn’t made easy for UK residents to obtain – and tax clearance paperwork has to be given.
Registration of title to the property needs to be transferred out of the deceased’s name before it can be sold, and it can be challenging to get Spanish bank accounts closed. Also, Spanish authorities need legal and official translations of English probate documents.
When an intestate English/Welsh estate includes immovable property, there might be questions of forced heirship, where close family members are entitled to part of the estate.
Since 2008, time has demonstrated that there aren’t easy answers to that dilemma of whether estate representatives should sell or keep Spanish property. Any time within the last seven years was probably a terrible time to sell.
The Spanish market has been improving since 2016 and appears to be going from strength to strength according to the Global Property Guide.
However, Brexit is a concern for those Brits wishing to invest in Spain, not only because of the fall of the pound against the euro (which has now made purchases more expensive) but because of unknown outcomes of negotiations with Europe – so the golden boom days may not return. This might not be due to the strength of the Spanish property market, but more so due the unknown implications of Brexit and the current devaluation of the pound.
Louise Levene is the asset services manager at Finders International. If you would like an initial, informal discussion about valuing or disposing of Spanish property, or to talk about any estate matters with an overseas asset element, contact Louise on 0800 085 8796 (UK only), 020 7490 4935 or, email [email protected] www.findersinternational.co.uk
[1] Spanish housing market recovery continues: Global Property Guide. https://www.globalpropertyguide.com/Europe/Spain/Price-History
This article has been first published in legalfutures