Equity Release in Spain is brand new. We are currently the only English speaking company offering personal loans and finance to our British clients in English in fact.
Back in the UK where so many of our clients are from, Equity Release has a reputation of being a bit underhand.
Check out any tabloid newspaper and you’ll see a story of a guy who sold his house too cheaply without his family realising what he was doing. The investor promised the pensioner that he can live there all his days, and now a week later he is being evicted! Sad stories, but totally preventable with good legal advice.
We want the clients, the investors, the sellers, the families, everyone, in fact, to understand how Equity Release in Spain works.
Here is a question we had from a lady client of ours, Maria. Her deal is actually a sale and leaseback deal, so slightly different from the normal. She sought advice from the assessor she purchased her Alicante house from 12 years ago, not a qualified Spanish lawyer, who simply did not understand what the offer was and how it worked.
You can see the reply from Pedro Molina of Molina Solicitors below. Often that is all clients need to put their minds at ease.
Pedro did not even charge the client for the advice, but when the conveyancing happens in a few weeks, Maria now knows that she must 100% use a solicitor who knows what they are dealing with. Why take a shortcut on this?
Had she listened to her “lawyer”, she would have missed out on the opportunity to free up some cash from her Spanish home.
Email from Maria to Ian, our Alicante agent
We have taken the contract you sent us to our solicitor, and am attaching her reply and comment.
These have left us with some concerns. She has really worried me and James.
The solicitor is the one who helped us in the notary when we bought the property in 2009.
When you have read it, please contact me with your response to these queries. We are assuming that this is not the only time a client had concerns, and you are able to answer the queries raised by our solicitor.
She said that the investor can evict us with 3 months notice.
She said the bank can evict us if the investors stop paying the mortgage.
She said that we must register the rental contract BEFORE we go to the notary with the lawyers and the buyers.
Obviously, we have to ensure we are fully covered if we go ahead with this.
Maria & Jim
And below is what we all needed to hear
Practical LEGAL advice, from a real lawyer with experience.
I hope you are well.
Further to our conversations, I inform you that:
It is not possible to register the rental agreement prior to the registration of the purchase and sale and mortgage in this case, because the seller will be the tenant. Nobody can rent to himself. You can only rent when you are not the owner. Therefore, in this case, the sale and mortgage will have to be registered first, and the tenancy agreement later. In practice, the 3 documents will be registered at the same time.
If the rental contract is registered into the Land Registry Office, even after the mortgage, the contract will be safe and guaranteed. Therefore, any potential buyer will know the house is rented before buying, and he will have to honour the contract.
Article 13.1 of The Tenancy Law is very clear: in case of foreclosure proceeding if the rental contract is registered in The Land Registry Office it must be honoured until the period ends. This article is applicable in this case, because the seller will be the tenant, and the rental contract will be registered at the same time, so the Bank/Investor couldn’t deny they know about the tenant agreement before lending the money.
So, as a summary, the rental contract will be honoured by the Bank/Investor until the end of the period, because it is registered and they were aware before lending the money. It doesn’t affect if registered before or after the mortgage.
Any questions let me know,
Look how simple it all was in the end. Maria and Jim went ahead and got the deal they wanted- if you are buying or selling a property in Spain or especially if you are involved in an Equity Release deal, you must get accurate legal advice from a real Lawyer!