Marbella

Local property taxes are going up in Marbella, so be sure to check your mail if you own property there.

By Rafael Berdaguer of Berdaguer Abogados

Do you own property in Marbella? Have you checked your mail lately?

If you do own property in Marbella, you can be sure you have a certified letter on the way from the Spanish Tax Office. Why? Because your property values have been revised and the tax authorities very kindly just want to let you know.

What if you don’t agree with the new value assigned to your property? Then you have only one month to file a complaint. This must be filed with either with the national Tax Office (Agencia Tributaria) or the regional Economic-Administrative Court (Tribunal Económico-administrativo de Andalucia).

Property values haven’t been updated in Marbella since 1988, and so many things have changed in 23 years. For one thing there is a noticeable difference between market values for properties and the value used to calculate property taxes. What’s more, the Marbella Town Hall finally passed the new property zoning laws in 2010. This also affects the value of many properties throughout the municipality. The revision however – even if justified – comes at a difficult time when most people are tightening their belts and trying to make it from month to month.

The property tax rate is used to calculate a number of taxes such as the Rates (IBI), the Income Tax relating to the ownership of real estate property not used for commercial or professional purposes or as home, the Non Resident Income Tax, the Plusvalia Tax. It furthermore serves to check the value of real estate for death duty, gift tax and transfer tax.

Lawyer Rafael Berdaguer is specialized in Spanish property law. He has personally checked the calculations of some of the new tax rates and found errors. According to Berdaguer, “Sometimes we discover a mistake in the size of a plot or that properties have been included that don’t actually belong to the owner. Another possible error is to calculate the value of one owner’s property by including common areas that the entire community is using. Another important error involves overvaluing a property by as much as 50% more than the market value!” Berdaguer expects this last type of error to affect a large number of property owners due to the way the current financial crisis is affecting property values. All of these are good reasons to file a complaint in order to correct the government’s assigned rate.

What if you are in dire financial straits? Can you just do nothing when the notification arrives in the next few days? As a responsible citizen you need to stand up for your property and make sure that the value of your land has been properly calculated.

The truth is that these notifications are difficult to understand. Written in pure legalese, these are heavyweight documents full of technical references, coefficients and data that require specialized legal expertise to understand. However, there are experienced professionals who can revise property values for a fee that is very small compared to all the money an owner can save by detecting errors. Not only do owners save in direct property taxes, but also on all the other taxes mentioned – because all of them are based on property values!

How much are property values set to increase?

In some cases property values will rise by up to five times! Some property owners naively think they can protest at the town hall when their taxes come due. Nothing could be further from the truth. This tax is regulated by the national government and the only way to contest new property values is at the proper agencies and within one month of receiving notification. Other property owners will ask for a reduction of local property tax rates – and this might help – but only for one tax. The key is to be sure the property value itself has been impeccably calculated so that all the taxes that depend on it will be fairly figured. Once again, there is just one month to file complaints, and then everything is set in stone.

This is why Spanish lawyers like Rafael Berdaguer, recommend taxpayers take action.
“Don’t waste your time complaining and doing nothing,” he says. “This will just have negative financial consequences in the long term – and you will have to live with this for years to come.” What is his recommendation? “Get a professional to go over every fact and figure with a fine tooth comb. Maybe they will find that everything is in order. Maybe they won’t. If there is an error, you can get it fixed and save yourself money in the future. If everything is okay, at least your conscience will rest easy knowing you did everything you could.”

Banana Beach, Marbella, one development that cannot be legalised.

The town council of Marbella has slashed the fine that developers will have to pay for legalising homes they built in contravention of planning permission, bringing the end of Marbella’s town planning chaos a step closer.

So long as the developers responsible for building some 16,500 illegal properties in Marbella compensate the town hall for legalising the properties, fines will be slashed by 75%. In most cases compensation involves donating land to the town council.

The decision to reduce fines was taken by the town council in early July, and complies with Andalucia’s regional planning laws (LOUA), argue the municipal government. Developers shouldn’t have to pay twice with compensation and fines, and anyway most can’t afford to do so, a council spokesman told the Spanish press. By that line of argument, smaller fines are better than nothing.

For example, the developer of the La Cañada commercial centre, Tomás Olivo, will have his fine reduced to 5.7 million Euros from of 23 million, plus ceeding 2 plots of land to the town hall.

Developers will welcome the news, but not necessarily all the conditions. They have to pay 25% of the fine up front, and provide a bank guarantee for the remaining 75% until compensation has been taken care of.

Developers that fail to meet all the conditions may be forced to demolish illegally-built property, if compensation and fines go unpaid.

The Malibu development near Puerto Banús, built on Connery's former property

Former Bond star Sean Connery, 79, his French wife Micheline Roquebrune, and several others including lawyers said to have represented Connery in Spain are to be questioned in an investigation into corruption and money laundering in Marbella, reports the Spanish press.

Connery, who used to own a luxury beach-front villa near Puerto Banus in Marbella called ‘Casa Malibu’, has been dragged into the ‘Malaya’ corruption scandal that has rocked Marbella since 2007. In what the Spanish police are calling ‘Operation Gold finger’ Connery is due to appear in court in Marbella at the end of the month to answer questions relating to the sale of Casa Malibu in the late 90s.

The anti-corruption magistrate is reported to be looking into town planning irregularities and possible money laundering following the sale of Casa Malibu. After the sale 70 homes were built on the property, and the town hall may have lost out on 2.7 million Euros in taxes, according to press reports.

Connery sold his property when he became disenchanted with the way Marbella was being developed by the then Mayor Jesus Gil’s corrupt municipal administration. For Connery, who bought in the 70s, Marbella had lost its charm.

It seems that even A-list celebs like Connery can’t escape the mess created by property corruption scandals in Spain.

After a sharp drop in 2008 and 2009 it looks like the property market in Spain – and much of Europe – has bottomed out. In other words, the sector seems to have found its lowest level, the point at which production and prices level out and no major new drops are recorded. Normally this would be the point at which we could start looking forward to the early signs of recovery, but in the current circumstances the situation isn’t quite as simple as that.

If you are interested in property in Marbella, this report by leading Marbella estate agents Diana Morales is well worth reading. This link will take you to the report at the DM Properties website: Marbella Real Estate Market Report 2010

If the figures are kosher, Muñoz has reason to be positive. A report from Marbella’s tax office shows there were 2,499 property sales in the first 3 months of this year, a rise of more than 200% compared to the same period last year. Look a bit further back and it appears the first quarter of this year was the best by far in the last 4 years.

Year – Sales in first quarter
2010 – 2,499
2009 – 820
2008 – 1,263
2007 – 1,602
2006 – 1,224

If correct, the figures show the market has improved by 100% compared even to the first quarter of 2006, before the ‘Malaya’ corruption scandal exploded, when the market was still relatively buoyant, just starting to come off the boil.

Does that make sense? Some argue it might be the increase in VAT in July bringing sales forward, but I doubt it. So have Marbella property prices dropped, and confidence returned enough to give the market such a big push? Well, I hope so, but I have to say it took me by surprise. I’d heard that there was some improvement, but nothing like this. It makes me wonder.

Ángeles Muñoz, on the other hand, has no doubts. As you would expect she is using the figures to vindicate her policies, saying that Marbella will be “first out of the crisis,” in a message aimed at local and international investors.

María Ángeles Muñoz, Mayor of Marbella

Marbella’s new town-plan is also helping. It comes into effect this month, legalises 16,000 properties, and enables owners to “sell, mortgage, swap or use as an asset,” properties that have been frozen out of the market for years, says the Mayor.

Very nice, but who's paying for it now?

There’s a lot to be said for living in a ‘community of owners’, or what the Americans would call a condo. Communal costs are shared so you get to enjoy facilities like gardens, pools, and tennis courts for a fraction of the cost. But at times like this, when the economic going gets tough, some owners stop paying their community fees, causing problems for everyone else.

In many cases the biggest offenders are the original developers still stuck with unsold units. In Marbella alone, developers are in arrears to the tune of 10 million Euros in, according to the Malaga association of real estate administrators. The outstanding debt gets bigger with each passing day.

Of course the developers never meant to be a part of the community of owners. They planned to sell and be off, but it didn’t work out that way. Many were caught out by Spain’s property crash, which hit Marbella earlier than the rest of the country.

To make matters worse, many of them are also in bankruptcy proceedings, so they can’t be forced to pay the community fees they owe. Claims against them just have to join the queue with all their other ordinary creditors, which could take years to resolve.

Developers are not the only problem. In Marbella, where an estimated 2 out of 10 owners (including developers) are in arrears, 50% of them are foreign owners, mainly British. Foreigners tend to own holiday homes, which they bought when times were good. In the thick of an economic crisis, with a weak pound, many have decided to sell, and the first thing they do is stop paying the community fee.

Foreign owners not paying their community fees can’t escape their debts forever. For a start they can’t sell up if they owe the community money, so they will have to settle up if they ever want to sell.

In the meantime, owners who are up to date with their bills face higher fees to cover the shortfall from those not paying, though many communities are also cutting maintenance costs to the bone. On some urbanisations community fees are reported to have doubled thanks to non-payments.

The new town plan sets the scene for legalising 16,500 properties in the municipality in return for compensating the town hall with money and/or land. Some 1,500 properties have been left out of the amnesty, only 500 of which have been sold to third parties and occupied. The previous draft of the plan, approved last July by Marbella’s town hall, envisaged leaving just 300 occupied properties out of the planning amnesty.

Still a Banana

The Junta’s decision to leave more homes out of the amnesty, at least for now, is partly a response to legal action by owners at the Banana Beach development who accused the planning authorities of inconsistency. Banana Beach, already sold and occupied by innocent third parties, was to be left out of the amnesty, whilst other developments like Jardines de la Costa (unoccupied), Alvarito Playa, edificio Alcotanes ,and Cerrado de Elviria Beach (Carril del Relojero), were to be legalised, despite similar planning infractions within 100 metres of the sea shore. The Plaza del Mar commercial centre has also been left out.

Banana Beach, Marbella

Banana Beach and the other developments left out of the amnesty like Golf Río Real represent less than 1% of the new plan. Seville is pushing for demolition, whilst Marbella is pushing for legalisation, and a final decision on what to do with them will be taken at a later date. This could drag on for years, maybe even decades. That will be little consolation to elderly owners at developments like Banana Beach.

The latest draft of the town plan envisages 26,500 more homes in Marbella, 9,500 of them social housing.

Banana Beach, Marbella

The municipal government of Marbella rejected a suggestion to re-house owners of the doomed Banana Beach development, reports the Spanish press. A beachside complex of 297 apartments, Banana Beach is only one of 3 occupied developments (the other 2 being Río Real and Torrevigía) that is not included in the town planning amnesty legalising 18,000 properties in Marbella.

Apparently, town planners from the regional government in Seville floated the idea of rehousing owners at Banana Beach during negotiations over Marbella’s new-town plan, in which María Ángeles Muñoz, the Mayor of Marbella, tried to get Banana Beach included in the planning amnesty. The idea was build a new development of flats on a plot of municipal land next door to Banana Beach, paid for by the local government, and classified as social housing. As there were not going to be enough flats to compensate all the owners at Banana Beach, only those registered as resident in Marbella were going to get re-housed once Banana Beach was demolished. Marbella’s town council rejected the idea as “too expensive” for the town to afford, and unfair on owners at the other two illegal developments. “Why would be build homes for some and not for others?” a town hall spokesman told the Spanish press.

The future for owners at Banana Beach looks increasingly bleak. Angeles Muñoz still talks of finding solutions that are “better than demolition”, but once Marbella’s new town-plan is approved – now just a question of time – the courts will have to issue a demolition order for Banana Beach, if the law is to be applied.

Banana Beach was built after the town hall issued a construction licence for the development in 1998, and was even given licences of first occupancy (LFOs) by Marisol Yagüe, then Mayor of Marbella, just 35 days after Andalucia’s High Court reaffirmed Banana Beach’s illegal status.

María Ángeles Muñoz, Mayor of Marbella

Marbella’s town council yesterday approved the final draft of a new town-plan that will put an end to more than a decade of town planning chaos that has weighed heavily on the local property market. The plan now goes to the regional government in Seville for final approval.

The new town-plan will replace the existing plan, approved in 1986, that was systematically abused over 15 years by a succession of corrupt mayors, resulting in 18,000 illegal properties in Marbella.

The new plan legalises 16,500 properties in return for compensating the town hall with land and payments to restore public spaces that were lost to private developments. Under the latest draft developers are the only ones on the hook, after Ángeles Muñoz, Marbella’s Mayor, fought to ensure that innocent third party buyers will not be liable for any compensation payments.

Despite macho talk and brinkmanship from the Mayor last week, the new plan will not save the most contentious illegal properties from demolition. Last week Ángeles Muñoz said she would extend the planning amnesty to 500 illegal but occupied properties, against the wishes of the government in Seville. But in the end the new plan she sent to the town council for approval did not offer a way out for the unfortunate owners of properties in the Banana Beach and Rio Real developments. In theory these properties will have to be demolished, along with 1,000 other properties that were built but never sold, as the new plan does not provide for any other solution.

Banana Beach, Marbella

The regional government in Seville is expected to nod through the new plan, which will them come into force. Marbella’s first town plan since 1986 can only be good news for the local property market.

Muñoz recently made it clear that every single occupied home in Marbella will be legalised in the latest draft of the town-plan she will submit to the town council for approval on Wednesday 29 July. That puts her on a collision course with the urban planning department of the regional government in Seville, who drafted the original plan, and who emphatically rule out legalising some 500 occupied properties spread over 3 developments, the best known of which is Banana Beach.

In Muñoz’s latest draft, the illegal developments Banana Beach and Rio Real are included in the town planning amnesty in return for giving up their gardens and parking areas to the town hall, whilst the La Víobra development gets legalised if it is modified to avoid any risk of flooding.

The first draft of the new town-plan, drawn up by the government in Seville after the town hall in Marbella was suspended for rampant corruption, envisaged the legalisation of 18,000 properties in return for land from developers, but left 700 occupied properties out of the amnesty. In negotiations between Marbella town hall and Seville, that was brought down to 500 in the provisional draft approved in July 2008. Close to the end of the drafting process, Muñoz is now pushing hard to extend the amnesty to all occupied properties, including Banana Beach and Rio Real, calling it “justice for all people who bought in good faith.”

Both sides have established their ‘red lines’, which don’t appear to offer any solution. Someone will have to give, and it will have to be soon. One way or another, the town planning chaos that has poisoned the Marbella property market for years is drawing to a close.