Reply To: Desperate vendors selling below original Escritura value

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Anonymous
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Hi Sarah.

Yes both Charlie (the first lawyer) and Inez are right. But I’d like to point out this not a change in the law or something new.

It simply didn’t happen before because property values increased by two digits p.a. and no one was desperate to sell, unlike now.

But now as property prices have stalled or even decresed however slightly this happens on a daily basis.

Basically a person sells on a loss because they are in a rush for whatever reason.

The purchaser will be held responsible for the difference in value declared and a lovely “complementaria” may be received some months later by which the Tax Authorities state that they think the vendor underdeclared so as to evade taxes (CGT) and so did the purchaser on 7% Transfer Tax (ITPAJD). They will make a study of the values of the propertiesin the neighbourhood and tell you the market value of the property is really 3x and you only declared 2x. You owe us x and a fine (%) on said x.

Imagine I am really a Tax Inspector, If I see this I am bound to think these people are deceiving me and so I will fine them. I will request the difference in value AND I’ll fine them (percentage of the defrauded amount).

So how can I avoid this? Good question. You have to do what Inez said -and pray, alot-.

You have to warn Hacienda of your intention and have them writing some official sealed reply (sello del registro de entrada at least) which you can use at a later date as ground to object to the complementaria. All dep and PPC contracts will be lodged with the Public Notary. However, all this doesn’t render you inmune, it simply tries to prove you acted in good faith and that there is nothing to hide.

Ask a Public Notary of your choice don’t be afraid, they will be delighted to advise you free of charge on this legal matter (or any other).

We are going to see this happening now very frequently with the ARM adjustments back in the UK in December which will hurt all those who have taken a second mortage in Spain with a remortgage back in the UK or Ireland.

Houses are not ATM machines. Only a fool confuses “price” with “value”.