Borrow now, don't pay later
I've heard that lifetime loans, or Hipoteca Inversa, are available in Spain? Is this true and who are they suitable for?
These are in effect, although not greatly extended yet into the real estate market, since enforcement of Act 41 on 7th December 2007, which reforms the real estate mortgage market. Hipotecas Inversas or "lifetime equity" (UK) or "reverse mortgages" (USA) have a proper legal regulation in Spain. There are currently in Spain a number of financial institutions, both banks and insurance companies, who market this kind of product amongst those of their clients who meet the necessary conditions.
A hipoteca inversa is a financial transaction which allows you to raise funding from the equity value of your property without having to lose its ownership. Such funds can be received by means of periodic payments or through a fixed lump sum. The amount you can apply for will depend not only on your personal needs, but also on your age and the valuation of your property. Once the amount of the loan has been received in full, no further dispositions will be available but the total loan will continue to accrue interest.
The significant difference with ordinary mortgages is that no funds will need to be repaid, neither in capital nor in interests until - in most cases - the time of the mortgagor's death. At that time, the heirs will have to pay off the mortgage plus all the accrued interests through their own equity funds, by refinancing the debt (for example with a new ordinary mortgage) or out of the proceeds of the sale of the property.
Should the heirs refuse to cancel the mortgage or should they not be willing to dispose of the property, the mortgagee will have the possibility to seize the property and recover payment of the full amount plus interest through the sale of the property. Due to its particular conditions as well as the proposed timing for repayment, this is a kind of product designed especially for those who are over 65 years or those who are highly dependent, who fully own their home which should not bear any other mortgage on it.
We need a licence to live in our own house!
I have found out that my new property does not have a Licencia de Primera Ocupación, even though I have paid the full price and the developer has handed me the keys. What should I do next?
The Licencia de primera ocupación, or housing licence, is the last administrative check control in the construction process where the town hall will confirm that the building corresponds to the building license and the project submitted for its application, and that the property meets all conditions for it to be occupied.
Consequently, from a strictly legal point of view, a property which does not have the said housing license could not to occupied and, from a practical point of view, it is quite common that until it is issued you may find it difficult to contract the basic supplies such as water and electricity. It is therefore important, before completing the purchase of a property, that you check that it does have the proper licence in place, and if you are buying a property under construction, your lawyer must insist that granting of the licence is a condition sine qua non for final completion and payment.
Delivery of a property by the developer without the said housing licence constitutes a breach of contract and you would therefore be entitled to remedies. These will however depend on the cause for its denial, hence the first step would consist in knowing the reason for which the license has been denied. There are cases - fortunately the majority - where the granting of the licence will simply require adapting the construction to the building licence and project (e.g. where the construction has exceeded the building licence). In such cases the developer is responsible for conducting those works and delivering the licence. Should he fail to do so, these works may need to be conducted by the purchasers who could claim damages from the developer.
A worse situation would be when the licence will not be able to be granted (e.g. where there has been major alteration or excessive construction which could not be demolished without ruining the whole building). In this case, the breach of contract has been so significant that you have been delivered goods - a property - which is not suitable for the purposes for which it was acquired. You would therefore need to pursue legal actions against the developer for the rescission of the sale and reimbursement of the total purchase price plus damages. Courts do tend in practice, to moderate damages depending on whether there has been any responsibility by the developer.
Since the solution will very much depend on the particular circumstances of each case, it would be highly advisable that you contact your lawyer in order to determine the best course of action.