Mike: “Yeah, it’s been there a long time. I wish I knew which corner.” Source: “My Man Godfrey” 1936 (Universal Pictures; Director: Gregory La Cavae
This bit of bleak humour from the depression-era screwball comedy “My Man Godfrey” never seems to lose its relevance, as the global economy bounces from boom to bust, or navigates the fragile limbo in between.
Throughout the prosperous 1990s, British daytime television was peppered with programmes which painted a pleasing picture of investment opportunities in Spain and beyond for British householders with a pot of equity to spend.
You could have a retirement home or an investment, whatever you needed. Building companies in Spain responded to demand with a huge construction programme, some of which turned out to have been built almost literally on sand, with building firms granted unsustainable mortgages by banks on the rash promise of quick sales.
Clients who bought retirement villas and flats on the Costa del Sol during that time might not have counted on a scenario in which they died, in the throes of a terrible recession. Spanish property prices have tumbled up to 40 percent since 2008.
For lower-priced property in particular, this can leave the estate with a dilemma. Sell the Spanish property as quickly as possible, at a loss, or hold out in the hopes of a recovery at the mercy of European market forces, while the fabric of the property deteriorated every year?
Investors know, or are expected to have some idea about, the risks they are taking. But it is the executors that have to juggle those risks against their occasionally conflicting duties as estate representatives when the investors die.
Personal representatives must gather in estate assets, and act promptly in administering and preserving the estate. Disposal of a property, even at a loss, might meet one such duty, but retaining the property, even if it costs money to do so, might arguably meet a different one. There might be reason to hope the value of the property will improve.
Even once the decision to sell the property, or transfer ownership to beneficiaries has been made, dealing with property in Spain can be slow and expensive. Spain’s laws are kinder to UK estates than others in Europe: Spain uses nationality to determine how an estate should be dealt with, but it will accept the renvoi from England & Wales.
The Spanish inheritance process needs to be followed, involving the services of a notary (‘notario’). Spanish notaries are responsible for the drawing up of deeds covering the administration of estates and the registration and disposal of property.
They don’t all communicate equally effectively, and some struggle to understand the English & Welsh concepts of domicile and executors. Spanish NIE (fiscal identification) numbers have to be obtained for the beneficiaries – something that is not made easy for UK residents to obtain – and tax clearance paperwork submitted.
Registration of title to the property must be transferred out of the deceased’s name before it can be sold. It can be difficult to get Spanish bank accounts closed. The Spanish authorities need official, legalised translations of English probate documents. When an intestate English estate includes immoveable property, there may be questions of forced heirship, where close family members must benefit from part of the estate.
Since the financial crash of 2008, time has shown that there aren’t easy answers to that central dilemma of whether estate representatives should keep or sell Spanish property. Any time within the last seven years was arguably a bad time to sell, but continuing uncertainty and year-on-year declines in Spanish property values since that time also made it difficult to wait, with confidence, in the hoped-for improvement in the market.
For now, there are signs that the drop in values may have bottomed out, but UK property owners in Spain might still be glancing warily at Europe’s tribulations, and wondering which corner that much-needed prosperity will turn out to be ‘just around’.
Louise Levene is asset services manager at Finders International. For an initial, informal discussion about valuing or disposing of Spanish property, obtaining NIE numbers or closing bank accounts in Spain, or to discuss any estate matters with an overseas asset element, contact Louise on 020 7490 4935 or, in the UK, 0800 085 8796, or by Email