Spanish legal advice in plain English

Insolvent estates - Realising assets in Spain

A guide for creditors or those administering insolvent estates to realising assets in Spain.

Hi.  I’m Jonathan Eshkeri, English solicitor and Spanish abogado, practising law in London and in Tarragona, just south of Barcelona.

During the 60s, 70s and 80s and even more so in the period between the early 90s and the crash in 2008, the purchase of homes in Spain became extremely prevalent amongst Brits.  Even after the crash there is a healthy appetite amongst Brits for Spanish property. The result is that a huge number of UK nationals now own property in Spain, very often unencumbered.  It stands to reason that a proportion of those property owners incur liabilities which they can’t discharge and they may even be declared bankrupt as a result. Sometimes properties are purchased in the name of companies registered in foreign jurisdictions, such as England & Wales, or Scotland, or perhaps in the name of a Delaware registered company.   

The question for the creditor, the Trustee in Bankruptcy, the AIB’s agent in relation to Scottish sequestrations, or the Liquidator in relation to companies, is how to register an interest in the asset and then realise it, if necessary, without huge difficulty, delay, or expense.  As many of you will already know or will’ve heard from others, recovering assets in Spain is usually difficult, slow moving, and expensive. It can also be difficult to identify professionals with suitable experience in the market and an understanding of your needs, in terms of responsiveness and competitive pricing.

At E&G Solicitors we’ve handled a great many such matters over the past 14 years and so we’re in an excellent position to advise and assist you.

I’d like to take you through the broad steps necessary to register an interest in Spanish assets, with a particular focus on real estate, and then consider how to realise the asset successfully and cost effectively if needs be. If you’re watching via our website then further down the page you’ll find some bullet points setting out each step, and below that a transcript of everything I’m saying, in case you find that easier to follow, either now or later on.  Of course, I’ll be more than happy to speak with you either on the telephone or in person about a specific matter when I’ll be able to provide you with a lot more detail.

The starting point will be registering your interest in the Spanish asset, and in order to do that we’ll need a court order of some sort, or the consent of the owner of the asset.

This is one of three videos considering how to realise Spanish assets and how to secure any debt owed by way of a charge registered against a Spanish asset.

In this video, I shall be considering what a Trustee in Bankruptcy or Liquidator, or the equivalent in any given jurisdiction, needs to do in order to register his or her interest in a registered asset in Spain.  I’ll be focusing on real estate rather than personalty, as it is far more common that Spanish assets in a bankruptcy estate are immovables. I will also limit my consideration of the process to the realisation of real estate in an English bankruptcy, although the same principles will apply to any insolvent liquidation of assets.

Upon the court making a bankruptcy order in England the Official Receiver is appointed Trustee in Bankruptcy.  By certificate of appointment the Official Receiver may subsequently appoint an insolvency practitioner as Trustee in Bankruptcy.  As the legal interest in the bankruptcy assets will vest in the Trustee from the moment the Bankruptcy Order is made, it is from that point that we can register the Trustee’s interest in the Spanish asset.

Currently the process is governed by the provisions of Regulation (EU) 2015/848, whereby the Spanish property registrar must recognise insolvency proceedings of member states of the EU upon receipt of a Bankruptcy Order and a Certificate of Appointment if relevant, both duly legalised by having the Hague Apostille attached to each of them.  That may all change with the UK’s imminent departure from the European Union. If it does change then the process for registering the Trustee’s interest will probably become slightly more longwinded. That said, whatever the process, what is clear is that in addition to a Bankruptcy Order and a Certificate of Appointment, the only other documentation that may be required in order to register the interest of a Trustee in Bankruptcy against a Spanish property is an Affidavit of Laws setting out the effect of the Bankruptcy Order and Certificate of Appointment, and a power of attorney authorising your legal representatives to submit to court an application for the recognition and enforcement of the Bankruptcy Order and Certificate of Appointment.  We currently ask a Trustee in Bankruptcy to grant us a power of attorney at the outset, as in addition to registering the Trustee’s interest in the Spanish property on the property register, we may need to apply for a Spanish tax number for the Trustee and in due course we will need to sell the Trustee’s interest in the property, for which we will also need a power of attorney. It is useful to have a power of attorney in place at the outset even now, as it enables us to give the property registrar confidence that we are in fact acting for the Trustee.

When engaging a Spanish lawyer to act on your behalf in relation to a matter before the Spanish courts, you also need to engage a court procurator.  A procurator is an administrative intermediary in the Spanish civil and criminal justice system who presents documentation to the court, and receives documentation issued by the court and presented to the court by the other party or parties, forwarding copies of the documentation issued by the court and received from other parties to his or her client, through the lawyer with conduct of the matter, as soon as the documents are received.

You may ask yourself why you’d need to grant a power of attorney to engage a lawyer and a procurator to act on your behalf.  It’s because in Spain the courts will not recognise a lawyer’s standing, or indeed the standing of a procurator, unless the client has granted each of them full authority to litigate on behalf of their client and to do everything in relation to the litigation, including but not limited to reaching a settlement, receiving funds, appealing decisions, and making applications to recover costs.  These are extremely broad powers as you’ll recognise, particularly when contrasted with the position in the UK. Notwithstanding the very broad authority conferred to us by a power of attorney for litigation purposes, at E&G Solicitors in Spain we’ll only ever take steps on your behalf once we have set out the options available to you, advised you as to each option, and have received from you your written instructions as to the steps you want to take.

Once the Trustee’s interest is registered on the property registry against the interest of the bankrupt, only the Trustee can sell or mortgage the asset.  If the property is owned in the sole name of the bankrupt then provided the property is not occupied by anyone, the Trustee can take possession and sell it without further delay.  The question of possession is determined by whether anyone has their possessions in the property. So, if the property is furnished then there is a possibility that it is occupied.  If the Trustee takes possession of an occupied property, then the person or persons entering the property are committing a criminal offence according to Spanish law. So, if the property is occupied then we need to obtain a possession order from the court with jurisdiction, that being the court that made the Bankruptcy Order. Of course, an English court will not make a possession order in respect of a Spanish property, or any other property located outside of England & Wales, but it will make a declaratory judgment stating that the Trustee has the right to take possession of the Spanish property. We can then enforce that judgment in the Spanish courts and by so doing obtain in Spain a possession order, with which we can evict the occupant.  As well as handling the Spanish element of the process, we advise in relation to the text of the draft order, so that the judgment we receive is understood well by the Spanish court.

If the property is jointly owned then the position is more complex.  We will need to agree with the joint owner either to buy the other half of the property from the Trustee, or to sell the property together with the Trustee.  If the joint owner is not prepared to do either, then we can help the Trustee to obtain an order from the court that made the Bankruptcy Order authorising the Trustee and those whom he may so authorise to sell the joint owners interest in the property and hold the proceeds of sale for the joint owner subject to any other terms of the order.  If for any reason that is not possible, then the Trustee will need to make an application to court to dissolve the joint interest in the property. Once the Spanish court has made an order to dissolve the joint interest, the Trustee can apply for the property to be sold at public auction.

A date will be arranged for the public auction of the real estate in question.  This means that an auction will be arranged for that asset only. Any interested parties will need to attend the auction, which’ll almost always take place in an office in the court building and will be run by two civil servants.  No judge will be present. There is also an option to attend an auction by way of the court’s internet portal. Anyone attending to bid will have to have either deposited funds with the court amounting to 5% of the auction value of the property, or deposited a bank guarantee with the court to the same value.   

The auction value of the property will be determined by a valuation provided by a court appointed valuer upon application by the chargee.

Anyone attending the auction will be able to bid for the property.  The lowest price at which a bidder will be able to own the property will be as little as the total value of the debt secured against the property, subject to the way in which other bidders behave, including the person forcing the sale of the property.

If nobody attends the auction, or nobody bids successfully for the property, then the party enforcing the charge can be awarded the property for as little as 50% of the auction value if the property is not the primary residence of the debtor, or as little as 60% of the auction value in the case of a primary residence. The property may then be registered in the name of the creditor, who’ll have to pay transfer tax as if he or she was purchasing the property.  It’s for that reason that sometimes people or banks who are awarded property in this way don’t register the property in their name until they find a purchaser.

Once we are in a position to sell the property, either with or without the assistance of any joint owner, we need to identify a purchaser.  Of course, finding a purchaser for a property in the Spanish market is not as easy as finding a purchaser in London. There are pockets of intense activity, such as in the cities of Barcelona and Madrid, and perhaps a few other areas with extremely buoyant property markets, but on the whole the market is relatively soft.  Hence, the key to selling a Spanish property is to engage an estate agent who’s motivated to sell because the selling price is sufficiently attractive for it to be the type of property that sophisticated buyers are looking to purchase. Estate agent’s fees tend to be 5% of the purchase price plus Spanish VAT, currently 21% and are usually payable by the seller, unless one is selling in Valencia, in which case the custom is to charge the seller 3% plus VAT and the buyer a further 3% plus VAT.  That’s also a pretty good incentive, but only if the price is sufficiently attractive to secure a sale. The idea should be to find a purchaser within two months or so, rather than to have the property sitting on the market for between six and 12 months, or longer, which is not unusual if one doesn’t take care when appointing an estate agent. An independent lawyer with significant experience of realising assets in this way ought to be able to introduce an effective estate agent to market the property for sale.

Closing a sale in the Spanish market is never a straightforward matter and an experienced lawyer will understand very well the pitfalls to avoid from the outset.  The completion of the sale of Spanish property is always attended. It takes place at a Notary’s office. Present are the Notary, the buyer (or someone representing the buyer), the seller (or someone representing the seller), and often at least one of the estate agents responsible for introducing the purchaser. Purchase monies are typically paid by banker’s draft and it’s common for part of the purchase monies to be paid directly to the estate agent or estate agents at the completion meeting, also by banker’s draft.  Photocopies of the banker’s drafts are included with the completion documentation, so it’s clear to see how the purchase funds were paid. It’s likely that the buyer will retain some funds, whether to cover expenses relating to the property that have yet to be paid by the seller, or to cover 3% of the purchase price on account of the Spanish tax liability of a seller who is not a Spanish resident, which is a requirement of Spanish law in those circumstances. The net proceeds of sale are then paid into a Spanish Euro account and then transferred to the seller, less any expenses relating to the sale.

At E&G Solicitors in Spain, since 2004 we have been helping Trustees in Bankruptcy, the Scottish Accountant in Bankruptcy, and Liquidators to realise assets located in Spain.  Please be in touch with me directly for specific advice in relation to your matter. You can find my details on our website,  Thanks for watching.


E&G Solicitors in Spain handled my property purchase very well. I felt that the communication was good. I found E&G Solicitors in Spain to be very professional.

Michael Robinson, Oxford