I lent a friend of the family, the equivalent amount to 40,000 € by transfer to his bank account in Spain. What is the best way to ensure that the money will be returned if something happened to me or the debtor? What do you recommend?
Dear reader, thanks for your inquiry.
Loans between acquaintances, relatives, etc., are very common and normal, but sometimes, due to the trust between the parties, they are not always documented nor formalised in the best and safest possible way, to protect the interests of the parties.
We advise you to:
- Document the agreement by signing a Loan Agreement. It is essential to set out clearly the obligations of the parties, to have a proper record of it, and also to indicate in detail the personal data of the parties involved, with their passport or ID card, NIE, address, etc.
It is also important to state precisely the conditions of the loan: amount borrowed, when and how the money was lent, the duration of the loan, ie, the period to repay the amount borrowed, interest payable (if any), etc.
- Although, it will involve a higher cost, if possible, we advise that the loan agreement is signed before a Spanish Public Notary, and if possible, the same is guaranteed by a mortgage against the debtor’s property, similar to what happens when we agree a mortgage with a bank.
If done in this second way, the agreement will be reflected in a public document: so it cannot to be lost, disappear, etc., and also if the obligation to return the money is secured by a mortgage, the property is liable for the fulfillment of the agreement, and your rights are protected in a better way if you or the debtor passes away, or if the debtor transfers his property in Spain, etc.
From a fiscal point of view, we must remember that loans between individuals (who do not do it in a professional way), are exempt from the Transfer Tax (TPO), and also Stamp Duty (AJD) will not be paid on the Mortgage, as has declared by the General Tax Direction on its consultation V1246-05 dated on the 27/06/2005
Therefore, if you want to guarantee your loan and document it in the best way to protect your rights, contact us and we will help.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.
Carlos Baos (Lawyer)
Spanish solicitor -barrister.
Alicante, Denia, Costa Blanca Marina Alta
White & Baos 2016 – All rights reserved