RAFFLE PROPERTY IN SPAIN.POTENTIAL PROBLEMS
RAFFLE REAL PROPERTY IN SPAIN. POTENTIAL PROBLEMS
Dear Readers and friends,
We’ve been receiving several enquiries from clients asking us for information about this interesting topic.
The concept sounds alluring. Rather than selling your Spanish house in a standstill property market,- (and probably getting thousands of Euros less than you hoped for),- why not just raffle it, flogging tickets for around 5 to 35 Euros (or more), to thousands of people anxious to fulfil their dreams of acquiring a good property in the sun?
Many examples can be given (like for instance the Spanish who tried to raffle his property by flogging 64.000 tickets for 5 euros each, etc). However, what in theory might look like an attractive and profitable option both for buyers and sellers, have ended up unfortunately in failure in the majority of cases.
The problem lies in the fact that there is in Spain a pretty complex legal and tax regulation, which requires the seller to follow a very bureaucratic process.
In a nutshell, first of all, the specific detailed rules of the raffle must be submitted for approval to the “Organismo Nacional de Loterías y Apuestas del Estado-ONLAE”. (The ONLAE, with two centuries of history, has secured its position as the most reliable games and lottery operator in Spain).
Secondly, irrespective of the outcome of the raffle, a non refundable expensive bond or deposit must be paid by the seller upfront, which is usually the 10% or 15% calculated on the total value of the tickets to be issued.
In addition, it will be necessary to pay the stamp duty tax (18% based on the value of the dwelling), before the ticket prize is given at the Notary, not to mention that a large capital gains tax might also be encountered.
Further, due to the fact that the Spanish Notary must supervise the legality of the whole raffle process in order to avoid scams, it will be necessary to pay Notary and land registry fees as well.
Therefore, it will be crucial to determine who is going to pay for all these expensive costs, in order to avoid late unpleasant tax surprises for the “lucky winner”. Therefore, Licensees should advise any participant in such a raffle to consult a Solicitor and tax advisor concerning the tax consequences to the winner.
Moreover, there is another danger for ticket-buyers: most of the competitions stipulate that the house won’t be sold unless all the tickets have been snapped up. Subsequently, considering that most of the tickets sell for between 20-30 Euros, sellers will need to carry out a gargantuan promotional campaign among thousand of people, aimed to reach the market value of the property.
This means in practice that you will have no chance of a return on your let’s say 25 Euros stake, unless all the tickets are sold out or alternatively that the seller might accept to pay for the difference in order to raise the required total sum.
We hope this information is useful and should you have any additional question about this or other legal matter, please visit any of our two websites: www.ricorabogados.com or www.englishsolicitorinspain.com
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Thank you very much for your attention and permanent support and we look forward to helping you!
Mr Oscar Ricor “NON-PRACTISING ENGLISH SOLICITOR IN ENGLAND AND WALES”, under the “Solicitors Regulation Authority” (SRA) SRA number 519196 and practicing Spanish Solicitor