| Monthly Articles |
November 2008 CostaLife Issue
Business advice from the Business Doctor at Link Point Legal and Business ServicesFirstly let me introduce myself, my name is Chris Spence and I am the Director and Business Management Consultant at Link Point Legal and Business services. Each month I will be putting together different articles relating to Business development. These will range from setting up a new business to helping an existing business grow and all aspects this entails. During my many years in this field I have given advice to many people in all areas of business all who have had one key aim, to make money and help the business grow. Let’s face it when you go into business on your own one of the main motivations has to be to earn a good living whilst at the same time having a good time working for yourself. If you are one of the few people who go into business to lose money then I have a suggestion that may help, simply send me all the money you want to lose and I will happily get rid of it for you!! . All joking aside running your own business is hard work and can be very rewarding if it is approached in the right manner. For many people buying and setting up in business for the first time is one of the most exciting things that you can do, HOWEVER, if this is undertaken without being properly researched it can turn into one the of the biggest nightmares ever. This month we will look at Traspaso. A “traspaso” is the act of selling on a business which is being carried out in a property that is rented and not owned by the current business owner. In the LAU (Urban Rental Law) the traspaso was never really contemplated and so was substituted by “cesion de contrato” (ceeding of contract) or a sublet. Previously the owner of the premises would be obligatorily compensated when a traspaso was made. However, modifications made to the law have tried to do away with this although it is still common practice to compensate the landlord in order for the traspaso to go ahead. In most contracts it will be stated that on a Traspaso the Landlord will ask for 10% of the sale price plus an increase in the rent being paid. When you buy an existing business you must ensure that you know exactly what you are buying, for example are you buying all the fixtures and fittings or do they belong to the Landlord and not the person selling the business? The latter can cause major problems for the new owner should there be a clause in the contract stating that at the end of the lease all equipment must be replaced as new. When looking at the books for an existing business it is good practice to ask to see the IVA returns as this will show the true declared income for the business rather than what the seller wants you to believe. It is common practice to under declare earnings within a cash based business. So, in short, the old adage “Let the Buyer beware” was never so important as to when it comes to buying an existing business. At link Point we can offer you independent advice and whilst we cannot guarantee that your new venture will be the dream that you hope it will be we can guarantee that you will not find any nasty surprises lurking around the corner after you sign on the dotted line. For more information or to speak with the Business Doctor please contact us at Link Point Legal and Business Services, 96 626 0500, or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
December 2008 Costalife IssueCB or SL that is the question.When you decide to go into business one of the first decisions you need to make is whether to trade as a single self employed trader or whether you want to trade through a company. If you decide the latter then you have two choices, one is to form a CB (Comunidad de Bienes) and the other is an SL. (Sociedad Limitada) this month we look at a CB and next month an SL. Firstly what is a CB company? Well basically it is two or more people who decide to form an association to run their business through the difference between this and an SL company, is that all members of the CB will be personally liable for any and all debts that may be incurred by the company or business rather than being limited to the capital value of an SL Company. Also the cost involved in setting up a CB is substantially less than that for an SL. As I said the minimum number of people required is two, however there is no maximum number. When you are setting up your CB you will be asked to allocate the percentage share that each of the members will hold in the newly formed company, this does not have to be an even split although it is usual that is it. However if one party is investing more money than the other then this can be dealt with within the share issue. A point to bear in mind is that whatever you state as capital investment you will have to pay Stamp Duty (ITP) on that figure at 1% of the total. It is quite usual to state an investment of 100.00Euro per investor so as to reduce the Stamp Duty (ITP) tax due. This does not mean that you cannot spend more on your new business it just caps the tax due. Once you have decided on the name for your company it will be necessary to seek the services of an accountant (Gestor) or a lawyer (Abogado) prepare all the paper work and registered with the Tax authorities. It does not matter whether you decide to trade through a CB or simply be self employed in both cases you will need to become what is known as “Autonomo” in Spain which means you will need to pay Social Security each month, usually this will be in the region of 240.00 Euros a month. It is dependent on your age and not your earnings. A question I am often asked is can a Self employed “Autonomo” employ other people, the answer is yes, but with a proviso, if the tax authorities think that you are doing it to avoid paying 2 sets of social security payments as you would do with a mutual CB , then they may fine you. Forming a CB will allow you to formalise your business negating any problems which may arise in the future if you get into a dispute over who owns what within the company. That may sound negative but it is a fact of life that the best laid plans can sometimes go wrong and protection at the beginning will make resolving these so much easier. If you would like further information on starting your own company please contact the Business Doctor at Link Point Legal and Business Services on 96 626 0500.
Round Town News 15th December 2008
Off Plan Woes, Michael Olmer Solicitor Link Point Legal and Business ServicesRecently, some of the country´s biggest developers have collapsed leaving behind them billions of Euros of debt. Not only the banks and trade creditors are affected but all these problems have hit prospective purchaser´s hard, both emotionally and in their pockets. If you discover that the builders of your dream home in the sun have declared themselves bankrupt or gone into administration what can you do about it? First, always keep a close eye on the progress of construction. If you suspect the builder is getting into difficulties take independent legal advice immediately. Under Spanish Law a builder selling property “off plan” must provide an “aval bancario”, a bank guarantee to protect all money paid by the buyer until completion can take place, or an insurance policy with the same effect. The guarantee document, or insurance policy must be named in the documentation provided to the buyer. You should receive a copy of the guarantee or extract of the insurance policy at every staged payment. The precise terms under which you can exercise your rights will depend on the wording of your contract and either the guarantee or insurance policy. If your builder declares itself bankrupt – “quiebra” -or goes into administration – “suspension de pagos” - it is vital that that you take immediate legal advice so as not to lose your right to claim under the builder´s guarantee or insurance policy. Bankruptcies and Administrations are registered in the provincial Registro Mercantil (commercial registry) and also in the central registry maintained in Madrid and are announced in the daily bulletin published by the registry. If there is no bank guarantee or insurance policy or if you have missed the deadline for claiming under them then you will have to file a claim for any money paid by you in advance with the “Administrador” in the bankruptcy or administration. You will need a lawyer to fill out and sign the claim forms and submit all the documents. There are strict deadlines for the submission of these claims. In the absence of a bank guarantee or an insurance policy the success or failure of your claim in a bankruptcy or administration will depend on the state of the builder´s finances, and how many other creditors there are. If the builder´s finances are reasonable and the creditors can agree a rescue package, then you may recover some, if not all of the money paid and in some situations even get your property finished. If you are or think you may be in this situation it is vital that you take immediate independent legal advice to protect your interest before it is too late. By Michael Olmer Solicitor • Link Point Legal and Business Services
Round Town News 26th December 2008
Community Swimming PoolsIn the depth of winter it may seem strange to be writing about the rules concerning the safe operation of swimming pools belonging to Communities of Owners, but now is a good time to consider this issue so that your community can look forward to a trouble free swimming season. I will deal with the rules that apply to open air pools for communities in the Valencian Community where Decrees 255/1994 and 97/2000 are the governing legislation. Your community should check its insurance policy in case it imposes any special requirements that are additional to those contained in the legislation. The pool must be constructed so that the depth down to 1.40 metres does not increase at a gradient of more than 10%. Beyond 1.40 metres the gradient down to the maximum depth in the pool must not increase at a rate of more than 35%, so that sudden shear changes in depth are avoided. There must be a set of steps at least every 20 metres around the edge of the pool and wherever there is a significant change in depth. The water must recirculate at least every eight hours. In pools built since 1994 which have a surface area greater than 200 square metres the water must pass through an overflow that runs round the entire perimeter of the pool. If your pool has a surface area of less than 200 square metres the water can pass through skimmers, but there must be at least 1 skimmer for every 25 square metres of surface area. The water should be tested twice a day and a written record kept of the readings. For safety, there must be 2 lifebelts for any pool with a surface area of up to 350 square metres, plus an extra lifebelt for each additional 150 square metres of surface area. All pools should have available a rope for life-saving which is at least 3 metres longer than half the maximum width of the pool. The regulations do not specifically require pools to be fenced, but not taking care to keep the pool secure and in good condition can lead to heavy penalties, and may also invalidate the community’s insurance. No animals are allowed into the pool or the sun-bathing area around it. If the pool has a surface area of 200 square metres or more, it is compulsory to employ a qualified lifeguard who must be on duty whenever the pool is open. Pools with a surface area of more than 500 square metres require additional lifeguards. Pools for the exclusive use of communities of owners are exempt from providing disabled access. Your community can make its own rules concerning air mattresses and inflatable toys, etc., ball games, and eating and drinking inside the precincts of the pool. If you have any doubts about whether your community pool complies with the rules you should raise the issue with the President or the Administrator of your Community of Owners. For more information please contact Michael Olmer, Solicitor at Link Point Legal and Business Services on 96 626 0500. By Michael Olmer Solicitor • Link Point Legal and Business Services
January 2009 Costalife Issue
CB or SL that is the question. When you decide to go into business one of the first decisions you need to make is whether to trade as a single self employed trader or whether you want to trade through a company. If you decide the latter then you have two choices, one is to form a CB (Comunidad de Bienes) and the other is an SL. (Sociedad Limitada) Last month we looked at CB and this month we look at an SL. In short an SL is similar to a limited company in the UK. This means that if your business fails your liabilities will be limited to the company and not to all your personal assets. It is possible for a single person to set up and SL Company and this will be known as an SLU. You may decide to buy an existing SL which is already trading this will negate the time needed to setup from scratch, however it is imperative that if you do buy an existing SL that it is fully checked out to ensure that there are no debts that are associated to it. The process of buying or setting up an SL will need to be done via a Lawyer or a Gestoria as the process can be long and tedious and will need to be Notarised to ensure that all things are legal.
As the process is quite complicated I have listed below a quick reference guide to setting up a new SL Company, these are guide lines only and as I have already stated you will need to consult with a lawyer or a gestoria to ensure that there are no mistakes made. Quick reference Guide
When you setup your SL you will need to register share capital, which is a minimum of 3006.00 Euro´s, although this can be made up of company assets such as plant or machinery and not necessarily all cash. Obviously you will need to set up Bank accounts for the company to trade with and you should take great care when choosing your bank as the services offered can vary between banks, you want to choose a bank that is going to be helpful to you as in the early stages of the company it may be necessary to apply for a bank loan. Unlike in the UK it is unusual in Spain to be able to have an overdraft facility, an important point to bear in mind!! I hope that these 2 articles have given some help to those people setting up new businesses and I sincerely wish everyone whether they are an existing business or a brand new one, all the best luck in the world. In these difficult times it is not easy for any of us in business. If you would like further information on starting your own company or have an existing business which you need help with please contact the Business Doctor at Link Point Legal and Business Services on 96 626 0500. He is here to help and give advice on all aspects of business, business problems and business development. Round Town News 9th January 2009
Advance Medical Directives in Spain – ‘Living Wills’During the late 1970’s and 1980’s, the concept of the ‘Living Will’ was developed in Anglo-Saxon countries. The idea is that a person who may in the future become unable to communicate to manage their own medical condition, or their other affairs, can give written instructions while they are still capable of doing so and appoint a representative to act for them when and if they become incapacitated. In Spain, the right to express your wishes concerning medical treatment and appoint a representative to represent you only in relation to medical treatment was bestowed in the national law to regulate patients’ rights and obligations concerning medical information and documentation, Art. 11 of Law 41/2002, together with legislation passed by the autonomous communities, setting out the formalities for the creation and use of a valid ‘Advance Medical Directive.’ In the Valencian Community, where ‘Advance Medical Directives’ are known as ‘Voluntades Anticipadas,’ the local rules are contained in Art. 17 of the Law 1/2003. A Voluntad Anticipada must be in writing and can only be executed by an adult. It can set out your wishes concerning medical treatment in the future, when you are no longer capable of expressing your wishes yourself. You can nominate a representative to make decisions concerning medical treatment and any instructions concerning organ donation. If the Voluntad Anticipada allows organ donation, your relatives cannot prevent the use of those organs. The Voluntad Anticipada must be respected by all those providing medical treatment. In the event that medical personnel object on grounds of conscience to carrying out the instructions contained in the Voluntad Anticipada, the medical authorities must provide other personnel or resources to ensure that they observe it. However, medical personnel are not obliged to carry out instructions which are either illegal or which do not comply with the terms of the Voluntad Anticipada. There are two specific methods of creating a Voluntad Anticipada. Either it must be signed in the presence of a Notary, or in the presence of three witnesses. In addition, any other method which is legally valid is permitted. You have the right to amend or cancel the Voluntad Anticipada before it becomes effective but any amendment or cancellation must be done either in writing or by any other method which leaves no room for uncertainty. Your Voluntad Anticipada must be included in your medical file so that all those providing treatment are aware of its contents. If you have already made a Spanish Will or are about to do so, you may want to consider creating a Voluntad Anticipada so as to ensure that if the worst happens, you will be represented by a trusted person who will act in your best interests and respect your wishes. For more information, please contact Michael Olmer, Solicitor at Link Point Legal and Business Services on 96 626 0500. By Michael Olmer Solicitor • Link Point Legal and Business Services
Round Town news 23rd January 2009What is your Lawyer?We may all have our own personal answer to this question, but here in Spain from time to time it is inevitable that we have to deal with the legal system so it can be important to understand the differences between the different types of Spanish lawyer, and the other officials who work together with the legal system .
First, what is a Lawyer? A Lawyer is a professional person authorized to practice law. Spanish qualified lawyers are known as Abogados. They must hold a law degree and be registered with the legal association, or “college”, of the province where they practice. Only Abogados are allowed to act for parties in proceedings in Court. Of course a large part of their work involves the preparation of documents and providing advice to the public, “asesoramiento juridico”. There are many reputable Spanish “asesores juridicos” who provide advice and prepare documents. They are legally qualified but are not members of the provincial college as they have chosen not to represent clients in court proceedings. Many specialize in Spanish employment or tax law. If you become involved in Spanish court proceedings your Abogado must engage the services of a Procurador, who is the professional representative of your Abogado and deals with the formal aspects of the proceedings: filing of papers, arranging hearing dates, etc. Procuradores also have their own ¨college¨ in each province. The Notary plays a vital part in many transactions but he is not your Lawyer. Rather, a Notary is a law graduate who has gone on to become a highly trained public official. He does not act for any of the parties involved in a transaction. His role is to ensure that documents for use in connection with many types of transaction comply with the law and any necessary formalities. Property transactions, mortgages, Company Formations, Wills and many other types of business are concluded in front of Notaries so as to provide a guarantee that the all these formalities have been observed. The Notary does not guarantee that the terms of any transaction are fair or reasonable. That is the responsibility of the parties involved and those advising them. The final member in this pantheon of Spanish Advisors is the “Gestor Administrativo” who practices in a “Gestoria”. A Gestoria can only be operated by a “Graduado Social” who is highly qualified in dealing with many different types of administrative matters. He is also qualified to represent clients at the many types of tribunal that regulate the citizen´s dealings with central and local government, such as social security, employment, etc. Most often expats find themselves instructing a “Gestor” to re-register their cars, obtain business licences, and other permits of all kinds. There is often a large overlap between the expertise of all these advisers, but whichever you engage make sure that that they are properly qualified. For more information, please contact Michael Olmer, Solicitor at Link Point Legal and Business Services on 96 626 0500.
By Michael Olmer Solicitor • Link Point Legal and Business Services
Round Town News 6th February 2009Legal Aid in Spain As foreigners living in Spain it is easy to forget that we are entitled to the same rights as Spanish Citizens, and this includes entitlement to Legal Aid. Lawyers working within the Spanish Legal Aid system are known as “Abogados de Turno de Oficio”. Entitlement to a Legal Aid lawyer is normally dependent on satisfying certain financial qualifications, and on being present in Spain legally, except in the case of deportation proceedings or claims for asylum. For people below the retiring age of 65 or who are not disabled or incapacitated in some way, the income limit for entitlement to Legal Aid is either a maximum household income of €14.473,20 or for an individual no more than €7.236,60. Pensioners, the disabled, and victims of domestic violence can take advantage of more liberal financial qualifications. Their household income can in certain circumstances be up to 4 times this figure. Victims of domestic violence are not required to prove their financial entitlement when applying for legal aid. Lawyers working within the system are divided into various panels – criminal, civil, administrative, employment, domestic violence, juvenile etc. To apply, your application form, or on-line application, is sent first to your provincial Colegio de Abogados. In the Comunidad Valenciana the Consejeria de Justicia, Interior y Administraciones Publicas (Board for Justice, Interior and Public Administration) oversees the system. The Colegio must respond to each correctly completed application within 15 days of receiving it. If the application is rejected or the Colegio does not respond within this period then you can apply directly to the Consejeria to resolve the matter, which in its turn has a further 30 days in which to give its decision. The appointment of an Abogado de Turno de Oficio also carries with it the appointment of a Procurador, which the Abogado must use in their administrative dealings with the Court. A successful applicant has the right to reject the Abogado and Procurador appointed by the Colegio or the Consejeria and nominate an Abogado and Procurador of their own choice, subject to them being on the official panel. Being granted Legal Aid also carries with it certain other important benefits including complete exemption from charges for obtaining copies of witness statements, and a discount of 80% of the cost of notarization of other documents. Also, If you need to appeal a decision made against you then you cannot be required to provide a sum of money as security while your appeal is being dealt with. The right to Legal Aid is enshrined in Article 119 in the Spanish Constitution and is regulated by laws 1/1996 and 16/2005. The administration of the system in the Comunidad Valenciana is regulated by the decrees 29/2001 and 28/2003. If you would like more information on whether you might qualify for Legal Aid here or in England and Wales please contact Michael Olmer, Solicitor, at Link Point Legal Services. B y Michael Olmer Solicitor • Link Point Legal and Business Services
Round Town News 20th February 2009Get it in Writing! Most of us have moved to Spain in the hope of enjoying a more relaxed and less complex lifestyle. Very soon we discover that one area in which our lives become more complex is in the documentation we need in connection with our homes, our day to day purchases, and even our very existence. Many times in my professional life I am asked to advise clients who have made agreements in connection with personal or business transactions on the strength of a handshake on trust without getting any written evidence of what has been agreed or even who they have made their agreement with. When things go wrong, and you need to seek professional advice or the assistance of the courts to redress an injustice this is the first thing that we, as professionals, ask for. The essential information can be summed up as who, what, when, where, and how much!
Often all this information will fit on the proverbial “back of an envelope” but both parties to the transaction must sign it. In a private transaction, as a minimum, when paying over any money whether in cash or by cheque to a private individual always get a receipt in writing from the person you are paying. This should show the recipient´s name, address, the amount paid, what you are paying for, and as we are in Spain, their NIF, NIE, or passport number, and you should expect to provide them with same information. Vehicles, boats, and other movable property which has to be officially registered are outside the scope of this article, but check in advance with your lawyer or gestoria, what are the essential documents in transactions concerning these items. If you are dealing with a business, by law they must either provide you with an invoice showing all the above information and the amount of IVA (VAT), or for smaller transactions below €3,006.00 a till receipt, which contains the same information (Royal Decreee 1496/2003). If the person or business you are dealing with is unwilling or unable to provide this information then simply refuse to do business with them. Remember, in the words of Sam Goldwyn “a verbal contract is not worth the paper it´s written on” For more information, please contact Michael Olmer, Solicitor at Link Point Legal and Business Services on 96 626 0500.
Round Town News 6th March 2009
Trial by Jury - 9 Angry MenA perennial favourite theme for British and American authors, playwrights, and film makers is the Court Room Drama. We have all held our breath as the Jury of 12 men and women return to the Court Room to deliver their verdict at the end of the proceedings. Here in Spain the Jury system functions quite differently. Whether out of academic interest or for those who have the misfortune to be facing serious criminal charges, or as witnesses in a criminal case, it is helpful to know how the Spanish system works as regulated by the Ley Organica 5/1995 as amended. As one would expect the principal types of serious offence for which trial by Jury is available are Homicide, making threats of serious physical harm, burglary, arson, bribery, fraud, and several more listed in the Spanish Criminal Code. Unlike an English jury which consists of 12 people, a Spanish jury consists of 9 men and women. They are drawn from the register of Spanish citizens compiled in each district in September of each year. All jurors must be adults, in good health, literate, and resident in the area in which the alleged offence took place. Jurors can apply to be excused on grounds of age if they over the age of 75, ill health, if they have family or professional commitments, and if they have served on a jury during the previous 4 years. There is a long list of people who are disqualified from serving on a jury ranging from the King down through members of the Spanish Parliament, the Cortes, various provincial politicians and office holders and serving members of the Spanish armed forces. In addition to the 9 men and women summoned to serve on the Jury, during the whole period of the trial and their deliberations they have the assistance of a Magistrate who is a professional member of the local judiciary. The Magistrate´s role is to advise the jury on the law, seek any clarifications needed from the Court, the prosecution, or the defence, and at the end of the jury´s deliberations to prepare a detailed written verdict based on their findings. The principal task of the 9 members of the jury is to decide whether the prosecution has proved each fact in the case against the accused. As in the USA and England the jury carry out their deliberations in secret, but in Spain they are accompanied by the Magistrate allocated to them. The jury´s first duty is to elect a spokesman or foreman. The law expressly states that in all matters must be decided by the jury by a vote of each of them in turn to avoid one member railroading the others into a decision. In England the jury must either bring in a unanimous verdict, or if directed by the judge they can decide on the guilt or innocence of the accused by a majority of 10 to 2. A Spanish jury always has the right to decide on guilt or innocence by a majority vote. The presumption of innocence is enshrined in this process as a guilty verdict requires a majority of 7 to 2, but an innocent verdict only requires a majority of 5 to 4. To attempt to try a person twice for the same offence has been seen as an infringement the rights to be tried according to due process of law contained in Article 24 of the Spanish Constitution, but this view may be changing in Spain as it has done recently in the UK. If you do find yourself facing criminal charges of any sort always seek legal advice and remember that if you do not already have a lawyer the Court will appoint a lawyer to represent you. In addition, if you are required to act as a witness in a case it can also be helpful to take legal advice before providing written statements or attending Court. For more information, please contact Michael Olmer, Solicitor at Link Point Legal and Business Services on 96 626 0500.
By Michael Olmer Solicitor • Link Point Legal and Business Services
Round Town News 20th March 2009Know your NIF´s, NIE´s, CIF´s, SA´s and SL´sThe fiscal identification numbers that all residents and non-residents with economic interests in Spain should possess can help you to see what kind of person or organization you are dealing with and knowing how these numbers are composed can help you spot imposters and scams, especially in these days of internet fraud. These numbers can either be composed simply of 9 digits or a letter of the alphabet and 7 or 8 digits. For individuals, Spanish citizens over the age of 14, resident in Spain, have an identity number which consists of 8 digits together with a ‘check’ digit. Spanish children under the age of 14 who need a fiscal number have a number which consists of the letter K and 7 digits. Spanish citizens resident outside Spain who do not have a Spanish Identity Card have a number consisting of the letter L and 7 digits. Foreign individuals with financial interests in Spain allocated numbers before 15 July 2008 are designated by the letter X and 7 digits. After that date, the Spanish authorities began using the letter Y as they had run out of numbers as there were more than 10 million foreigners registered in Spain! Finally, any foreigner not resident in Spain who needs a fiscal number for a specific reason is allocated a number consisting of the letter M with 8 digits. The most common types of organizations have the following designations: Public companies, “Sociedades Anonimas” or ‘SA’s’, are designated with the letter A followed by 7 digits and a ‘check’ digit, while private companies, ‘Sociedades de Responsibilidad Limitada’ or ‘SL’s’ have registration numbers beginning with the letter B. In addition, under European Union law, the Spanish Companies Registry, ‘Registro Mercantil’, must now make clear which public and private companies have only one shareholder and are known as ‘Unipersonal’. These are designated either as ‘SAU’ or ‘SLU’. This does not imply that the company is of poor financial standing. Even Telefonica de Espana is now known as an SAU, as it is part of a larger group. Business Partnerships, ‘Communidades de Bienes’ or ‘CB’s’ are all designated with the letter E and 8 digits, Co-ops have numbers beginning with F, even Communities of Owners in blocks of flats or commercial premises, and Urbanisations have a special designation which is the letter H. Public and religious authorities - local, provincial, and national, registered before 1st July 2008, were allocated numbers beginning with P, Q, and S. Since 1st July 2008, newly registered religious institutions are allocated the letter R. Foreign organizations with interests here, such as branches of foreign companies will be registered either with the letter N, or if newly established, with the letter W. Before 1st July 2008 the letters J, R, U, V, and W were not used by the authorities so regard with great suspicion any person or organization which claims to have been registered before that date with a fiscal number beginning with those letters. These rules are set out in Order EHA/451/2008 and the Order of the Ministry of the Interior INT/2058/2008. If in any doubt, the Agencia Tributaria offers a service available to registered professionals, which enables them to verify NIF and CIF numbers of businesses. It is worth knowing how to wade through this ‘alphabet soup’, as it can help you feel more secure in your dealings with private individuals and businesses. By Michael Olmer, Solicitor Link Point Legal and Business Services www.linkpointlegal.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Round Town News 3rd april 2009
Your Lawyer and Your MoneyAll transactions involving lawyers inevitably come down to money. The money needed to buy a house, or received from the sale of a property; obtaining probate of an estate; money recovered through proceedings in Court; the lawyer’s own fees. Lawyers often find themselves acting as banker for their clients, and their professional bodies have developed rules to protect clients and their money from those few members of the profession who unfortunately are either incompetent or crooked. These rules are rigorously enforced and failure to observe them can result in severe penalties. Many people who pride themselves in keeping up to date with their rights as consumers when buying a washing machine or car, are unaware of their own rights and their lawyer´s obligations when they hand over thousands of euros or pounds to their lawyer. The Code of Ethics for the Spanish Legal Profession (Royal Decree 658/2001) in Article 20 provides that clients´ money must deposited in a separate account at a bank or other recognized financial institution and kept separate from the lawyer´s own money or that of his firm and available to the client at all times. There is also a specific prohibition against confusing the funds belonging to different clients. Client´s money can only be used for the purposes authorized by the client. To prevent money laundering, lawyers must know exactly who is providing them with funds. Lawyers are not allowed to use client´s money for their own purposes, including payment of their own fees unless they have either the prior written agreement of the client or the client´s later permission. Article 17 of the Code gives lawyers the right to request advance provisions of funds but these must be reasonable in the context of the work in hand and the likely ultimate bill for the work. If clients fail to put their lawyers in funds the lawyer has the right to stop work or impose special terms on the client. The Law Society of England and Wales first introduced Solicitors Accounts rules to regulate the way solicitors handled clients´ money in 1936. These rules have been developing ever since and the 2008 edition of the basic rules occupies 127 pages. As in Spain, clients´ money must be paid into a “client account” at a bank or building society. The title of the account, the statements issued for that account , and cheques and other payment instruments issued by the solicitor from the account must state “Client”. Again, the money must be available to the client, or other person entitled to the money at all times and any money due back to the client must be paid promptly. A solicitor can only use the client´s money for purposes specifically authorized by the client or for payment of his own fees, provided that the client has either first received a bill, or prior written advice of the fees from the solicitor, or agreed a fee with the solicitor in writing. Like a bank a solicitor must pay interest to his client at a reasonable rate. The amount and period for which a solicitor must pay interest to his client varies from a minimum of £1,000.00 held for 8 weeks or more up to £20,000.00 or more held for more than 1 week, provided that the amount of interest is more than £20.00. Nowadays with internet banking and rapid international transfers, ask yourself if it necessary to deposit large sums of money with your lawyer or other intermediary so long as the funds are available when needed. Lawyers´ codes of conduct try to strike a balance between the interests of the professionals and those of their clients so as to protect all parties; on the one hand the client´s hard earned money and on the other the lawyer´s most precious commodity, his time and expertise. However, the watchword is “caution” when paying substantial amounts of money to any intermediary especially those who are not subject to any professional regulation. Do you know exactly who are you paying your money to? Who will be holding it? Where will it be held? Could you get it back? By Michael Olmer, Solicitor Link Point Legal and Business Services www.linkpointlegal.com
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