FREQUENTLY ASKED QUESTIONS
about the Sale & Leaseback
The following is a list of the questions most frequently asked by the elderly and their families.
If you have any other questions, please do not hesitate to contact us and we will help you.
Since 1996, Grupo Retiro has been helping the Elderly to make their homes profitable and continue to enjoy them.
From 65 years of age, as with the Reverse Mortgage or any of the other products managed by Grupo Retiro, due to the tax advantages/exemptions involved in the transfer of ownership for those who sell their primary residence and are 65 years of age or older, as they are exempt from personal income tax on any possible capital gains. Furthermore, and especially in the Lifetime Rental modality, the high life expectancy of many Elderly people makes it very difficult to find investors who are genuinely interested in a Sale and Rental transaction for people under 65 years of age.
It would be possible to do a Sale and Leaseback on a second residence, although it is usually done on the habitual residence, as it has many more tax advantages. Besides, it is more logical for the Elderly Person to keep the house in which they have always lived as a Lifetime Rental.
Of course, it is feasible. They work in the same way as if they were carried out on a home. However, it must be taken into account that for the Elderly person/Seller there will not be the tax advantages inherent to the habitual residence and that the Investor for this type of asset will be much more demanding, as well as wary as to whether they have good future rental prospects.
Yes, of course. The Sale and Purchase would be signed by the spouse who owns the property and the Tenancy Agreement would be signed by both spouses so that both have the same rights as tenants.
Senior Citizens who carry out such a transaction must pay the corresponding Municipal Capital Gains Tax in their capacity as Sellers. With regard to the capital gain generated by the sale, if the Seller is over 65 years of age and the property transferred is his or her main residence, it is exempt from Personal income Tax. If the property transferred is not the main residence, then the capital gain will be taxed at 19% for the first 6,000€ and 21% for the remaining amount. Finally, as the new tenant of your home, you will have to pay the Tax on Property Transfers on the constitution of a lease, but it is a very low tax. Therefore, the only significant outlay in terms of tax would be the Municipal Capital Gains Tax, which you will be able to pay as you will have the liquidity obtained from the Sale.
The clauses that set out the conditions of the Rental Contract are the normal ones for any contractual document that sets out the agreements between the parties in a Residential Lease. In addition, the stipulations will be those included in the current Urban Lease Law of 1994, which regulate the Contract in all the points that have not been freely agreed by the parties.
Elderly people who sell their property under the Sale & Leaseback modality, normally wish to remain as tenants until their death, which is why it is usually a long-term lease contract so that it has a lifetime effect. However, it could be fixed for a different term, e.g. 5 years, 10 years, 12 years, etc. depending on the future plans of the new tenants. It is the Elderly who decide on the duration of their contracts.
It is not compulsory to register the Rental Contract in the Land Registry, but it is common practice to do so for greater legal security for the parties. The operations managed by Grupo Retiro are always registered.
The monthly rent that will be fixed in the Rental Contract, and that the Elderly Person will have to pay in his or her new condition as a tenant, is the one agreed between the parties, but in principle, it will be the one that corresponds to the market price of a property of similar characteristics and location.
The buyers as full owners of the property could, if they so wish, set up a financing operation on the property (mortgage, guarantee, etc.). However, this in no way prejudices the rights of the Elderly Person as a tenant of the house, since it is a practically obligatory requirement in these operations that the Lease Contract be registered in the Land Registry, in such a way, and following art. 13. 1 of the Urban Lease Law (LAU, in Spanish), in the event of a forced alienation derived from a foreclosure or court ruling or similar action, the entity or person holding the new ownership rights over the property is obliged to respect the conditions of the Lease Contract in all its terms.
The owner of a property, who transfers the same under the figure of a Sale & Leaseback, would become a tenant with all the rights and obligations established in the current Urban Lease Law, as well as the rest of the particular conditions established by the parties by mutual agreement.
There is no doubt that both options are very interesting. Deciding on one or the other will depend on the personal and family situation of the Elderly Persons, as well as the future plans that the owners of the property have regarding their place of residence. The age of the Elderly Person at the time of contracting the property is also fundamental, as the Sale and Leaseback option is only interesting for older people or those who are going to stay in the property for a short period.
In a Sale and Leaseback, the Buyer will normally pay all the expenses inherent to the ownership of the property (property tax, Community of Owners receipts, extraordinary expenses, building insurance, etc.). On the other hand, the tenant must pay the utility bills (electricity, water, gas, telephone, etc.), as well as the urban waste tax in those municipalities where it is in force and the Contents and Civil Liability Insurance of the house like any other tenant.