Do you know what vertical property is, how it differs from horizontal property and what obligations and limitations affect it? In this post we tell you all the details so that you know what vertical ownership consists of and everything it implies for the owner.
What is vertical ownership?
We are used to communities of owners in which, on the one hand, we have the owners of the apartments and premises of the building, and, on the other hand, we find common elements of the building such as the pool and gardens, for example, which are the property of all co-owners based on their participation fee. This is what is called horizontal property and is regulated by the Horizontal Property Law, common law, and by the Catalan Civil Code.
When the entire building and, therefore, all the floors and premises, belong to the same owner (who can be a natural person or a legal entity), we are dealing with vertical ownership. In these cases, it is quite common for each property that is part of the building to be dedicated to renting, for example, apartments, offices or commercial premises.
Therefore, the vertical property is divided into entities susceptible to independent use, but it is a single registered property (it has a number assigned in the Property Registry). In horizontal property, however, each entity is an independent registered property (with a different number each in the Property Registry), and the common areas and elements are assigned to these independent entities based on a participation fee. .
Vertical Property Features
Vertical ownership therefore has the following characteristics:The entire building is owned by a single natural or legal person.
– The building is a single registered property.
– There are no common elements, since there is a single owner.
– The Horizontal Property Law does not apply.
– There are no community fees to pay.
– It is not necessary to create a community of owners and all rights and obligations will correspond to a single owner.
– The property can be made profitable through the rental of each of the properties that make it up.
– The building in vertical ownership can be transformed into horizontal property through a horizontal property division deed.
Obligations and limitations on vertical ownership
Having a property under the vertical ownership regime implies a series of obligations such as the following:
Conservation of the building in good condition
For the building to be in good condition, the corresponding improvement works must be carried out. In this sense, the Building Planning Law, in article 16.1, establishes the following:
The owners are obliged to keep the building in good condition through proper use and maintenance, as well as to receive, preserve and transmit the documentation of the work carried out and the insurance and guarantees it has.
Comply with tax obligations
These will be, among others, the following:
– Settlement and payment of Value Added Tax (VAT). Owners of buildings under vertical ownership must pay VAT on invoices from suppliers they hire for building maintenance and other services. The rate to pay for VAT will depend on the service provided, with the general rate being 21%.
– Settlement and payment of the Real Estate Tax (IBI). The IBI is a municipal tax that taxes rural, urban and similar properties. Specifically, it taxes the ownership of the following real rights over real estate: administrative concession, surface real right, usufruct real right and property right. In the metropolitan area of Barcelona, the so-called metropolitan tax or IBI surcharge must also be paid, intended to finance services in said area.
– Payment for ford or equivalent municipal permits. This is the license requested to restrict the use of public roads for the entry and exit of private vehicles from a building.
– Payment of the public price for waste collection. This public price will have to be paid by people who own an economic activity and who do not have their own collection service contracted.
– Payment of tax on constructions, installations and works. In the event that the owner of the building carries out a construction, installation or work, for which an urban planning license is necessary, he must pay this tax.
Payment of expenses
The owner of the building must be responsible for all building expenses such as those derived from maintenance (elevators, cleaning, gardening, etc.), supplies (such as electricity or water) and insurance, among others.
What happens if you want to sell a building as a vertical property?
If the owner of the vertically owned building wants to sell it, there are two possible scenarios:
Sale of the entire building as a unit
In this case there is no problem, a price is set for the entire building and it is sold in a public deed of sale. The new owner may, if he wishes, carry out the horizontal division, as we describe in the following section.
Sale by parts
In this case, it is necessary to horizontally divide the building by means of a deed of horizontal division granted before a notary, in which the division into different registered properties, the participation coefficients of each property will be determined and the statutes of the community of neighbors will be regulated. When the community of owners is established, the various bodies must be established such as the Board of Owners, the president of the community, the secretary and the administrator.
In article 553-1 of the Catalan Civil Code, horizontal property is defined as follows:
The legal regime of horizontal property implies, for the owners, the right of exclusive ownership over the private elements and in community with the other owners over the common elements.
On the other hand, said article establishes that the granting of the title of constitution of the horizontal property regime must contemplate the following aspects:
– The existence of one or more owners of ownership of at least one property made up of private and common elements.
– The determination of the participation fee in the common elements of each private element.
– The configuration of an organization for the exercise of the rights and duties of the owners.
How to manage a building in vertical ownership?
As we have seen, a building under a vertical ownership regime implies the need to comply with a series of administrative and fiscal obligations, among others. The procedures that involve these obligations can be carried out by the building owner directly or a team of wealth management experts can be hired to deal with aspects such as:
– Payment of taxes in a timely manner to avoid inspections or penalties.
– Rental management (search for tenants, control of the solvency of potential tenants to avoid delinquent tenants, management of rent collection, claims for non-payments, etc.)
– Processing building incidents (contact with suppliers, insurance companies, etc.).
– Cost optimization (negotiation with suppliers, search for the best options).
In short, an expert asset manager will help you save time and money, while freeing you from all worries and being able to optimize the profitability you obtain for the building.
How does VAT affect new housing?
