A significant share of Spanish real estate held by international investors is not held personally. It sits inside a company, often a Dutch or Luxembourg holding, sometimes a chain of two or three entities assembled years ago for reasons that made sense at the time. When that asset needs financing, the structure stops being a background detail and becomes the centre of the transaction.
Nothing about a foreign holding makes a Spanish asset unfinanceable. What it does is add a set of questions that a domestic file never reaches, and the transactions that go badly are almost always the ones where those questions were left until after a term sheet had been signed.
Security over the asset, over the shares, or over both
The first decision is what the lender takes. A mortgage over the property itself is the orthodox answer: it is registered, it ranks, and enforcement follows a known route. A pledge over the shares of the company that owns the property is faster to grant and often cheaper, but it puts the lender one step away from the asset and exposed to whatever else sits inside that company.
In practice lenders frequently want both, and the borrower should understand what each costs. The mortgage carries notary, registry and stamp duty on the deed. The share pledge is governed by the law of the company’s jurisdiction, not Spanish law, which means a second set of advisers and a second set of formalities. Where the shares are Dutch, the pledge is executed before a Dutch notary; the same applies with local variations in Luxembourg and elsewhere.
The combination also creates a sequencing question that is easy to miss: if the lender enforces the share pledge and takes the company, it takes the company’s liabilities with it. A clean company with one asset and no history is straightforward. A company that has traded for a decade is not, and the lender will want to know which it is dealing with.
Who can sign, and can they prove it
Spanish notarial practice is exacting about powers. A director of a foreign company signing a mortgage deed in Spain will be asked to evidence the company’s existence, its current directors, and the authority of the person appearing. That evidence generally arrives as corporate extracts and a power of attorney, legalised or apostilled, and translated by a sworn translator.
None of this is difficult. All of it takes time, and it takes considerably more time when the company’s own records are out of date, when a director resigned and the register was never updated, or when the shareholder chain includes an entity whose documents are in a third language. Two weeks is normal when it is planned. Six is normal when it is discovered at signing.
The structure that was efficient to build is not always the structure that is efficient to borrow against, and the difference is usually discovered at the notary.
Guarantees from entities that have something to guarantee
Lenders routinely ask the parent to guarantee the borrower. That request has to be tested against the parent’s own position: whether its constitutional documents permit it, whether there is corporate benefit in giving it, and whether the directors giving it are exposing themselves. These are not Spanish questions, they are questions of the parent’s home law, and in the Netherlands they connect directly to what board members are actually responsible for.
There is also a pricing dimension that groups forget. A guarantee given by one group company for another is a transaction between related parties, and where the group operates across borders it should be priced and documented on arm’s length terms. We deal with that in our note on intercompany loans, guarantees and cash pooling. A guarantee that appears for free in the group accounts is a question waiting to be asked.
Tax friction the lender will ask about
Interest paid by a Spanish borrower to a foreign lender, and interest flowing up a group chain, raises withholding and deductibility questions that belong in the model rather than in a footnote. Where the group already relies on a European holding for treaty access, the financing should not quietly undermine the position that holding was built to support. Our notes on withholding tax on dividends, interest and royalties and on treaty access and beneficial ownership set out the tests that apply.
Two Spanish points deserve specific attention. Entities resident in jurisdictions without adequate exchange of information face an annual special levy on the value of Spanish real estate they own, which makes certain historic structures expensive to keep. And the substance of the foreign holding matters increasingly for its own sake, a theme we cover in Dutch substance requirements. A lender does not assess these as a tax authority would, but it does notice when a structure looks fragile, because fragility is a refinancing risk.
What to do before approaching the market
Map the chain from the Spanish asset to the ultimate individual owners, with current corporate documents at each level. Confirm who can sign and obtain the powers, apostilled and translated, before they are needed. Establish whether the holding company has liabilities beyond the asset. Decide, with advice, whether the transaction is better structured as a mortgage, a share pledge or both. And confirm that the tax position of the financing is coherent with the tax position of the structure.
Done first, this takes a fortnight and costs a modest fee. Done in the middle of a transaction with a deadline, it is the reason the deadline is missed.
Montclare structures and arranges financing secured on European assets, and prepares the corporate and tax structure that sits behind it. Our services are set out on our services page.
This article is informational and does not constitute tax, legal or financial advice. Lending and credit intermediation are regulated activities and the treatment of any transaction depends on its facts. Each engagement is subject to scope and applicable regulation.