There are currently many tempting property bargains in Spain but the unfamiliar legal system can be daunting. Here are our top ten tips, in no particular order, for the legal side of the process.
1. Who is the seller?
Try to find out why they are selling and if they might have had problems with the property. Be careful with non-resident sellers – if they leave the country some of their outstanding debts could affect the property. It is also important to check whether they have any tenants at the property. There is no public register of tenants and Spanish law is very favourable to tenants at the expense of property owners. If there are tenants in the property you could be prevented from taking possession until their tenancy elapses.
2. Get a survey
In Spain it is common to buy properties without getting a survey done. The seller, estate agent and other people involved in the purchase make you feel you are being “difficult” by insisting on the survey and tell you it is not normal practice. Regardless, you should commission an independent survey before signing a contract. There have been problems with building standards in Spain and as a foreigner you are particularly vulnerable.
3. Don’t overlook due diligence
Due diligence means the legal checks necessary before buying a property, such as checking the seller’s title, pending planning permissions, compliance with Spain’s coastal laws, charges, incumbrances (a general charge on a property, such as a mortgage) and debts against the property, and previous breaches of planning law. Most problems encountered by British buyers could have been avoided with proper due diligence.
4. Check the property registration
This is possibly the most important element of the due diligence process. It is very common in Spain for properties to lack a title deed, or to be registered in the name of someone different to the vendor. Very often this is for perfectly innocent reasons and is fairly straightforward to sort out. However, in other situations it could reveal serious problems with the property. For example, an extension on the property may not have been registered because planning permission was not granted.
5. Sign a contract with caution
It is typical to sign a private contract with the seller before completing the sale by signing the public deeds. There are several types of contract, each involving different levels of commitment on your part and making the sale subject to various conditions (e.g. regarding due diligence). It is difficult to pull out of the private contract without significant losses so make sure you understand what you are committing to.
6. Pay the deposit to a third party
After signing the private contract you will pay a deposit on the purchase price. Sellers may ask for this directly but for obvious reasons you should pay it to one of the lawyers involved or (if they are well-reputed) the estate agent.
7. Cash payments
Sellers may ask for some of the purchase price in cash to avoid declaring it for tax. This is a common practice but nonetheless a tax fraud and if discovered you could be liable. Avoid participating in this if at all possible.
8. Don’t mess up the public deeds of sale
The sale is complete when you (or your representatives) and the seller sign the public deeds of sale before the notary (Spanish public official who presides over contracts). The date for signing the deeds of sale will be agreed between you and the seller earlier in the process. Make sure your travel plans, translator, legal representatives, power of attorney (if you are not attending in person), required documents etc are all in place on the appointed day – otherwise the sale could be seriously disrupted.
9. Plusvalia
This is a tax on the increase in the value of the property since it last changed hands. Responsibility for this falls to the seller but you need to confirm they are paying it. If the tax is unpaid and the seller leaves the country it will attach to the property, effectively making you liable for it. If the seller is a non-resident, to be on the safe side you may want to pay the plusvalia for them and deduct the value from the purchase price.
10. Register your title
You do not have to inscribe your title in the property register but this brings a number of advantages including the ability to secure loans against the property and protection from the seller’s creditors.
With proper research and the assistance of independent Spanish property lawyers there is no reason why you should not buy property with the same security as you would at home.
This article was written by Contact Law. If you would like to learn more about Spanish property, visit their site to find out how Contact Law’s property solicitors can help you.
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