Disclaimer: this post is of general interest only and is not to be construed or intended as substitute for professional legal advice. Seek legal counsel on your matter.
You have fallen in love with a property in Spain and now it’s time to take the dip and sign the contract! This short article is written with the aim to provide a buyer with basic guidelines on what you should be asking a seller for. It is structured depending on whether you are buying off-plan or resale.
Whilst it is possible to buy a property in some overseas jurisdictions, including Spain, without having to appoint a lawyer, it would be very unwise to do so. Buying a house is one of the biggest investments most people make in their lifetime. So why take the risk by not obtaining proper legal advice? It is only common sense not to accept lawyers recommended by those from whom you are buying (developer, agent), much less if offered to you free-of-charge i.e. in-house lawyer working for an estate agency or developer.
Banks and notaries are not your own personal lawyers, and will not carry out legal checks to protect buyer’s legal interests; that is not their job. This is a common blunder buyers make, particularly non-resident ones.
Instruct your own independent lawyer and never under-declare; besides being illegal, you will pay a massive Capital Gains Tax bill on selling it later on. It is illegal, it is stupid and only benefits the seller, not the buyer.
Remember to store the following invoices on buying safely which can be used to GREATLY mitigate your tax bill on selling:
- Lawyer’s fees (on buying)
- Notary fees (on buying)
- Land Registry fees (on buying)
- Taxes (on buying), yes these can be offset in full on selling – you're welcome
- Verify the plot of land is registered under the developer’s name whose contract you are signing.
- Request a copy of the developer’s Building licence.
- Request bank guarantees or insurance policy securing ALL your stage payments, including the initial holding deposit paid to the developer/estate agent. These will act as a safety net safeguarding your interim payments should the developer complete the property late, or not at all.
- Ensure the development is compliant with Coastal Laws.
- If the development is finished, request a copy of the Licence of First Occupation.
- If the development is finished, ensure you do a snagging list before completion.
- Post-completion: ensure your property is now registered under your name at the Land Registry and never take anyone’s word for it! Verify it yourself.
- Post-completion: arrange payment of local rates (IBI & basura) as a direct debit against your Spanish bank account.
- Post-completion: if you are non-resident, ensure you pay every year your Non-Resident Imputed Income Tax (NRIIT) on your Spanish property.
Please note we only have in mind physical individuals acting as sellers on writing this rundown, if companies are involved, then far more checks would be necessary.
- Request a copy of a seller’s Title deed.
- Request a copy of a Licence of First Occupation, where possible. This is required for holiday rentals and also by lenders to raise finance against a property (i.e. to buy the property itself, or because you need money to pay health-related expenses later on in life, etc).
- Ensure the person/s you are dealing with as sellers are the ones registered as the property owners. If not, ensure they are acting through a valid Power of Attorney.
- Request an updated nota simple, or else procure yourself one.
- Ensure the property is classified legally as a dwelling and not as commercial property.
- Ensure the property is freehold, not leasehold.
- Verify the property is not in arrears with its Community of Owners, if applicable. A buyer becomes liable for the previous 3 years in arrears plus the current one (total 4 years).
- Verify there are no outstanding local rates to be paid: IBI and refuse charge (basura, in Spanish). A buyer becomes liable for the previous 4 years.
- Verify there are no tenants living in the property. Under new stringent rental laws tenants at times are legally entitled to stay 8 or 10 years in a property, even if sold on! The buyer must respect the duration of the whole rental contract, unless a tenant formally agrees to leave ahead in exchange of ‘compensation.’
- Ensure the property is unencumbered (no mortgage against it).
- Ensure the property is free of liens i.e. rights of way, rights of view, hunting rights, gathering rights, well rights…
- Ensure the property is free of charges i.e. no registered embargoes against it.
- If investing in a Buy-to-Let, verify your Community of Owners has not banned or restricted holiday rentals.