Buying Property in Spain
A comprehensive practical guide to buying a property in Spain
4. Buying a re-sale property
Whether you are buying a property directly from the owner, a friend of the owner or an estate agent,remember that before committing yourself to buy any type of property in Spain,it is advisable to meet an independent solicitor with expertise in this field. A short meeting face to face or a telephone conversation may be sufficient and can save you a lot of worry and sometimes money.
In Spain,there are many English speaking solicitors who specialize in conveyancing matters.If it is possible,try to find a solicitor who has also estate agency expertise and local market knowledge as they will be able to give you a broader range of advice.
Your solicitor will give you an outline of the whole conveyancing transaction,advising you on topics such as:ownership, finance,tax implications,inheritance issues,and guiding you through the main steps of your particular transaction,foreseeing any possible pitfalls in advance.
4.1 Making an offer
After discussing the matter with your solicitor,ask him to place an offer for you to the owner or to the selling agent showing your intention of buying the property. An offer,duly prepared by your solicitor,will be drafted taking into account the circumstances applicable to your chosen property and will not compromise you to buy the property until your solicitor con firms that it is safe to proceed.
In practice,if the seller accepts your offer,you will be asked to pay a reservation fee typically between 300 and 6,000 euros until the contract for sale and purchase has been agreed and exchanged,normally a few days later. Your solicitor will explain the consequences of making this payment,and will make sure when drafting the offer that this money will be refunded to you if something is not correct.
If you are buying a property through an estate agent, the selling agent will request that you pay a reservation fee as above and sign a document to secure the transaction. Remember always to seek independent legal advice prior to committing yourself to buy or to make a payment or to sign a document .A telephone conversation with your solicitor should be suffcient.This is a very important point to consider as estate agents normally have standard documents that may contain binding terms and conditions difficult to avoid at a later stage. Also,if you change your mind you may not be able to recovery your money.
4.2 Preliminary searches
Once an offer to buy is accepted by the seller and
before signing the sale and purchase contract,your
solicitor will make pre-contract searches and enquiries
that are specific to the particular transaction.Also,your
solicitor will need to have access to the Title Deeds in
order to check that the seller is the registered owner
of the property and is entitled to sell the property free
of any charges,encumbrances,mortgages,restrictive<
covenants,tenants and occupiers ´rights.
All documents need to be examined in detail to ensure
that there are no matters adversely affecting the property.
In some circumstances,various other documents may
need to be checked to make sure that there are no local
authority notices,which affect the property.Your solicitor
should report to you in writing with the results of his
findings,explaining all the significant points.
If for any reason you are not using the service of a solicitor, at least make sure that the following investigations are carried out:
Ask the seller for a true copy of the Title Deed,known
as the “Escritura ”,which is signed before a Spanish
Public Notary.Do not rely on purchase documents,
which are not witnessed by Spanish Public Notaries. Under Spanish law,purchase contracts that are not
witnessed and issued in front of the Notary Public
will not have been produced to the Land Registry for
registration.
Apply for a Land Registry office copy entry to make
sure that the property is duly registered in the seller ´s
name and to find if there are any registered charges
affecting the property.Be aware,that if there are any
registered charges or mortgages affecting the property,
the law makes the new purchaser liable for them.It
they need to be discharged before
completion.
It is very common that the office
copy entry may reveal some “tax
warnings ”.Most of the properties
are by law charged with an entry
at the Land Registry issued by the
Inland Revenue.It does not mean
that there is something wrong but
the necessary checks need to be
carried out.
Check out the accurate measurements of the property and if necessary appoint the services of a surveyor.The sale of a property is normally based on the “cuerpo cierto ”which means that you are buying the property as it is and you will not be able to claim,after the purchase contract is signed,if you find the property has less square meters.
Find out if there are tenants in the property as the
new buyer is by law obliged to honour the tenancy
agreement.
If necessary to your particular transaction,file an
application to the City Hall to obtain a planning
certificate for the property.
Ask the seller to provide you with the last four years
receipts of the City Hall rates payments.
Get copies of the Community Owners Rules and
the Minutes of the most recent community meeting.
Check there are no outstanding fees.The law makes
the buyer liable for those fees using the property as a
guarantee of the payment.
4.3 Preparing and exchanging the contracts
If the above investigations are satisfactory,then a contract to sell and buy the property,
containing all
the terms and conditions of the transaction,needs to
be drawn up.is agreed,the parties
exchange contracts and the
buyer will normally pay the agreed
deposit to the seller generally 10
to 20%of the purchase price.
This deposit is normally non-returnable once contracts have
been exchanged.
4.4 The purchase contract
There are several types of contracts
that are commonly used in the
property business.The type of
contract to be used may vary from one
purchase to another.It will depend
very much on the circumstances of
the particular transaction and both
parties ´intentions.Your solicitor will
explain the legal consequences of
the contract to be agreed in your particular case.
A purchase contract contains a number of clauses.It is
important that the seller ´s details are correctly stated in
the contract and he appears as the registered proprietor
at the Land Registry.The property should be clearly
identified including full Land Registry details.The full
purchase price needs to be correctly stated and do not
agree to show a lower figure in the contract,as this can
cause tax and legal problems in the future.
Make sure that registered charges are to be fully discharged at completion and make provisions if you decide to carry on with the seller ´s registered mortgage. In this case,the contract should state that the existing mortgage amount will be deducted from the purchase price.
Unlike the Title Deed known as "Escritura ",which is the final purchase contract witnessed by the Spanish Notary Public at completion,the private purchase contract signed between the parties at this stage,will not offer you complete security of the transaction,as this is not produced to the Land Registry for registration. Therefore, when you sign the private contract with the seller,it is important not to pay the full purchase price agreed, instead an interim payment known as "arras "normally 10%or 20%of the purchase price is the common practice.
Basically under the terms of "arras ",the parties will be able to agree that if the buyer then fails to complete he will lose the payment made.If the Seller fails to complete then he will have to return double the amount received. Alternatively,it can be agreed that neither party will be able to pull out of the contract without the other party ´s consent,so making each other liable to complete. If one of the parties fail to complete there will be a breach of contract and the party at fault can be sued for damages.
As to the advantages and disadvantages of each type of agreement you should discuss this with your solicitor who will advise you accordingly.
4.5 Completion
Unlike in the UK,completion will normally take place at the Notary Public Office on the date agreed within the contract.The Notary Public is acting as a Government witness and takes care that the purchase deed terms and< conditions comply with Spanish formalities.
Both parties will have to prepare all the necessary paperwork and whatever is required in order to transfer and convey the legal estate in the property to the buyer. The Transfer Deed (Escritura)must be executed by all parties in the presence of the Notary Public and sets out, amongst other things,the parties involved,the agreed price,the date of completion and a full description of the property.The buyer hands over the balance of the sale price and the seller releases the keys and gives vacant possession of the property.
Powers of Attorney
Very often it will not be convenient for you to attend completion at the Spanish Notary Public Office. A practical solution is a Power of Attorney.This document authorizes the person appointed (the "Grantee ")to do whatever you (the "Grantor ")authorize eg.Sign all relevant documents for the purpose of the purchase.
Your lawyer can discuss your requirements with you and prepare the necessary document.
4.6 Post completion
After completion,the appropriate taxes need to be filed
with the Inland Revenue or Government Tax Office
and the Title Deed (Escritura)submitted to the Land
Registry to have the transfer of the property registered.
Registration of the title is completed,normally some month later.
Most Spanish properties have freehold title,which means
an owner is entitled to absolute possession of the property
for an indefinite time.
The change of ownership should be informed to the City
Hall and to the community of owners.Also utility contracts
need to be changed into the new owner ´s name.
Once the Title Deed (Escritura)has been registered,keep
a receipt of all the payments and request a completion
statement of accounts.
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