How to Avoid Legal Problems When Buying Property in Spain
Buying property in Spain is an exciting investment, but it can also be a legally complex process if proper precautions aren’t taken. It’s crucial to be well-informed and follow the correct steps to avoid future legal issues that could affect your investment. Here is a detailed guide on how to avoid the most common legal problems when purchasing property in Spain.
Verify the Legal Status of the Property
Before conducting any transaction, it’s essential to ensure that the property you wish to buy is free of encumbrances or legal issues. Key aspects to verify include:
Property Registry Certificate: Ensure that the property is correctly registered in the seller’s name. You can do this by requesting a nota simple from the Property Registry, which provides information about the owner, any existing encumbrances (mortgages, liens, etc.), and the property’s description.
Encumbrances and Liens: Check if the property has debts such as unpaid mortgages, liens, or any other encumbrances. These will transfer to the new owner, potentially causing financial problems.
Building Licenses and Permits: If the property has been renovated or is under construction, verify that all work has the corresponding permits and licenses. Without them, you could face legal issues with the local council or even be required to demolish the property.
Confirm the Seller is the Legitimate Owner
One common mistake when buying property in Spain is not verifying that the seller has the legal right to sell. Ensure the seller is the legitimate owner by checking:
Seller’s Identity: Confirm that the person presenting themselves as the seller has valid official identification matching the records in the Property Registry.
Notarial Power of Attorney: If the seller isn’t the direct owner, ensure they have a valid notarial power of attorney to sell the property on the owner’s behalf. If it’s a company, verify that the signatory has the authority to execute the contract.
Sign an Earnest Money Contract or Pre-Contract
Before finalizing the purchase, it’s common to sign an earnest money contract (contrato de arras), a legal agreement between buyer and seller that guarantees the seriousness of the transaction. Ensure the contract includes:
Property Price: Clearly indicate the agreed price, along with payment methods, deadlines, and conditions.
Refund Conditions: Specify what will happen if either party fails to comply with the agreement. Typically, if the buyer backs out, they lose the earnest money; if the seller backs out, they must return double the amount received.
Review Tax Liabilities and the Property’s Tax Situation
Being aware of the property’s tax obligations is crucial. Main considerations include:
Property Tax (IBI): Verify that the seller is up to date with the Property Tax (Impuesto sobre Bienes Inmuebles or IBI). If not, you might inherit the debt.
Community Expenses: If the property is part of a homeowners’ association (e.g., an apartment block), ensure there are no outstanding community fees. Debts can be claimed from the new owner.
Municipal Capital Gains Tax: This tax is paid upon the sale of a property and is the seller’s responsibility. However, if not clarified in the contract, the buyer might become liable.
Review Ownership Documents
Before signing the deed of sale, review all documents related to the property:
Deed of Ownership: Verify that the property’s deed is correct, signed, and registered in the Property Registry.
Energy Certificate: Ensure the property has an energy efficiency certificate, mandatory for all properties in Spain.
Debt Certificates: Request certificates from the seller confirming there are no outstanding debts with the local council or homeowners’ association, if applicable
- Hire a Specialized Property Lawyer
Engaging a lawyer specialized in real estate law can prevent many issues during the purchase process. A lawyer will help you:
Review Legal Documents: Examine all legal documents and verify the transaction’s legality.
Advise on Taxes and Expenses: Provide guidance on taxes and other costs associated with buying the property.
Protect Your Interests: Ensure the purchase contract is drafted to safeguard your interests.
While it may seem like an additional expense, hiring a lawyer can save you significant money and stress in the long run.
