A Brief Guide to Buying Property In Spain

Due diligence

It is important to do some legal checks before signing any contracts, or making any non-refundable payments. You need to confirm that the property belongs to the seller in its totality, and that it is free of charges (in Spain mortgages, tax obligations, and other charges are ascribed to property rather than individuals). In some cases, you may also need to run a number of other checks related to land classification, urban development plans, the condition of the property, maintenance costs, and community obligations.

Your lawyer can advise you on the appropriate level of due diligence in your particular case. In most cases, the following checks are carried out:

Property Registry Report

Check the property registry report (known as the nota simple in Spanish), which lists the owner(s), and reveals if there are any debts and/or charges, such as a mortgage, attached to the property.

Title Deeds

Check the title deeds (Escritura in Spanish), a copy of which you should be able to get from the vendor. Amongst other things, you need to confirm that the property is accurately described in the deeds.

Planning Permission

When buying off-plan from a developer, or even from an investor selling on an off-plan property, it is sensible to check that the property has the necessary planning permission, given the recent problems with illegal building in Spain. If a newly built property has a licence of first occupancy (see below), then it is fair to assume that it was legally built with a valid construction licence.
 
When buying a resale property, planning permission is normally not an issue, though you should always check with your lawyer, as resale properties in some parts of Spain may have been illegally built in their day. However, it is quite common for resale properties in Spain to have extensions or additions that were carried out without planning permission, and which are not registered in the deeds. These need to be identified, and legalised before you proceed to buy.

Tax payments

Check the latest payment receipts for local taxes (IBI) to ensure that they are up to date, and in some cases check with the town hall (ayuntamiento) that there are no problems with unpaid rates from previous years. The town hall can issue a certificate to this end. Any unpaid rates become the new owner’s liability.

If buying a resale property you might also need to check the how much local capital gains tax (Plusvalía) will become due when the property changes hands. In theory the seller pays this tax, but in some cases the buyer agrees to pay it. It is important to know how much it is, and who will pay it before committing.

Utilities

When buying resale property it may be prudent to ask the seller to demonstrate that all utility bills are up to date, and to specify in the deposit or private contract (if you enter into any such contracts) that they will be up to date at the time of granting of the public deed of sale.

Community bylaws and fees

When buying property that is part of a community of owners (Comunidad de Propietarios) it is important to know what the bylaws governing the workings of the community are, and what the financial obligations are per period. A copy of the community bylaws can be obtained from the secretary of the community, or the land registry. You may also need to check with the president, or secretary of the community, that the previous owner is up to date with community bills.

Insurance if buying from a developer

Developers who sell property under construction are legally required to arrange bank guarantees to protect any payments made to them before the property is completed. This ensures that you get your money back if the developer fails to complete. Never buy off-plan from any developer who does not provide bank guarantees for all stage payments. Note that developers are also required by law to hold an insurance policy which guarantees for 10 years eventual damages occurring due to defects affecting ground work, supports, beams, reinforcement bars, retaining walls, or other structural elements.

Licence of First Occupancy

Once again, when buying from a developer, it is important to check that a licence of first occupancy (licencia de primera occupación) has been granted by the town hall before completing. Utility companies will not supply properties without this licence, which is why you should never complete without when. Though some may try, developers cannot force you to complete without this licence.

Property Survey

There is always the option of having a chartered surveyor check a property before you buy. This is advisable if there are any doubts as to the condition of the property. A survey can also be carried out on new build property to confirm that it is delivered in the condition promised.

© Mark Stucklin (Spanish Property Insight)

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