Editor’s note: As foreign buyers return to Spain in increasing numbers, some will be tempted by the dream of a rural idyll in the Spanish countryside, where some of the most beautiful scenery in Europe can be found. However, the risks of buying in a rural environment are significantly higher than in consolidated urban areas. Legal expert Raymundo Larraín Nesbitt explains.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of August 2014

The following article is the fifth, and last, on my five-part series ‘How to Buy Property in Spain Safely‘. You may also be interested in reading Buying Resale in Spain, Buying Off-Plan Property in Spain, Buying Distressed Property in Spain or How to Buy Commercial Property in Spain.

Introduction

Rural property; to many these two words conjure idyllic visions of a bucolic lifestyle in a placid setting silhouetted against a dramatic dusk sky drop. To me they simply mean accident waiting to happen. Call me jaded.

Buying rural land in Spain is unlike anything in the United Kingdom; it is riddled with problems. Beware of anyone telling you the opposite; they are lying through their teeth. It accounts for well over half of the horror stories affecting expatriates we read in the press every now and then. The main reason behind this is that most people do not fully grasp the concept of rural land in Spain which differs from their home country. From this simple misunderstanding stem most of the problems i.e. buying on the wrong assumption you will be allowed to build a new property there.

I simply cannot stress enough the importance of appointing a conveyance lawyer from the outset on buying rural land in Spain. This is the single best advice I can give anyone.

Eight Useful Tips for Buyers of Rural Property in Spain

1. Is the Property Registered under the Vendor’s Name?

This may sound as a fairly obvious point but quite often than not I’ve found out the person who had the property listed at the estate agency was not the registered owner. This can be explained for a number of legitimate reasons i.e. the registered owner has passed away recently and the inheritance tax liability has not been sorted out yet. Until the Spanish IHT is not settled, the property cannot be registered, mortgaged or sold by his beneficiaries.

With rural property in particular it is often place the vendor is not the registered owner (specifically when buying from locals). This is because inland property may be passed several times from one generation to the next without anyone actually bothering to update the change of ownership at the Land Registry. After all, in a small village everyone knows each other and who owns what; so it’s fairly pointless (from their perspective) to lodge the new details. There are several legal ways to overcome this minor setback; such as an ‘Acta de Notoriedad’ or else following an ‘Expediente de Dominio’.

This will likely be the first check your appointed lawyer will carry out. You can actually request a Nota Simple yourself from the Land Registry where the property is located; either physically or online (you have to be a registered user for the latter).

Only the registered owner or else someone appointed by him acting as proxy (through a Power of Attorney) can sell a property.

2. Is the Title Deed Accurate? Moreover, does a Title Deed even exist?

It may come as a surprise, but do not take a Title deed for granted when it comes to rural land. Indeed, Title deeds may not even exist. As a rule-of-thumb I recommend walking away from a rural property that has no Title deed. The legal nightmare you are going to get yourself into is seriously not worth the aggravation.

Should a Title deed exist, it is frequently outdated and inaccurate. The golden rule is not to buy rustic property (in fact any type of property) until a vendor has fully updated all the missing details at the Land Registry (at their expense) to the buyer’s lawyer satisfaction. Unregistered extensions have legal repercussions on seeking finance that one ought to be fully aware of as I explain below in two examples; one from a buyer’s and one from an owner’s perspective.

From a buyer’s perspective that plans to use the rural property as collateral to secure a mortgage loan, let us think of a property which has undergone extensive refurbishment and extensions over the years to the point it is now a villa with a whole new wing plus a swimming pool. When a lender checks the Title deed only a one-bedroom campo house is mentioned with an orange grove; there is no trace of a villa. Consequently a lender will only volunteer a small fraction of the asking price as it considers the new extensions do not exist (legally). This may jeopardise the sale for lack of appropriate funding.

From an owner’s perspective, consider the case of an elderly couple owning rural property of substantial value with multiple unregistered extensions. They seek to improve their lifestyle by requesting a lifetime loan. A lender will examine the deeds of the rural property and will only offer them a mere fraction of what they could have achieved had these extensions been properly registered.

The lesson to be learnt here is that what is not legally registered at the Land Registry is as if it did not legally exist to a lender. For those seeking finance (either as a buyer or as the owner) a lender’s mortgage valuer is obliged by law to reduce the property’s valuation in line with any non-registered features meaning loan seekers stand to receive significantly less than what they would otherwise be entitled to i.e. a rural property with a market value of £500,000 which villa and outbuildings remain legally unregistered would only fetch a value of £100,000 in a lender’s eyes. Bottom line; lodge at the registry all extensions and refurbishments, it’s in your own best interests.

3. Are There Charges, Encumbrances, Liens or Debts Against the Property?

Self-explanatory. Any debts go against the property itself, not against the owner i.e. an outstanding mortgage would be a financial lien against the property. Any debts or charges become the responsibility of the new owner. This is why it is the conveyancer’s duty of care to ensure a Title deed is passed over free and clear of charges, encumbrances and debts. Deed restrictions create limitations or obligations on the property use that a would-be buyer should be made aware of prior to acquiring the land.

Rural property abounds with easements unlike its urban counterpart due to its very nature. Common examples:

• Right-of-way: adjoining plots of land may have a lien to facilitate access to a neighbour’s property. Another example; Shepard’s may have a right (consuetudinary law) to enter your property at certain times of the year to herd their flock (transhumance).

• Hunting rights: your land may subject to cynegetic interests and turned into a hunting ground during the shooting season. Be at the ready to collect all those spent cartridges.

• Right-of-view: this encumbrance caps the building height on the plot of land so as not to impede the views of an adjacent plot.

• Right to extract water: from your private well or from a stream running through your property’s boundaries.

4. Is the Property Lodged Accurately at the Land & Cadastral Registries?

Rural property more often than not is inaccurately described at both the Land Registry and the town hall’s Cadastral Registry. Typical discrepancies include but are not limited to:

• Plot size: frequently real-life measurements differ from what is reflected at both the Land Registry and ‘Catastro’. This is why on my eighth tip, further below, I strongly recommend a chartered Surveyor is commissioned to carry out a surveyor’s report where such discrepancies will come to light. This discrepancy can be explained because land over time may be extended to compromise adjoining plots which are bought or else may be reduced as a result of successive inheritance procedures that divide it. These changes may have gone unrecorded officially.

• Inaccurate property description: as mentioned above in my second tip we can think of extensions or refurbishments made to the property which have gone unregistered by the owners to the point a dwelling’s footprint has been illegally increased.

• Boundaries: rustic properties’ boundaries are hazy at best. Limiting the boundaries of a plot of land using the names of neighbours long deceased is not exactly ideal. This can be highly confusing. Another example is that rural land is frequently demarcated by white boundary stones (‘mojón’) or some iconic landmark (old tree). Needless to say boundary stones can be displaced (heavy rainfall) and a tree can always be chopped down. These blurred lines give rise to interesting legal disputes between adjoining plots of land.

The buyer’s lawyer should ideally insist a vendor corrects and updates the reality so it is reflected legally in both the Land and Cadastral Registries prior to the property being acquired. Any discrepancy will bring about legal and financial consequences such as those I have highlighted above in my second tip regarding seeking finance from a lender using the property as collateral. A buyer’s lawyer can always practice a retention at completion to safeguard the amendments will be carried out by the vendor but ultimately I advise not to complete until they are effectively carried out.

5. Is the Charming Rural Villa Built on the Land Legal? Specific Focus on ‘Casa de Aperos’

I feel compelled to emphasise this point as it affects scores of rural landowners and may in fact lead to criminal prosecution by the state.

Some owners, either out of (inexcusable) ignorance or else purposefully, abuse the planning system using a legal loophole (‘casa de aperos‘) to circumvent planning restrictions to build on rural land. Traditionally Spanish Authorities were lenient in such cases to the point nothing was done for decades. However over the last years the Government has taken a firm stance clamping down on all who build on rural land earmarked as unfit for development.

The most common example is when an owner of rural property applied for a licence to build a tool shed (‘casa de aperos’) of 3*3 m² to store the tools to plough the fields. The landowner purposely exploits this legal ‘loophole’ to circumvent planning limitations and build a rustic villa instead. The reason a landowner would breach planning laws and risk prosecution is because a rural plot of land stands to appreciate significantly on building a villa.

This may lead local authorities to threaten with a demolition order, at the owner’s expense, besides imposing heavy fines and even face prosecution in the most serious cases. Almost every case we read on the newspapers of British having their rural property under threat of looming demolition relates to what I have just explained.

A buyer’s lawyer will determine if a rustic villa does have planning permission from the local town hall. If it doesn’t, then I strongly recommend a buyer walks away from it to avoid a legal quagmire. Beware of all those rural properties advertised “with planning permission”. Most are ‘web bait’.

6. Does the Property Comply with both Town Hall and Regional Planning Regulations?

This carries on from the previous point. It is essential your conveyance lawyer ensures the rural property complies with both local and regional planning authorities.

Remember the Prior’s? The impact on people’s lives on having two administrations squabbling over planning competencies simply cannot be understated. This is a real-life example on how a British couple’s dream to live a placid retirement inland was shattered. The Prior’s applied for a Building Licence at their local town hall’s planning department which was subsequently issued. Relying on its validity they went on to build a villa on their rural land; so far, so good. However, unbeknown to them the BL was challenged administratively by a third-party. This led to an ongoing dispute between the town hall and the Regional Planning Authorities over the legality of the issued BL. Regional Authorities are empowered to override planning decisions made by hierarchically lower administrations, such as a town hall, so they are bound to win. As a result their dream villa was demolished – at their cost.

Another example of the importance of double-checking everything is above board on planning issues is Valencia’s Land Grab Law. Admittedly this is a problem that only affects one of Spain’s seventeen Autonomous Communities but the international (negative) media repercussion it’s had has been huge.

7. Is the Property Connected to the Mains? Does it have Access to its own Running Water Supply & Utilities?

Spain is not a “dust bowl” (as one of my London friends enjoys teasing me). Spain’s climatology is diverse as it’s affected by both the Atlantic Ocean and the Mediterranean Sea. As a result north and north-west Spain has a cold and wet climate with heavy rainfall comparable to the UK. Whereas south and south-east Spain enjoys a privileged warm weather all year round. The practical impact this climatic diversity has on rural property cannot be underrated.

Whilst water may not be an issue in the north, southern Spain is a whole different story. It often suffers from severe bouts of draught lasting several months. Local Authorities will enforce severe water restrictions. Water shortage coupled with sweltering heat is a lethal combination that will kill off any tree or plant in your property. Rural landowners have devised countermeasures over time to offset draught’s effects such as digging up their own wells to secure access to water. However even such wells dry up from time to time as was the case of my clients who were baffled because they had basically been cut off from their water supply and were very much isolated in their campo house in the middle of nowhere.

A surveyor’s report will highlight for example if the property is connected to the mains drainage. Frequently rural properties are not connected to the mains sewarage and have their own septic tanks in use which leads to problems as these must be emptied every now and then to avoid ‘overflow’ and ‘seepage’ problems, not to mention health-related issues.

Additionally few rural properties are connected to the electric grid. It is very important a would-be owner fully understands what utility connections are available – if at all – and its limitations i.e. power surges. It is commonplace rural properties have their own generators which bears severe restrictions on the use of household appliances.

8. Hire a Chartered Surveyor

I have badgered relentlessly over the previous seven points, with practical examples, on the usefulness of hiring a surveyor. In my opinion it should be mandatory when it comes to purchasing rural property (in fact, any kind of property). The cost of a valuation survey will be largely offset by the problems that are picked up by a seasoned professional. This valuable report can be then used by a lawyer to know what weak points to watch out for and which are likely to give problems down the line. The lawyer will then use this insight to his client’s advantage knowing what should be negotiated and worded into a Private Purchase Contract, prior to completion, to better protect the buyer’s interests. Bear in mind that conveyance lawyers, under normal circumstances, do not visit properties; we only examine the associated legal paperwork.

Taxation

From a buyer’s perspective, rural property is subject to Property Transfer Tax (ITP) which varies, depending on the Autonomous Community where the property is located, between 7 to 10%. Rural property is a speciality of how to buy resale property.

Post-Completion Checklist

A property normally takes two to three months to be registered at the Land Registry. The reason being is that all taxes associated to the purchase must be paid first. Only then can the deed transferring ownership be lodged at the Land Registry. A buyer can ensure everything is above board on requesting a Nota Simple. I would advise requesting one only after three months have elapsed since completion.

You should open a Spanish bank account if you haven’t done so already. Utility companies do not accept overseas payments and like setting invoices as standing orders against your Spanish account. You should set at least as standing orders all the following:

• IBI tax. Paid annually (akin to the UK’s Council tax).

• Garbage collection. Paid twice or once a year depending on the town hall.

• Utility bills (invoiced quarterly in the case of water and monthly with electricity) if applicable.

You are also liable to file Income Tax on owning property in Spain every year for which you may need to appoint Fiscal Representation in Spain.

Finally, on owning property, I cannot stress enough how advisable it is that you make a Spanish will to dispose of your Spanish estate. This will not preclude any other made in your home country and is limited exclusively to your Spanish assets. It will save your beneficiaries time, money and hassle at a time of bereavement.

How to Buy Rural Property in Spain – Conclusion

Buying rural land in Spain is normally fraught with problems; there is no other way around it. You really need to take on board a good conveyance lawyer from the outset to help you through. Good luck! You are going to need it.

“So, does that mean we can’t use our well?” Client on realising the two-thousand-year-old Roman well on his newly-acquired rural property dried up about the time Carthage was taken over during the Third Punic War (animus iocandi).

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

Legal services Larraín Nesbitt Lawyers can offer you

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