[Anonymous]

Hi,

It’s looking like I might have sold my apartment, so I would be grateful for some advice of the potential pitfalls. I need to educate myself about the process, and would welcome any advice.

So if anyone has any views on the following:-

Deposit – size of.
who normally holds the deposit
using a selling solicitor.
current scams
anything else 🙂

Thanks
JP

[Anonymous]

It all depends.
Deposit – size of.
DO,YOU HAVE A MORTGAGE ON YOUR PROPERTY. TAKE AT LEAST 10%, IF POSSIBLE GO FOR STRAIGHT COMPLETION.

who normally holds the deposit
NO HARD & FAST RULE, YOU KEEP IT. PROVIDE A RECEIPT ASK THE BUYER TO SIGN.
using a selling solicitor.
I WOULD NOT USE A SOLICITOR. ONCE YOU GOT THE MONEY ITS, SO BUYER HAS TO WORRY, CAVEAT EMPTOR, SELLER DOES NOT HAVE TO BE AWARE.
current scams

THEY ARE PROBEBLY THINKING OF ONE AT THIS PRESENT TIME.

ARE YOU ACCEPTING ANY CASH ? INSURE THEY ARE NOT FORGED. LEAVING THE NOTARY BE CAREFUL AND IF YOU ARE MORE THAN ONE PERSON DIVIDE THE CASH. DONT KEEP THE CASH IN BREIF CASE.

BANKERS DRAFT, TO ENSURE THAT ITS NOT FORGED. GO TO THE BUYERS BRANCH WITH THE DRAFT & A COPY. TO GET IT OK. IF YOU CAN GET TO THE BANK BEFORE THE NOTARY, THIS WILL MIMIMISE THE RISK THE OF SWAPPING A KOSHER DRAFT, WITH DODGY ONE.

IF YOU ARE A NON RESIDENT, THEN THE BUYER WILL WITHOLD THE 3% RENTENTION. ALSO ENSURE THAT THE CONTRACT IS DRAFT IN A MANNER THAT THE BUYER PAYS THE PLUS VALIA, OTHERWISE IT BECOME YOUR RESPONSIBILTY,

GOOD LUCK, GET READY FOR YOUR BANK TO RIP YOU OFF FOR CASHING IN THE BANK DRAFT WITH SOME SILLY BANK CHARGES.

GOOD LUCK

[Anonymous]

Hi Shakeel,

Thanks for the advice.

The property is mortgaged, selling for less than the mortgage! There will be no under-declaration, it’s already priced at a considerable discount.

My only concerns are,

1) Property is correctly transfered to new buyer. So I have no legal responsibility whatsoever.

2) The buyers funds are received by my morgage provider and thus the loan is cancelled

3) Retention deposit is lodged with the tax office.

I Don’t speak Spanish so this is beyond my ability to ensure is actioned correctly. I think I would be foolish not to use a solicitor, but I would like to hear why there is no risk for me for all 3 of the above

[Anonymous]

The property is mortgaged, selling for less than the mortgage! There will be no under-declaration, it’s already priced at a considerable discount.
THIS IS WHAT I WOULD DO, I AM SURE OTHERS WILL HAVE THEIR VIEWS.

ADVISE YOUR LENDER SO THAT THEY CAN PREPARE THE PAPER WORK, THEY WILL SEND THEIR GESTOR TO THE NOTARY OFFICE. HOW DO YOU INTEND TO MAKE THE DIFFERENCE BETWEEN THE SELLING PRICE & THE SHORTFALL ??? INFORM YOUR LENDER AND IF POSSIBLE PAY IN THE DIFFERENCE

My only concerns are,

1) Property is correctly transfered to new buyer. So I have no legal responsibility whatsoever.

ONCE THE NOTARY HAS CARRIED OUT THE ACT. THE TRANSFER WILL TAKE A FEW DAYS. YOU CAN GO TO THE LAND REGISTRY WITH SOME ONE WHO SPEAKS ENGLISH OR AN ENGLISH SPEAKING GESTOR TO VERIFY THIS. BESIDES ONCE THE PROPERTY IS NOTORIESED & MONEY HAS CHANGED HANDS, BANKS MORTGAGE IS SETTLED, WHY SHOULD YOU WORRY.

2) The buyers funds are received by my morgage provider and thus the loan is cancelled.

THE BUYERS MORTGAGE PROVIDER WILL ENSURE THAT THEIR INTEREST/CHARGE IS REGISTERED.

3) Retention deposit is lodged with the tax office.

IF YOU HAVE NOT MADE PROFIT ON THE SALE & ARE NOT BUYING ANYTHING ESLSE IN SPAIN. I WOULD NOT BOTHER HANDING OVER THE 3%, AS YOU WILL HAVE DIFFICULTY CONVINCING THE TAX MAN THAT YOU DID NOT MAKE ANY PROFIT ON THE SALE

I Don’t speak Spanish so this is beyond my ability to ensure is actioned correctly.

TAKE A TRANSLATOR.

I think I would be foolish not to use a solicitor,

YOUR CALL, THE SAD REALITY IS CAN YOU TRUST A SOLICITOR TO DO HIS JOB ?. AS THE FORUM IS FULL OF SOLICITORS, NEGLIGENCE ETC.

IN NORMAL CIRCUMSTANCES, I WOULD USE A LAWYER, HOWEVER AS I DONT HAVE CONFIDENCE IN THEM FOR REASONS WELL DOCUMENTED. I WILL NOT USE THEM.

but I would like to hear why there is no risk for me for all 3 of the above

[Inez]

You wont have a choice about the 3% retention as it is the buyer who is responsible for collecting this to hand to hacienda. There are other papers you need to deal with after a sale as you may have problems in the future and one is as you are selling well under value, it would be prudent to inform Hacienda prior to the sale as if they decide they dont beleive the price then they will hold all the retentative moneis from you

Keep the bank account over to collect the retention as it is sent back automatically.

If all is agreed, you could approach the buyers lawyer to deal with your paperwork. You should provide a purchase contract for the buyer, if not the buyer can do so but be careful. They are standard BUT they may try to fit something in.

You are liable for plus valor, a small tax to do with the increase in land value from the time you bought it.

Just prior to completion your bank needs o be informed so they agree on the amount to pay them back and a cheque to be made in their name. Make the appointment with the notary a couple of days prior to compeltion.

You may be advised to use a gestor who are a lot cheaper to act on your behalf. I would always recommed a lawyer is used.

Re deposit, standard is 3 or 6k paid as holding deposit for 2 weeks to allow the buyer time for due diligence – you will need to supply an updated nota simple to the buyer. Then after 2 weeks 10% non refundable deposit followed by completon within an agreed timescale.

Good luck

[Anonymous]

Hi Shakeel,

Thanks again.

I own 2 properties in Spain and I live in the UK with my Spanish wife.

I bought both properties without using a solicitor. Both were new apartments. For my first purchase I thought I would simply buy the property the Spanish way, my wifes family have bought many places over the years and I had faith that they would advise if anything was unusual. For my second purchase I was now “educated” in my families business acumen and decided that a solictor was the way to go. However, I decided, like you that if their was a serious issue after the event I would have no redress and since I was buying new from a developer funded by a Spanish Bank there was little risk. I obviously verified LFO etc myself.

Selling is a whole new experience.

My first hurdle would be the purchase contract, I will need one, I cetainly can’t write one and neither can my wife. We have sold the apartment privately so we do not have the services of a estate agent to call upon, whom I believe would normally prepare the private sales contract.

Your point about retention tax. I assumed there was no choice in the matter and the buyer MUST withold 3% of the purchase price. How can I prevent this? With regard to profit 😉 I am taking just under a 100k Euro loss (with fees, mortgage costs etc) on a apartment (never lived in) I paid 187k and got the keys in 2007.

Anyway I will continue to educate myself on the selling process. Thanks for the help.

[Anonymous]

Hi JP,

There is no way around the retention tax, and as Inez said, the buyer keeps it back and is supposed to pay it to the Hacienda.

An easy way of handling this (and it gives you confidence that the buyer has passed on the cash to the tax man), is to get the buyer to agree to let the notary pay the tax direct to the tax man (autoliquidacion). If the notary offers this service, ensure the buyer comes to the notary with their bank details. If you know its been paid, then you can chase the tax man for any repayment.

They’ll then pay it electronically and submit thde details, on the correct form (I believe Modelo 211), to the tax office. The buyer should receive a copy of the form but I think you should request a copy from the notary as well. Note … this may happen a couple of days after the sale, or if you sweet talk, then the notary may be able to get their office to process it the same day.

[Anonymous]

@jp1 wrote:

My first hurdle would be the purchase contract, I will need one, I cetainly can’t write one and neither can my wife

Indeed you can write one yourself. When I bought my most recent property privately that was exactly what the vendor and I did – drew up our own purchase contract. Handwritten!

[Anonymous]

Hi All,

Thanks for the advice it is all very useful and informative. Please keep it coming.

I would like to have written into the private sales contact a time stipulation of no more than 3 months to complete the purchase or less if the buyer agrees. I appreciate once a deposit has been accepted (by both side) then in effect without any clauses regarding time one or the other could drag their feet.

Can anyone see any downside to this?

Also is their a resource where I could download a typical private sales contract?

With regard to the retention, I have no problem with that being withheld and waiting a year for the refund. It just seems that with the buyer withholding this tax there is another huge area for potentail problems. For example what/who ensures he passes this tax on. What stops him claiming he ever witheld it??

Thanks
JP

[Anonymous]

“There is no way around the retention tax, and as Inez said, the buyer keeps it back and is supposed to hand it over to the Hacienda. “

In my experience there are many sellers knowing that they are selling to a non resident do not deduct the retention amount nor do the Notary touch the subject.

My suggestion to do so was in the above context. As you already have another property, the situation changes.

[Anonymous]

shakeel wrote:

“There is no way around the retention tax, and as Inez said, the buyer keeps it back and is supposed to hand it over to the Hacienda. “
quote]

There is not really a supposed about it!

The tax, if unpaid, would become a charge against the property.

The buyers lawyer ensures the tax is submitted.

Can anyone imagine leaving this tax to be paid by the seller?? They would simply skip-off to the UK leaving the poor buyer to foot the bill!

This is one of the few sensible processes in the Spanish property conveyancing system.

[Anonymous]

[quote=”Peter Good
The tax, if unpaid, would become a charge against the property.

The buyers lawyer ensures the tax is submitted. [/quote]

So in essence that is my guarantee that the tax is paid. It is lodged against the property and even though I would still have interests in Spain the tax office would simply see the new owner responsible and not pursue me.

However, in this case there is no tax to pay. So theoretically the buyer could still not forward the 3% retention. The tax office aren’t going to levy a non-existant tax on the property becuase no tax falls due to the previous seller making a loss.

What prevents this potential scenario?
Maybe this is the next scam for UK sellers (due to a falling market), retention tax withheld by the buyer and not passed on, knowing that a charge will never be placed against the property.

[Anonymous]

The retention is paid to Hacienda and then you have to prove that no tax is payable and claim a refund as explained above. They will also use it to pay any other outstanding non-resident taxes, if applicable.

[Anonymous]

Hi,

I wrote the last post before leaving work (I was tired).

I now appreciate that Hacienda will never know that there is no oustanding tax liability on the property since they will not know the original purchase cost.

So its assumed there is always a liability until proved otherwise..

So one card stacked in favour of the seller for protection.

[Anonymous]

Peter Good wrote:

There is not really a supposed about it!

The tax, if unpaid, would become a charge against the property.

The buyers lawyer ensures the tax is submitted.

Can anyone imagine leaving this tax to be paid by the seller?? They would simply skip-off to the UK leaving the poor buyer to foot the bill!

This is one of the few sensible processes in the Spanish property conveyancing system.

Hi Peter,

Aaaah but isn’t it strange how the little details in life can upset the simplest of processes. For example, if the Buyer had some cash flow problems, then they could choose to let a charge go against the property, until they has some liquidity to pay the charge off. Would the Seller be left in limbo, trying to claim back a payment that hadn’t been made? At the least, it wouldn’t make things easier.

The point that I was trying to make, and given that the buyer doesn’t have to have a lawyer ….. if you want some certainty that things have happened then use the notary to do the autoliquidacion and get a copy of form 211 from the notary as proof of payment. Both the notario’s in my nearest town perform this service.

[Anonymous]

” if the Buyer had some cash flow problems, then they could choose to let a charge go against the property”,

Yes, it can. It may also that he never takes the charge off & pass it to next buyer. Knowing how chaotic the process is the new buyer will end up paying. As it has happened in many cases to foreign buyers.

Would the Seller be left in limbo, trying to claim back a payment that hadn’t been made?

Yes, He/She would be. barring the current situation most of the people would have made a profit on their property so once all the cost, tapering relief is allowed the situation would have even it self out. I AM NOT SAYING THIS WILL HAPPEN IN ALL INSTANCES, THIS IS JUST A DIFFERENT ANGLE ON THE SUBJECT.

At the least, it wouldn’t make things easier.

[Anonymous]

Mortimm,

Thank you for that information. This is exactly the sort of knowlegde I am looking for and will almost certainly try and arrane autoliquidation on sale.

[Anonymous]

@mortimm wrote:

Hi Peter,

Aaaah but isn’t it strange how the little details in life can upset the simplest of processes. For example, if the Buyer had some cash flow problems, then they could choose to let a charge go against the property, until they has some liquidity to pay the charge off. Would the Seller be left in limbo, trying to claim back a payment that hadn’t been made? At the least, it wouldn’t make things easier.

The point that I was trying to make, and given that the buyer doesn’t have to have a lawyer ….. if you want some certainty that things have happened then use the notary to do the autoliquidacion and get a copy of form 211 from the notary as proof of payment. Both the notario’s in my nearest town perform this service.

It’s worth considering that a large proportion of properties sold are done so with either a mortgage to settle, a new mortgage taken to buy, or both.

In these cases the bank will employ a Gestoria to handle the tax submissions anyway.

Property sales without mortgages will almost always include a lawyer representing the buyer and sometimes the vendor too. To not employ a lawyer is folly, rather like not bothering to stop at a crossroads, it is simply idiotic not too.

But, if for some reason the buyer does not employ a lawyer, then the notary would usually make an extra charge to ensure the paperwork is processed.

For example, after the title deed is formalised at the notary, then all documentation is moved on the the land registry for inscription. The land registry cannot do this unless all taxes are proven to be paid up. Without this documentation, the property will not be officially conveyed from vendor to buyer, this means the new owner does not officiall hold title and will therefore stack up fines for non payment of taxes etc.

In 9 years of sales experience, I have come across only 1 example where the owner did not employ a lawyer to process the conveyancing. When they brought the property in to my office to sell, my checks revealed that the property had been unregistered at the land registry for 3 years and the title deeds were still with the notary. The vendor had to pay almost €8,000 to get the land registry side completed and pay the fines before we could sell the property, so to delay any payment of taxes is expensive and counter-productive.

[Author]

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