Reply To: Buying a property in a company name



Dear Greg,

David is right with his comments regarding your consultation, buying on a company’s name might be a good idea…or bad, depends.

As a lawyer I am dealing with a case like that at the moment, my client wants to buy a big farm house with land in Málaga Province and the property is in a company’s name ( Spanish S.L. ), well I have been discussing it with my client and my advice is ti buy the property, NOT the company.

Reasons: just as David says, you can’t be accurate checking the liabilities and debts of the company, not as you can with a property. According with the Spanish Law when you buy a property the Land Registry is automatically closed for embargoes, claims or debts which were directed to the previous owner,( in fact the Spanish Land Registry is a model of efficiency in Europe ) . You can’t do that if you buy the S.L. as there could be hidden debts or legal problems which might reach the S.L. ( and therefore the property) even after it is sold. Another problem is powers of attorney given by the S.L. previous to the sale….very dangerous.

And the definitive reason: If the company has no business activities in Spain and is just incorporated to own a property , when you come to buy trying to avoid the 7% transfer tax ( in theory applicable only when you buy a property not a company) the Tax Office might consider it a “fraude de ley” therefore claiming a 7% tax as it were the transfer of a property ( actually it is ).

Anyway you should meet a spanish tax advisor or a lawyer in your area.

I hope this opinion helps, and excuse my english !

Jose Maria Sánchez Alfonso
Lawyer, Abogado
Fuengirola, Costa del Sol