SPANISH LEGAL SYSTEM “not difficult … just different”
The Spanish legal system of purchasing property is not rocket science, but it is different to purchasing in the UK, which means it is important that you have a rough understanding of what to expect.
These notes are designed as a guide to assist you when you are considering purchasing an overseas property and will make clear that you need legal representation, preferably from an English-speaking Lawyer.
Worth considering
A reputable local Spanish Lawyer acts in your absence, on your behalf, helping to protect your financial and legal interests throughout the purchase. Because he is based in the country where you are making your purchase, your Lawyer is on the spot to sort out queries.
Procedures and terminology
Sometimes, they are difficult to understand. Consequently, you may decide that Lawyer’s fees, usually around 1% of your net purchase price, is money well spent because of the peace of mind it will give you throughout your purchase.
Purchasing on a residential development
If you choose to purchase on a recently built residential development or a development already under construction, “the developer” is likely to have historical property rights and responsibilities on the site. This helps simplify things, because it is likely that those people who have already purchased on the site will have already ironed out any discrepancies. A chat with existing owners on a development can be extremely beneficial and may help put your mind at rest if you have any uncertainties.
Purchasing older property
The best advice really is to have local legal advice. Your Lawyer will automatically look into “past ownership and inheritance”, because under Spanish law even remote family members could have rights in the property. However, if you get your title registered from the legal owners, you will be automatically protected!.
Don’t end up disappointed
Because of the current high demand for properties in Spain, if you find something you like it is important to “reserve” it. A reservation fee is usually around £2,000, which can be made using a sterling cheque. Once this reservation has been agreed, the price is fixed, and the property will be removed from the market immediately. In these cases, drawing up a contract is essential and your Lawyer can help you with this issue. Because of this system, “gazumping” is not possible in Spain.
Outstanding Debts
In Spain, any outstanding property tax or unpaid service charge is usually attached to the property, which means you could become liable for the debt in place of the former owner. Your Lawyer will ensure all debts are paid, and will retain, on completion, the relevant monies to pay any outstanding debt on your chosen property.
What will my Lawyer do?
He will verify that the property or piece of land is “free of debt” (freehold). If it does have a debt attached, it is normal for the lawyer to sort this out in front of the 'Notario' (see below for “Notario”).
Amongst other things, he will check that:
1. The vendor has good and marketable title to the property and is freely entitled to sell it.
2. There are no charges or fees which need to be settled.
3. Taxes and other legal debts due on the property have been paid.
4. All permissions and licences are in place, and that the final contract is fair and has reasonable terms.
He will then take your instructions for transferring the property title into your name, and will pay all fees and taxes for which you are liable. Finally, he will take care of the legal registration of your ownership of the property with the authorities (land registry, town hall…).
Legal words explained: ‘Escritura’ and ‘Notario’…
A term you will come across during the purchase process is 'Escritura' … the Spanish title deed, which is signed under your Lawyer's guidance when all other formalities are complete.
Since the process leading up to the signing of the Escritura can take several weeks, most people find it inconvenient to sign this in person, and therefore appoint their Lawyer as their “Attorney” (even those living in Spain!), giving him “power of attorney” to sign the Escritura on their behalf.
IMPORTANT NOTE: If you are present on completion, your Lawyer should translate a copy of the Escritura into English, before you agree signing for the property. Signatures to the Escritura are witnessed by a 'Notario': a senior official who verifies that the deed is genuine and understood by everyone signing it. The Notario is there to ensure that everything is conducted fairly and properly … however they do not give legal advice.
How much to allow for fees and costs
Whether your purchase is for a new or re-sale property, the Spanish Government require 7% (IVA for a new property or property transfer tax for re-sale). In addition, your legal costs are usually in the region of 3% of the total purchase price, including notary fee, land registry fee, lawyer’s fee and stamp duty tax. Your Lawyer will let you know what is the actual figure when your completion-date approaches. A Spanish bank account should be opened well in advance, to enable you to put regular payments, associated with property ownership, on standing order (water, electricity, rates…).
Sole, joint or corporate ownership
Advice should be taken from your Lawyer regarding sole or joint, and in some cases, “corporate”, ownership of your Spanish property.
Making a Spanish will
Because the “inheritance process” in Spain is slow and expensive if you die without a will covering your Spanish interest, is good advice that, if you own property in Spain, you should make a Spanish will. This will avoid any doubt about your intentions for this property upon your death and enable your wishes to be carried out, which may be far too complicated if you rely upon your UK will. Lawyers in Spain and specialists in the UK will be able to give you advice on this subject.
With more and more UK citizens purchasing in Spain, the systems, although still “different” are far less complicated. The formalities of purchasing in Spain have now become far more routine and straightforward, provided good advice is obtained and followed.
