Being an informed property buyer gives you the edge and here is some sound advice. Article code BIPB
If buying bricks and mortar it is strongly recommended that you choose an independent lawyer who is specialised in Spanish land law (urbanismo). Independent means that they work on your behalf only and are not connected in any way with the interests of the estate agent or land developer. The Spanish property conveyancing system is very different to the way it is done in the UK so you should ensure that those involved in the transaction are accountable in Spain.
It goes without saying that you should be alarmed if an estate agent, promoter or lawyer urges you to cut corners to save you money or time. Cutting corners comes with risks.
A Spanish notary in the province will be involved in preparing the contract of sale and issuing the public deeds in exactly the same way as they do for Spanish nationals. As the purchaser, you also have the right to choose which notary you use as there are more than one in any province. The notary is a public servant who has a duty to provide you with free and impartial legal advice on all aspects of any contract before you sign. It is a sensible move to seek advice from a notary early on even if it means a trip to Spain. When a date is set for signing the contract, you have three days beforehand to visit the notary and ask all the questions you may have about any aspect of the contract you will be signing.
Many Spanish citizens also use a ‘Gestor’ to carry out the bureaucracy on their behalf and following their example is not a bad thing. You should however note that only a Gestor Administrativo with the GA kite mark is professionally qualified and certified to process any paperwork directly with the Spanish administration.
Funding your purchase:
Do your homework using the internet if still in the UK. You should compare a range of different products and services offered by different lending companies and banks because now the market place is picking up.
Look for a mortgage that will be the most appropriate for your repayment capabilities and initial needs. There are a range of mortgages on offer and you should pay special attention to the interest rate and repayment period. Do not forget that there are also fees for setting up the mortgage as well as early repayment and cancellation fees if you are lucky enough to clear the mortgage early.
If you cannot keep up the mortgage repayments, the Spanish banks have the right to repossess your property in Spain as a last resort. If the value of the property is less than the total debt outstanding (you are in negative equity), the bank may also pursue your UK assets to recover the mortgage shortfall using a European Enforcement Order.
Make sure that you fully understand any mortgage agreement you commit to and sign. If you have any doubts check with the bank during the 10 working-day period after the binding offer has been provided. They will always deal with any genuine concern after providing a binding offer.
Fraud, bear in mind:
Lots of horror stories in the old days but Spain has now tightened up the buying of land and property process. The days of dodgy developers working alongside dodgy agents and dodgy lawyers have gone now after many have been sent to jail.
That said, if you believe your lawyer has been negligent or has not met their obligations in full you should complain to them in the first instance followed by a complaint to the provincial bar association. If the response is unsatisfactory, you can then take your complaint to the regional and national bar associations. Complaints should be in writing and in Spanish, so it is quite likely you will need the services of a different Spanish lawyer to do this.
Buying property off-plan?:
Buying a property off-plan inevitably involves higher risk than buying re-sale property. If you are considering buying off-plan in Spain there are a number of points you must consider.
Make sure you have a bank guarantee (aval bancario) to cover your stage payments. Developers of off-plan properties are legally obliged to secure all deposits paid in respect of any development with a bank guarantee.
However, this obligation only comes into force once the developer has obtained planning permission for the development so get your lawyer to confirm before making any payments. Make sure your lawyer runs checks at the Land Registry, because if the description of the future building is registered it means the registrar will have seen evidence that the licence exists and work has begun in accordance with the approved design.
You should also ensure that any bank guarantee is individual to the future property concerned and not a collective guarantee covering the whole development. A collective guarantee does not give you the same protection.
Your lawyer (if he is a property specialist) should also ensure the developer has insurance covering damage caused by structural defects to the building. This insurance should be included in the property manual (libro del edificio) that the developer gives you.
It is also advisable to get a lawyer to obtain a certificate regarding the planning situation of the plot you wish to buy from the Town Planning (Urbanismo) department of the town hall. This will include other information such as whether the plot has any building restrictions, is in a green zone, includes a public footpath or if there are any current plans to build a motorway etc.
Once construction has finished, and before you sign the title deed, ask for proof from the seller that the construction has been finished in accordance with the description given in the plans. This is issued as a certificate (certificado final de obra). Your lawyer can also check this at the Land Registry.
Make sure you have the licence of first occupancy (licencia de primera occupación) which is issued by the town hall for all new buildings in their province and certifies that the property is habitable. You will need this document before you can connect with electricity and water companies. Developers cannot force you to complete your purchase without this licence.
Should the developer not build your property within the timeframe stated in the contract, or services and utilities are not completed and connected to standard, or the habitation certificate cannot be issued, you are legally entitled to either:
- rescind the contract and have the staged deposits you have paid returned plus interest
- extend the deadline, allowing the developer to complete the property
If you want to rescind the contract, it is advisable to seek further independent legal advice not connected in any way. Once you have consulted a second lawyer, their first step is to write to the developer to explain that due to non-compliance with the contract, you want to rescind the contract and request that the deposits paid so far are returned, as well as the accrued interest. You should also include any relevant documentation (e.g. a copy of the contract, copies of payments made, copy of the bank guarantee) and state a timeframe by which you want the amount to be reimbursed.
If the developer does not respond to you within the specified timeframe, you should contact the claims department of the bank responsible for the guarantee to request a refund of the payments made.
In the event that the bank does not comply, the only remaining course of redress is to instruct your lawyer to take a civil case against the bank.
If you believe you have been a victim of fraud however and you have neither a bank guarantee nor an insurance policy from the developer, you should seek independent legal advice regarding taking criminal legal action through the courts and register a statement with the police. Not so common these days and of course there is history of the police and courts taking action.
Letting your lawyer know that you have some knowledge regarding the processes involved purchasing property in Spain will no doubt help when asking them to quote the costs involved in using their services. That is why this article is a worthwhile read.
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Article code: BIPB