Spain has had a special place in the hearts of the British holidaymaker ever since the 1960s, when we stopped going to Bournemouth and gave Benidorm a try instead. Unsurprisingly, many of us now look to Iberia when we dream about buying a holiday home, or a property in which to retire.
In fact parts of the Spanish coast are now so crammed with Brits that, apart from the weather, one could easily forget one was in a foreign country at all. It’s vital to remember, though, that when you buy a property in Spain you are dealing with a legal system utterly different from the one back in Blighty.
Sign what may appear to be an innocent piece of paper registering your interest in a property and you could be committing yourself to a purchase you can ill afford; fail to take the appropriate legal advice and you could find yourself in legal and financial dire straits. Don’t leave your brains at the airport!
As in other parts of continental Europe, Spain has a system whereby contracts are signed at an earlier stage than is the case in the UK – so if you are at the stage of viewing properties and do not want to waste everyone’s time, including your own, it is important to be ready to commit to a purchase quickly.
Having said that, whether you are buying a property that has not yet been built, or one that has been standing for hundreds of years, it is vital to have any kind of contract checked out thoroughly by a bilingual lawyer before you make a commitment to buy.
And if, as is often the case with Spanish properties, the seller or their agent gives you English versions of Spanish documentation, do not assume they are accurate translations – get the original Spanish paperwork and the English translations checked out at the same time!
If you are buying an existing property – often known as a ‘resale’ – the most common approach is to agree a preliminary contract (contrato privado de compraventa) with the seller. This commits both parties to the transaction, so that the seller must sell to you at a stated price, via whatever terms are set out in the contract; and you must buy. You will almost certainly pay a 10% deposit at this point, which you forfeit if you fail to complete. If the seller pulls out, he or she must pay you back double.
The contrato privado should contain a number of routine clauses covering, for example, the names of the parties to the contract; a full description of the property, including its land registry entry; details of who is to pay the estate agent what commission; who the notary will be and when the final deed will be signed; and what happens if the parties break the contract.
Depending on the timing and whether or not you have already made a formal offer to buy, your lawyer may have already conducted some preliminary searches; alternatively, you may have gone straight to contrato privado, in which case the bulk of the checks on the property will need to take place after you are already signed up to the deal.
Standard checks in Spain include a check on the planning status of the property (the informe urbanistico); whether or not the seller is the registered owner; and whether it is being sold free of mortgages (both these elements should be revealed by the nota simple). The contract should contain a series of appropriate escape clauses (condiciones resolutorias) making clear the circumstances under which you reserve the right to pull out of the transaction and have your deposit refunded. These might stipulate, for example, that you can pull out if you are unable to secure a mortgage at a particular rate, if the results of the searches are unsatisfactory, or if planning permission is not forthcoming; and that the seller must clear all debts relating to the property before the deed of sale can be signed.
Many Brits buying properties in Spain do so at a stage when the building has not yet been finished – or even when it is little more than a twinkle in the eye of a property developer. In such cases the initial step, once you have identified the property you want to buy, is to sign a reservation contract.
Having reserved the property, you must then agree a full preliminary contract, at which point you may be expected to pay a deposit of as much as 40% of the purchase price. In this scenario, there are several different ways of dealing with the fact that the building has not yet been built.
The preferable one is to buy the land outright, along with whatever the seller has built on it already; and to separately enter into a contract for building the rest of the property, under which you pay by instalments according to the progress of the construction. This approach gives you the security of owning the land from the start, so that if the building company went bust or you were not happy with the way the development was going, you could draw a line under the project at that point and bring in other builders to complete the work.
This type of contract works best where you are buying a property on its own plot of land, rather than as part of an existing development. It suits a more ‘bespoke’ approach, where you perhaps buy a plot of land from a builder or developer, who at the same time offers to build a house for you.
An ‘off plan’ contract is more common, and is typical to villa or apartment complexes, whereby you agree to buy a property once it has been built. Again, you make payments as the building goes up, but you do not own the property outright until the very end, when the property is finished.
Developers prefer this kind of contract, because it makes you dependent on them to finish the job; they often want a schedule of payments on set dates too, regardless of how fast or slow the building work is progressing. At the very least it is worth pushing for payments to be dependent on how much of the property is completed, to give you more leverage.
If you are buying in a villa or apartment complex, chances are you will be buying into a ‘community of owners’ (comunidad de propietarios). This is a legal entity which exists to deal with shared facilities like communal swimming pools, lifts, parking areas, external lighting, shared gardens, etc.
The comunidad has no impact on your ownership of your own property, which you will own outright. It is simply a mechanism through which all the owners in the development band together to manage and pay for common facilities. Each comunidad has a committee which must hold an annual general meeting, and its own rules (reglementos) covering everything from use of the swimming pool to whether or not pets are permitted. It also charges fees – which may fluctuate considerably depending on how much maintenance work is required on the site – for which all owners are responsible, as stipulated according to the size of your property.
In some senses, and subject to the conditions laid down in it, the contrato privado signifies that you own the property, but only in respect of the previous owner having agreed to pass it on to you. What makes the transfer legal in terms of the rest of the world is the signing of the deed of sale (the escritura de compraventa).
As in many other European countries, in Spain the legal transfer of properties can only take place via a notary (notario), who must be based in offices in the area where the property is being purchased. The notario prepares the escritura and is responsible for its registration in the property register (registro de la propiedad) and tax register (registro catastral); he charges fees to the vendor and purchaser, according to a fee schedule set by the government.
In theory it is the buyer who chooses the notary, but in practice – especially where you are buying new property – the seller tends to have a big say over this decision. Often the notary will have been involved in getting together all the relevant information for the developer when they bought the land on which to build the development and then split it into separate plots to sell on, for example; so it makes sense for him to deal with the subsequent transactions as well. In any case, notaries are supposed to be neutral… weell, that’s the theory, anyway.
During the period between signing the contrato privado and signing the escritura – theoretically between four and eight weeks but often longer than that – make sure your lawyer carries out all the agreed checks on the property, and sorts out all the necessary documentation for the finalisation of the deal. In the meantime, you will need to arrange all the finances so that everything is in place for the deed to transfer on the agreed date. Good luck!