Reservation fees which is the sum of money vendors and agents in Spain request from a buyer to secure a property had to all intents and purposes disappeared from the buying process in Spain during the economic crisis.
Given the number of properties for sale outstripped buyers by quite some way a potential buyer had no requirement to remove the property from active marketing whilst preparation for exchange of contracts happened.
Technically the passing of a reservation fee as part of the buying process should ensure that the seller of the property in Spain stops marketing the property and has accepted the offer made by the buyer. In reality the reservation document plays no part in the legal stages of the buying process and has no legal standing in Spain and does not prevent the seller from continuing to look for other buyers or a higher sale price.
Are reservation fees refundable
Many agents and sellers look for the reservation fee to be non refundable in the event the buyer pulls out without good reason. There is no issue with this as long as clauses within the document provide sufficient time for legal searches like checking of the Nota Simple to be undertaken and finances in Spain to be arranged. What can cause issues is if these clauses are not in place and or the funds pass directly to the agent or the vendor.
In the instance where, after legal searches it is clear the sale cannot go ahead, it might be difficult to get your money back if the money has already been passed to the seller. Court action may be required and if the money is already spent even court action may not end up with funds being returned.
Given that a reservation document is not legally binding on the seller in Spain what is the point of paying a reservation fee.
Most sellers will on the receipt of the reservation fee play the game and stop actively marketing the property so it can have a benefit of ensuring the buyer gets some security of the purchase before contracts are signed.
If the buyer has any doubts however it is better to lose the property than to lose the reservation fee which is often between € 3.000 to € 6.000. There will always be a risk if you do not pay the reservation that you will finally not get the property and vice versa a risk if you do pay it you will lose the money.
The risk has to be weighed up carefully and after the contracting of lawyer services for buying in Spain. It is always best even at this early stage of buying in Spain to have an independent Lawyer who looks after your legal protection and who can advise on the benefits and drawbacks of paying a reservation fee and can look after your interests as far as this possible.
Is the market place in Spain changing
In the last few weeks, for the first time in many years, it has been experienced by Spanish Lawyers that their buyers are losing properties to a higher bidder so the importance of paying a reservation fee seems to be gaining some momentum again.
The best way to avoid the risk of losing the fee is to ensure before visiting Spain, and making an offer your finances are sorted. For cash buyers this is not an issue but for buyers requiring a mortgage either in country of residency or Spain it is sensible to get this pre-approved before parting with any cash.
Appointing a Spanish Lawyer who can advise on when it is safe to pass the fee and, who the fee should be passed to, is also important. Careful selection of your legal representative should be made to ensure they provide you with the full picture surrounding what you are doing and do not assume you know the facts without being informed of them. No Lawyer can tell you whether to pass the reservation fee or not they can only explain the risks and then it is down to the individual to make an informed decision as to whether this appropriate for them in the circumstances.
Do not allow yourself to be pushed into making the payment on the spur of the moment and be willing to accept that you may lose the property you want to buy to another buyer whilst you consider the right option for you.