Spanish Lawyers and their function in the buying process


Why do I need a Spanish Lawyer when buying in Spain

The process of conveyance in Spain is very different to the process in other countries. The level of information available from land registry and the robustness of that information is limited and in order to check all the legalities of a purchase a number of sources must be contacted and checked.

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What are the possible pitfalls and what must be checked.

At land registry, kept on record, are the details of the address of the property, what is registered at that address and the land classification as well as who the current owner is and any known infractions or embargos. Owners or selling agents of all properties being sold should make available for you a document called the Nota Simple which is an extract of the information from Land Registry.

There can be differences between what is registered and what exists and sometimes due to the manual manner in which Land registry work there can be delays on updated information making its way to the Nota Simple. In terms of the property itself only what is currently registered at land registry can be deemed as fully legal at that point

What types of registration issues can affect properties

Whilst for most apartments within an urbanisation there is unlikely to be a huge difference between the square meters registered and the actual square meters available, with Villas or Town Houses this is not always the case. Current owners may have extended the property without licenses or utilized existing space for a different use than that registered.

For instance, a Villa with a basement may have had the basement converted to bedrooms, when considering purchasing or making an offer you think you are buying a 4 bed roomed property when in fact at land registry it is a two bedroomed property with a basement.

Only bedrooms or living accommodation registered as such is what technically exists. A basement will always be a basement unless there is capacity within building density to apply and convert the space to living accommodation.

Whilst in the above example it is unlikely one would ever be required to covert the basement back to basement never the less in the instance of say a formal valuation for mortgage purposes the space will only attract non livable basement level of price per meter sq, basement space value is less than the value applied to living accommodation.

In other examples the issues may be more profound. Perhaps an extension has been built. If this extension has not gone through a full legal process and application for licenses to build acquired along with the registration of the extra meters, then future problems could occur and the new owner may be required by the authorities to remove the extension.

How can I avoid buying something with missing meters

To ensure what you are buying is what actually exists it is important that the lawyer checks physically that what you think you are buying is in fact exactly what is registered at land registry. This may require a visit to the property where measurements are taken, if there is not to be a valuation for mortgage purposes.

If registration of further meters needs to happen, and this cannot be done until after completion, it is wise for your lawyer to take over responsibility for this and to keep back a sufficient retention to cover any costs or fines that may be related to the situation.

Catastral Value

Each property has a minimum value which is recorded not at land registry, but by the local Town Hall. This value is what is used to calculate IBI the yearly council tax. If you buy a property that is a bargain but the lawyer has not checked if the price being paid is above the Catastral value you will be open to future purchase tax challenges from the regional authorities to whom purchase taxes are payable.

Regional authorities may, and often do, make an assumption that the price paid and recorded at Notary was not the actual price paid if the recorded purchase price is below the Catastral value. They will assume that black money was passed to the vendor and that this was done to avoid full purchase taxes being paid. After completion the file maybe reviewed and the regional tax authorities can pursue you after completion for further taxes to be paid even if legitimately you only paid the price recorded at completion.

It is therefore important the Lawyer checks the Catastral value against the purchase price being paid and advises as to what the implications of the purchase price are.

Outstanding bills

Unlike other countries outstanding bills in Spain sit with the property not the individual. This includes any Council taxes, Utility bills and community fees.

It is therefore important that a search, and verification with all authorities and supply companies, is undertaken to ensure there are no outstanding bills you will inherit after completion.

If the current owner is being pursued as part of a court action it is also possible that court proceedings in order to place an embargo are underway. Because it takes up to two months to register an embargo it may not as yet appear on a Nota Simple at land registry. The lawyer must therefore ensure no recent court action has taken place where the records office has not as yet caught up with the current situation.

Existing Embargos or Liens

Existing embargos or other debts on a property are also property related not necessarily individual related and would not be removed automatically at completion because the owner has changed.

Any existing Embargos will need to be cleared before or at completion and a representative from whatever body holds the Embargo; if it is to be cleared at completion would need to attend completion to sign to confirm this.

Embargos relating to tax or social security must be cleared before completion and the certificate have already been sent to Land Registry and recorded as removed .

Whilst not always necessary, as the clearance of Liens can be registered at the same time as the transfer of ownership it is safer to have all embargos not only cleared but registered as cleared before completion wherever this possible. In the event that they are not, like with under registered sq meters it is best for the Lawyer to keep a retention back at completion in case future problems arise.

Mortgages held on the property must also be cleared at completion or taken over by the new owner. It is possible because debts sit primarily with the property in Spain that a new buyer can take over an existing mortgage. The Lawyer or an experienced Spanish mortgage advice company can advise as to whether taking over an existing loan is more beneficial than setting up a new one.

Infractions and Urban planning

Because of past lax implementation of planning laws, properties in Spain can sit outside past and current planning regulations. The severity of the infraction will almost certainly dictate whether you should consider buying the property or not. Minor infractions or those where the property now falls under new planning regulations, (even if it was outside planning at the time it was built), can be dealt with and should not necessarily prevent a purchase.

Being aware of what possible issues exist and making an informed decision is however paramount.

In the past Lawyers in Spain, often recommended by the selling agent or vendor, have been loathe if they deem the infraction to be minor to inform their client of its existence on the basis it is unlikely it will ever cause an issue. The problem with this practice is that times change and what was acceptable in the past may not be acceptable now. Spain can and does take the view that they can retrospectively take action should the initial transaction or property not comply with pre-existing laws.

What types of infractions should I watch out for

One of the most common of the minor infractions is where the property was built on land not designated for residential building or overbuilt based on density of build rules that were in place locally. Previous control of building licenses was held by Town Halls and certain officials of the Town Halls did not always follow the guidelines or could be persuaded not to by means of a personal cash payment.

It was also common practice some years ago for developers to start to build before building licenses were granted and then apply after the build was completed on basis it would be granted.

In most areas of Spain new Urban plans have now been drawn up which encompass into them previous developments or properties that were built outside Town Planning. Some of these still however have outstanding fines against them or are awaiting some form of compensation to the local government for the misdemeanor. In these circumstances the compensation is usually linked directly to the individual who built the property and the authorities do not intend to pursue anyone else. There remains however an outside chance that if they do not come too agreed terms with the original owner that they could pursue the current owner in the future.

On all occasions where this type of issue exists it is possible for the lawyer in Spain to assess what the exposure is for the property you are buying, so you can decide if you wish to take the risk and or can make a cash retention provision at completion for a reasonable timescale to cover the risk.

First occupation license and 10 year building warranties

All properties should hold an occupation license. Due to past bad practice and advice some do not. At one point Lawyers in Spain assumed if the occupation license had been applied for, but the local authority had not made a visit to the property, or raised any objections, that the occupation license was granted under the rule of silence. The rule of silence does not and never did exist.

Some perfectly acceptable properties may still not have an occupation license even though they have been regularized under new urban plans. This maybe because there is an outstanding fine or compensation payable by the original builder and does not mean the property is illegal. However without an occupation license technically utilities should not be connected (even though they often were) and Banks these days are loathe to grant mortgages without an actual certificate being available.

In an ideal world it is always going to be best to buy a property that has all the paperwork in place but sometimes real bargains can be picked up that have a very low risk of future issues but do not hold the occupation certificate.

Older properties may legitimately not have an occupation licenses as these were not granted or necessary in the past.

To resell a property that is less than 10 years old the property should also hold a 10 year building warranty. Again it is possible to take an informed decision to buy a property where this does not exist but until the 10th year you may find it hard to sell on, particularly if your buyer requires a mortgage to purchase.

Rustica properties

In Spain there are broadly two types of land classification. One is Urban and the other is Rustica.

Urban land is land that has been designated solely for the purpose of residential property and the rules and regulations are very clear and precise. In the event of any infrastructure changes that might affect the property the owner would be entitled to full compensation at market prices from the government.

Land designated as Rustica is not land that is solely for the purpose of residential property. It is possible to have on Rustic land a perfectly legal property but the rules relating to Rustic land are very different.

Firstly much of the land is protected with very stringent building regulations as to what can be built, what density of build is available, and what type of property can be situated there.

What appears to be a beautiful Villa could in fact be registered as Tool Shed or stables and a tool shed or stables not living accommodation may be the only allowable building that will ever be legal.

Rustica land does not have the same protection against future infrastructure changes as Urban land so careful research into future plans in the area must take place as full compensation would not be made to the owner in the event of changes that affect the property.

It is perfectly safe to buy Rustica property but the level of research and checks that a lawyer should undertake will be significantly higher than those required for an Urban property.

Costs of a Spanish lawyer

Costs of conveyance in Spain are higher than many other countries. The level of work that should be undertaken to ensure you are safe and secure in your purchase is however also higher. This is reflected in the costs when buying in Spain,Spanish lawyers charge but not always then reflected in the level of service and legal robustness you receive.

A cheap quote may look good on the surface but does it include the level of checking you really require. Like any service it is possible to provide the basics or to provide a more detailed approach covering all potential risks. What you pay should be balanced against the level of due diligence you feel you require. It is also entirely possible to pay a high price and not receive the level of service you require but never take short cuts or penny pinch on what is such an important and expensive purchase.

Average lawyer costs in Spain are 1% of purchase price plus IVA. What is important is that you check exactly what this 1% covers. Does it include all disbursements, will it cover resolution of issues should any occur during the process, and or will you be hit on the final bill by un-specified and unqualified extras.

What protection do you get in Spain against your Lawyer

All Lawyer firms should be able to provide their Law college certificate number and a public liability certificate which covers you in the event your lawyer does not undertake their role in a diligent manner.

Should I use Spanish based or a UK based Lawyer

UK based Lawyers normally contract for at least part of the service a Spanish lawyer, so overall costs may be higher. UK Lawyers who do not contract a Spanish Lawyer for certain checks may not understand as fully as they should the intricacies of the purchase process in Spain.

A Spanish based Lawyer with high levels of English will normally be the best for you. A Spanish lawyer without a good grasp of English or a good understanding of the English culture may not be the wisest choice.

An independently sourced lawyer either from personal recommendation or your own research will be better than one recommended by the agent or vendor. It is not impossible by law as it is in the UK for a lawyer firm to work for both parties and a Lawyer who gets all their business referred by an estate agent may be less likely to discuss with you minor issues in case this puts you off buying, than one who only serves your best interests.

You should appoint a Spanish Lawyer who understands that you require to be informed on all aspects of the purchase, however trivial these might be, not one who assumes because you have not asked the question that you do not know to ask, you are therefore not concerned about that part of the buying transaction.

You do not want to appoint a Lawyer who takes it upon themselves to decide what information you may or may not deem to be of importance to you, nor one who takes risks on your behalf because they believe the risk is too low to mention.

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