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What is the legal due diligence for your Spanish property?
Property law Spain
Caroline, our paralegal adviser in the region of Andalusia explains to us how the due diligence works start:
“Once the deposit has been paid, we will request the real estate agency to provide us with the contact details of the vendors lawyer to notify them our representation and to request from them the necessary documentation in order to carry out the appropriate due diligence in which we will verify all relevant aspects related to the property.”
This due diligence work could take a few weeks and always takes place between the reservation deposit and the signing of the private purchase contract.
The due diligence works are different depending on the property purchase: New build or Resale. Here are the main issues that will be checked by your lawyer:
Legal due diligence checklist for a Resale property in Spain
- The legal identity of the owner/the seller of the property you intend to buy
- The land registry extract with boundaries and square metres of your land.
- Check if details match: ownership, features of the property,…
- Is there a mortgage or a debt linked to the property?
- Any legal proceeding linked to the building?
- Check that the property has been granted the corresponding municipal building permit and habitation licence by the Town Hall in question, and respects local urban planning rules.
- The license “Cedula de habitabilidad” (or “Licencia de ocupación”) provided by the town hall
- That the property is free from charges
- All utility invoices paid by the previous owner
- All community charges paid by the previous owner
- All previous annual real estate taxes paid by the previous owner
- Get the energy efficiency certificate from the previous owner
- Check the history of ownership of the property
How do you settle the IBI tax, “Impuesto sobre Bienes Inmuebles”, between the seller and the buyer?
Our legal adviser in the region of Catalonia, Juan, explains that the annual real estate tax or “Impuesto sobre Bienes Inmuebles” (IBI) is a townhall tax that is charged at the beginning of the year for the full year. So, when a property is sold, it is common to agree between the parties to share the tax proportionally, depending on the date of the purchase.
Pay attention to the pre-emptive rights from the administration
Our legal adviser in the region of Catalonia, Juan, ask to give special attention to properties for which the seller is the SAREB since there could be a preferential acquisition right over the property, benefiting the City Council or another Public Administration. If these pre-emptive rights have not been considered previously, and the appropriate communications have not been made to the Public Administrations to enable them to exercise their rights, there may be problems in the purchase, afterwards. Another important keep in mind before buying a leased property: is the possible preferential acquisition right of the lessee.
If you want to read more on that subject, our legal partner in the region of Alicante, Juan Carlos, wrote two interesting papers on that subject: What should you pay attention to when buying a property in Spain? and How to protect yourself against Hidden defects on a Spanish Property? Property survey in Spain
Legal due diligence checklist for a new build (or “off Plan”) property purchase in Spain
- Get a planning Certificate for the plot from the town hall and check for building restrictions on the plot or any potential negative developments to come.
- Does the promoter have an individual bank guarantee to cover your payments?
- Was there a permission to develop the plot at the Land Registry?
- Is the developer registered at the Mercantile Registry?
- Has the representative of the developer the legal power to represent the company?
- That the property is free from charges: (mortgages, liens, encumbrances, etc.)
- Has the developer an insurance covering damages caused by structural defects to the building?
- That the construction specification or quality specifications are made available to the buyer and included in annexe to the purchase agreement.
Our legal adviser in Barcelona, Juan, also reminds us that the developer is legally obliged to guarantee the amounts received before the construction is finished.
Once the construction has been finished a few items should be checked
- Get the certificate that the works were properly done in accordance to the plans: The property must be registered in the land registry with the correct details, as “completed house”.
- The builder supplies the Final Works License: the ten years Insurance (Insurance which covers during ten years the structural defects of the building), and the Certificate of Habitation.
- Community areas: The community areas like Golf Courses, commercial areas, pool, gardens, must be completed, or in the process to be.
- It is very important to “read” the community rules to see, for example, if your neighbour can run a business which can disturb you, or if dogs are allowed, etc.
- Community charges: This kind of properties can have high expenses for maintenance. It is very important to know them in the initial steps of conveyance.
- Get the licence of first occupancy also known as “Licencia de Primera occupación”.
- A final check by a chartered surveyor?
- Urbanisation charges and works: There are some areas, overall in Denia and Javea, in which the property may have pending urbanisation costs and urbanisation works to be finished, and on account of the owner! So, please, take duly care with this.
If you want to read more on that subject, our legal partner in the region of Alicante, Juan Carlos, wrote this interesting article: What should you pay attention to when buying a property in Spain? and we wrote this one as well that could be of interest Buy a new build property in Spain.
This article: “Part III. Legal due diligence on your Spanish property” is part of an extensive article covering the legal and tax aspects of property acquisition in Spain:
Introductory paper: Why do you need independent legal and tax partners for your property acquisition in Spain?
Part I. Buying a property in Spain: Is a Spanish Notary enough? Why is an independent Spanish lawyer strongly advised?
Part II. Buying a property in Spain as a foreigner: Are you allowed to buy a property in Spain as a foreigner? Do you need a Visa? Who is buying? How do you finance?
Part III. Legal due diligence on your Spanish property
Part IV. Tax aspects related to your Spanish property: acquisition, ownership and sale of your Spanish property
Part V. Inheritance, Estate Planning and Granting a Will in Spain
For easiness of reading, it is split into five different articles: they could be read one after the other or separately.
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Looking for another real estate expert in Spain: Mortgage, Insurance, Survey of property, Property hunting, …? Ask us directly one of our 100+ local partner!
Senior analyst and strategist at HTBIS