21st may 2019
BUYING A PROPERTY IN SPAIN
Buying your house or apartment in Spain is the dream of many foreigners. This dream can easily become a nightmare if not managed in a properly way.
Such an important financial and emotional transaction should be monitored by an independent legal counselor. Today we talk with attorney NÚRIA ANGULO ROIG, from AR LEGAL & BUSINESS.
During this interview attorney at law, Nuria Angulo explains the role of each of the professionals involved in the purchase of real estate in Spain, what are the previous steps to follow, whether is advisable to sign a reservation document, what is an "arras" /deposit contract and the different kinds of arras, and what to consider when asking for a mortgage.
Why is so important to contract and independent lawyer?
There are many professionals involved in the purchase of real estate: intermediates, real estate agencies, banks, notary…
It is essential when you buy a property in Spain to choose for a lawyer that works exclusively for you. A lot of money is in the game, and complex contracts shall be signed during the purchase. Therefore I advise to contract and independent lawyer, with no other conflicts of interest. Remember that real estate agents are not lawyers, however some agencies might have good law knowledge or might have an in-house lawyer.
The real estate agent has a contractual relationship with one of the parties, whether is the one that orders the purchase or the sale, signing a contract of real estate mediation.
On the other hand, the role of a Notary in Spain differs from other countries such as the Netherlands or France where they have wider competences. A Public Notary in Spain is a legal professional and also an State Civil Servant who provides documents granting special effects in terms of authenticity and veracity, but a Notary is not there to give you legal advice. the intervention of a notary does not grant that your interests are being defended. Actually, there is a general misunderstanding with regard to the role of a notary: a notary gives public faith of what is happening and identifies the individuals that are signing the transaction, but unfortunately his/her role stops here and they cannot guarantee the safety of a transaction and can neither be held responsible of any undesirable consequence.
Having your own lawyer shall guarantee an objective advice and prevent undesirable consequences.
What are the previous steps?
As previous steps to the signature of the purchase contract, your legal advisor should investigate what is the current status of the property at the public Land Registry in order to verify that the official description of the real estate matches with the reality, check who appears as effective owner at the time of the transaction and whether the property is free of charges or encumbrances.
Moreover, we advise to control at the Town Hall whether the property is built according all compulsory licenses and whether in case of necessary building improvements these shall be granted without troubles.
Likewise, we recommend verifying that all pending taxes and community charges are paid by means of asking a copy of the last receipt.
If the seller is a company, make sure that there are no solvency problems and that the person that signs the contract counts with a legal representation.
Do we need as a buyer to sign a Reservation Document?
Some estate agents shall insist in signing a reservation document. This is, from a legal point of view, not necessary.
The contract of reservation of a house falls within the scope of what are the preliminary deals of a sale, the fundamental problem is that these preliminary deals are not developed by law, which generates insecurity.
Moreover, be careful when it is signed by the agent and the buyer, the property owner is not signing. it gives you no guarantee on the reservation of the property.
What is an “arras” contract?
When buying a property in Spain you might be asked to sign the so called “ARRAS” contract. It is actually a deposit or down payment contract for 5 or 10% of the total purchase price. It is important to know that this percentage is not fixed by law. The percentage can vary depending on what the parties agree.
It is also good to know that it is not an obligatory step. You can sign a deposit contract or go directly to the notary for the deed of purchase.
There are three types of ARRAS:
ARRAS PENALES, PENITENCIALES and CONFIRMATORIAS.
Ultimately, the nuances between the three can make a significant difference in case of conflict.
The more common are the ARRAS PENITENCIALES or PENITENTIAL
Arras confirmatory/Arras confirmatorias
They are the "signal" or proof of a contract: It advances part of the price but they do not allow to withdraw from the contract. If it does not say anything in the contract, and it does not clearly specify the type of deposit, they are considered confirmatory. It applies Spanish Civil Code art. 1124. If the contract is terminated, there would be a compensation for damages, to be fixed according the circumstances.
Penitential arras/Arras penitenciales
The buyer may waive the purchase losing the amount given as a deposit and the seller may refrain from operation returning double the amount paid in respect of deposit. In both cases, without justification (art. 1.454 Spanish Civil Code).
They are also called arras of withdrawal, because they allow to terminate the contract legally, losing the deposit when the buyer refrains from the purchase or returning them duplicate when the seller would like to withdraw from the contract, within the meaning of Article 1.454 Civil Code. They are only considered as penitential when expressly stated in the contract
Arras Penalties/Arras penales
Besides being a payment on account of price, ensure that the contract is fulfilled. Should be established clearly criminal character. You can terminate the contract amount the buyer losing their, or returning duplicate the seller. It is a way of limit the possible compensation for damages, in case of default. The penalty, replaces the compensation. All, without prejudice to the possibility of moderation by Judge. It is regulated in Articles 1.152, 1.153 and 1.154 Spanish Civil Code.
Make sure that you pay the deposit only to the effective owner or his/her legal representative with powers of attorney and that you always get an evidence of payment. Do not accept to make payments to intermediates or real estate agents unless they can prove that are empowered by the seller to do so and, thus, let your legal advisor to check their representation.
We also advise to review the text of any contract before you sign it.
Make sure that the time planning of the “contrato de arras” is feasible, pay especial attention to the clause concerning the ultimate date of completion of the purchase. Many operations that the buyer needs to arrange are usually time consuming and can provoke delays in the initial schedule: negotiations with the banks and the transfer of money from foreign accounts, etc. Remember that unfortunately if you cannot meet the agreed deadline you might lose the deposit you paid in advance.
What if I need a mortgage?
In case you might need a Spanish mortgage to finance part of your investment, don´t take anything for granted! I advise to carefully study and negotiate with the bank certain main clauses, especially the ones referred to interest review and advanced non-programmed mortgage payments.
Many banks in Spain have been declared guilty to include abusive clauses in mortgages and therefore it is more than advisable to negotiate each one of the agreements in the mortgage deed.
With the new legal frame banks have to pay part of the fees for the mortgage deed: such as notary, register, taxes but still taxation report and opening commission are on the consumer´s side.
Once the purchase goes on, bear in mind that the purchase contract should be formalised before a Spanish Public Notary signing a notarial deed which should go together with the eventual mortgage deed. This means placing together at the notary: seller, buyer and bank with all necessary documents. Something quite simple but that could bring you disappointments and troubles when not arranged properly: imagine what a waste of time and money when flying to Spain for the signature while one relevant paper is missing!
Again, having a local professional monitoring the process shall grant that everything goes smoothly.
And the property Register?
Once you become an owner, you´ll need to register the purchase at the Spanish Property Register as soon as possible so that it has effectiveness towards third parties. This is normally arranged by the notary or a consultancy.
I hope my advice is helpful to you: buying your property is a dream that can become true, take into account these guidelines together with the specific advice of your legal counselor and enjoy becoming a property owner in Spain!