While many countries have similar protections in place for property conveyances, the apparently minor pitfalls when buying a house in Spain can really cause the most awful damage to an individual’s finances.
And so, to help avoid such a catastrophic outcome, below we highlight specific pitfalls that lie in wait for anyone buying a house in Spain. Of course, getting help from an experienced local English-speaking lawyer could help to avoid said pitfalls and save you a lot of money.
Below we reveal the top 10 most common and expensive mistakes when buying a house in Spain:
TABLE OF CONTENTS
- Registry Issues
- Financial Issues
- Problems with Title
- Licence Issues
- Contractual Issues
- Items included in the Purchase that are Missing
- Buy to Let and B & B Licenses
- Construction Errors
- Off-Plan Purchases
- Tricks to get you to pay Estate Agent Commission
- Regional Variations
- Buying a House in Barcelona
- Buying a House in Lanzarote
- Buying a House in Tenerife
- Buying a House in Mallorca
- Buying a House in Ibiza
- Buying a House in Valencia
Before we begin with our list of top 10 errors, one of our local lawyers Juan-Ignacio discusses a number of issues that property investors should be careful about:
1. Registry Issues
The first of our 10 pitfalls when buying a house in Spain arises where the house you are interested in is not currently registered in the Land Registry it is vital to find out if the it is capable of being so registered before you even considering buying it.
Many houses in Spain have never been officially registered due to being built in an area zoned as a natural park or too close to the beach, on green-belt, or maybe it is just an old property that was never registered. Some are capable of being ‘legalised’ others are not – rendering your investment worthless. Your lawyer should of course verify this for you in advance of signing any reservation documents.
A less well known registry issue relates to the Catastro register. The details of all houses in Spain must also appear in a second register called the ‘Catastro’, which is a register managed by the Tax Agency and its contents are used to calculate rates bills, inheritance taxes etc.
If the details on both registers do not coincide, problems can arise, and the registration of a new owner can be blocked. Typically issues arise due to discrepancies in the size of the property on the two registers and if substantial, will need to be fixed before your title can be registered. Such a discrepancy may also lead to overpayment of taxes.
2. Financial Issues
Another of the pitfalls when buying a house in Spain is that many properties purchased in Spain are located in urbanisations of many similar properties with communal facilities such as swimming-pools, lifts and gardens.
Owners of such properties have financial obligations towards the upkeep of communal areas. Any accrued debts are attached to the property and the new owner may find themselves obliged to pay-off any debts the previous owner had accrued with the Community of Owners.
In addition, if the Community of Owners has held meetings to agree to make a substantial investment to upgrade the facilities in the urbanisation (such as new lifts or building repairs and painting work), such costs are divided equally among owners according to their share of the urbanisation, and so, as a new owner you might well be facing a hefty bill soon after taking ownership.
Your lawyer should obtain and review the appropriate documentation from the Community of Owners to make sure no such debts or future liabilities exist or that at least you are aware of them and can negotiate a lower purchase price, as required.
3. Problems with title
Quite commonly properties in Spain are sold by those who have received the property as part of an inheritance – typically the children of the deceased.
If the property you are purchasing is the subject of an inheritance that is not yet fully completed, your lawyer will need to check that those who are selling the property are legally entitled to do so, and that there is not another beneficiary whose permission is legally required before the property may be sold and registered in the name of the new owner.
Failure to check this could result in expensive litigation to get the vendors to return any money already handed over, assuming they are still in Spain.
In other cases the property could be the subject of a life interest (in some inheritances this is what the spouse of the deceased receives), there may be a judicial claim on the property for the repayment of debts or title transfer could be the subject of restrictions due to the property being an Officially Protected Property with maximum resale potential.
Finally, there may be tenants in the property who have a prior right under Spanish law to first refusal to any offer to sell by the owners. They would also potentially have a right to remain in the property for between 3 – 5 years, though you would be entitled to any rental income legally agreed.
As you can see, there are several issues that can arise with regard to the title of a property and an experienced conveyancing lawyer is needed to ensure that it is safe to proceed with the purchase.
4. License Issues
In Spain, building permits are required in order to build a legally valid property. While these licences vary in type and nature, it can be simply stated that before proceeding with any purchase, your lawyer will check to ensure that the property was built in compliance with the legal regulations in force in that region of Spain.
In the past, entire Urbanisations have been built with questionable legal status, leading to resale problems and loss on investments. This can be a complex area of planning law, and your lawyer – potentially working with a local architect – will be able to provide you with expert advice on when it is safe to proceed, and when it is not.
Also note that it is quite common in Spain for previous owners to have added extensions to their properties and even swimming pools without obtaining the requisite planning permission. This will not appear in the land registry certificate and the legitimacy of such constructions will require checking with the Town Hall Technical Office.
5. Contractual Issues
The first mistake that buyers often make is to assume that the law in Spain will be the same as the law in the UK. It often is not – sometimes it varies slightly, but other time it us completely different.
So, a common error purchasers make is to agree to pay the costs of a notary, when the purchaser is only truly liable to pay to get a copy of the deeds. Given that notary costs may exceed €1000, it can be an expensive assumption!
As a purchaser, you are only liable to pay the rates bill for the proportion of the year that you own the property – clauses are often drafted in the purchase deed to foist this charge on to the purchaser – beware of this tactic.
A lawyer representing you will ensure that the vendors produces a valid Energy Certificate, which is obligatory in all conveyances in Spain. Exceptions to including an energy certificate include the purchaser making declarations in the deed of purchase that they will make substantial refurbishments to the property – again it will be wise to have a local lawyer available to advise on this in case the vendors try to slip this clause in.
A typical way that a lawyer would protect you would be to insist on a pre-purchase contract (known as ‘arras’) which will stipulate that the vendor will lose double the amount of any deposit should they fail to proceed with the purchase – this can prevent gazumping and the consequent loss of money invested in expensive and time-consuming pre-purchase activity making perhaps several visits to Spain.
6. Items included in the Purchase that are Missing
Quite often, when buying a house in Spain a decision is taken to purchase the property including the contents, such as furniture and even boats or jet-skis and similar items.
If you are buying the furniture contained in the property, then it is incumbent upon you or your legal representatives to carry-out an inventory of the items to be included in the sale, and to reference the inventory in the appropriate contract for sale.
This will avoid later disputes that can often arise when all of the furniture expected to have been included in the purchase is not retained in the property.
7. Buy to Let and B & B Licenses
If using a house you have purchased in Spain to generate an income from ‘tourist rentals’ you should ensure that a lawyer first checks any local restrictions in place – at the urbanisation level and also at the regional level. Often it will be necessary to arrange a tourism license and these may be virtually impossible to obtain in the area that you are buying.
There may be other urban restrictions in place in the area that you are buying as a result of local policy, for example, some apartment buildings may only be used for tourism purposes and not for long term living, in order to generate tourism in the area.
If the plan is to operate a B&B (a common activity in Spain among expats) then you will have to obtain a report from an architect that the property may be used for this purpose. Your lawyer will need to apply for an appropriate license and then make presentations to the local Town Hall.
This is a process that can take time and you may need to invest in refurbishment of the property to make the appropriate Health & Safety adaptations in order to comply with the regulations.
Obviously, these are all considerations that should be made before agreeing to make an offer on the property.
8. Construction Errors
A survey is vital before buying property in Spain.
While you may think that a property must be fine if in a large building then consider the problems caused by aluminosis.
In several Spanish cities and large towns, constructors in the 60’s used a special process of adding aluminium to concrete to make it set faster and save money. Years later however, it was discovered that this process caused ‘aluminosis’- especially in areas of high humidity – making the structure more porous and unstable as well as health issues.
This type of local issue will be known to local lawyers and surveyors and may well explain why a property seems to be a bargain. You should make sure the local experts advise you before proceeding – especially if it looks too good to be true!
9. Off-Plan Purchases
Huge problems have been caused by constructors unable to finish the construction of apartments. Unfortunately many individuals and families buying property in Spain ended up paying a mortgage for a home they could not enjoy. So much so that legislation has been introduced by the Spanish Parliament to increase protection for purchasers.
When buying an off-plan property, it is vital to ensure that the constructor has the appropriate bank guarantees to protect the deposits provided by the purchasers.
If there is any suggestion that this is not the case then the best advice is to walk away. If you proceed in such circumstances and things to go pear-shaped, you may be lucky to be left with an option to pursue the bank for your deposit, but it will likely take several years to recover.
10. Tricks to get you to pay Estate Agent Commission
If you would like to speak with an independent English-speaking solicitor in Spain regarding an upcoming property investment in Spain, just click on the ‘Contact Us’ button below to view contact telephone numbers and enquiry form. Be wise, look for help to easily avoid these common mistakes buying Property in Spain.
Buying a house in Barcelona
The charming and narrow streets of the Gothic quarter, the stunning Modernista architecture by Gaudi and his friends and its idyllic location wedged between forested mountains, make Barcelona a beautiful city.
In addition, the 1992 Olympic Games paid for a revamped marina, artificial beaches, and street sculptures that allowed the city to become a fashionable and sophisticated coastal resort.
Given the size of the city, Barcelona tends to be the preferred option for younger people seeking a busier environment in which to live. However, for those with a sufficient budget, the city offers a huge variety and has less hectic areas which give access to all that the city has to offer.
Our local lawyer Oscar describes an important and unique issue that affects building in Barcelona in his article: Buying a house in Barcelona.
Useful additional reading: Property Taxes in Barcelona
Buying a house in Lanzarote
Lanzarote has many great places to call home. Each area has its own advantages and disadvantages, from small towns to rural areas and resort areas.
You’ll likely find it easier to work if you live in a larger resort though bear in mind that you might notice that your weekly food bill is slightly higher if you live in the resort. This is a result of the fact that, due to the constant flow of tourists, places tend to raise their prices in resort areas.
Because they provide a good life balance, towns are great places to consider basing yourself in Lanzarote – Arrecife Teguise and Playa Honda will all offer you more for your money than living in resorts.. Though it is true that living in a town can have the disadvantage of being further from the beach.
Rural living in Lanzarote – as elsewhere – will give you a true Spanish experience. You will make new friends and feel like you are part of a small, friendly community. Although you may need to travel for large supermarkets or stores, the beautiful views that you will enjoy every day will more than make-up for it.
Read our local lawyer Cristina’s tips on: buying a house in Lanzarote.
Useful additional reading: Property Taxes in Lanzarote
Buying a house in Tenerife
Millions of tourists from around the world visit Tenerife every year. It is known for its amazing weather, which rarely drops below 20ºC in winter. The average summer temperature is 28ºC. It is dry and pleasant with little humidity, making it the ideal climate for those who want to escape the colder countries of central Europe.
There are many beautiful places to visit, including the sunny beaches lined with palm trees and the lush green pine forest forests and the lunar landscapes created by the volcanic area Las Canadas at Teide, which is the highest mountain of Spain.
Because it offers everything, the Canary Islands property market is always strong and accordingly, it is a great place to purchase property, whether you are looking for an investment or a second home.
There are many property types available, including rural houses, holiday apartments, villas, apartment buildings, and traditional Canarian cottages. You will find quiet Spanish villages, as well as tourist hotspots. You will find many excellent quality golf courses with villas and apartments surrounding them.
Tenerife offers many watersports, including scuba diving and kite surfing, boat trips, and jet skiing. You can also enjoy outdoor activities such as tennis, padel and bowling, horse riding, hiking, and cycling. You can also relax by the pool, or visit one of the many sandy beaches.
For a lawyer’s point of view, please read: Buying a House in Tenerife ,by our local lawyer Oliver.
Useful additional reading: Property Taxes in Tenerife
Buying a House in Mallorca
Mallorca’s Mediterranean climate attracts many expats. Its extensive coastline is perfect for water sports and sailing.
It is completely surrounded with water and, as a result, while it is true that summers can be hot and dry, the winter cold is a damp cold which means homes with radiators are a good idea – even if homes were never traditionally designed to take this into account.
Mallorca is generally safe and has low crime rates. There are more risks during tourist season as with all popular destinations. However, the crime rate is very low even in peak seasons.
With its multitude of sandy white beaches, warm water and equally inviting mixture of nightlife and culture, Mallorca has become a favorite holiday destination among visitors from all across Europe, in particular form the UK and Germany.
As a result of its popularity among well-heeled Europeans, property on the island has become among the most expensive in Spain. In her article, our local lawyer Rosa, explains a number of important “Do’s and Don’ts when buying a house in Mallorca.
Useful additional reading: Property Taxes in Mallorca
Buying a House in Ibiza
Ibiza is a beautiful island off the east coast of Spain, approximately around the location of Valencia. For years it has lain hidden in the sea between Spain and Italy. Over the years Ibiza has developed into one of the leading hotspots for clubbing in Europe, attracting thousands of visitors every weekend.
It is home to many of the most famous DJs in the world, and boasts a bustling nightlife with some incredible bars and nightclubs… But Ibiza’s story goes much further than nightlife, it is a long and fascinating history that goes from simple farming to full-blown nightclubs.
Many of the young people who were introduced to the island as a result of the nightlife have since grown-up and chosen it as the perfect place to own a holiday home or even to live permanently. One might say that the island is imbued with a ‘free-spirit’ and a certain cool vibe that distinguishes it from other Mediterranean islands.
Our lawyer in Ibiza, Cristina, provides some salient advice on the need to check that any house you are interested in acquiring was not build illegally, in her article: Buying a house in Ibiza.
Useful additional reading: Property Taxes in Ibiza
Buying a House in Valencia
Valencia is home to Spain’s third largest city and in many ways it offers everything that Madrid and Barcelona can offer, but perhaps on a slightly smaller, more bearable scale, and not quite the same level of daily noise.
Foreign property investors can find much they will like here including a modern, diverse capital, with modern architecture contrasted with the beauty of the old town. Not to mention miles of sandy beaches where locals and visitors alike enjoy the climate while sampling tapas, local wines as well as water sports for the more adventurous.
Our lawyer Inma in Valencia city provides more in-depth information regarding buying a house in Valencia.
Useful additional reading: Property Taxes in Valencia