The 9 Most Common (and Expensive) Spanish Property Purchasing Mistakes
Whether you dream about a home in a picturesque seaside town or an apartment in a bustling urban area, there will be many challenges. First and foremost, there is the issue of unfamiliar legal proceedings in a foreign language – whether you are buying a family residence for personal use or a profitable capital investment for rental purposes.
While there are multiple protections for buyers, there are also many local pitfalls with disastrous financial consequences for inexperienced investors. So, my first and most important advice is to schedule a consultation with a local, English-speaking lawyer specialising in real estate sales. You will save a small fortune in legal fees, better understand the local regulations (which you must comply with as a new owner), and much more!
Here are the 9 Most Common (and Expensive) Spanish Property Purchasing Mistakes
1. Registry Issue
The first potential pitfall emerges when a property is not registered with the Land Registry. Many Spanish houses have never officially been registered due to their proximity to protected areas – such as nature parks and beaches, or their location on "green belts" (areas where development potential is limited). This risk is especially high for older properties. There are no guarantees that these properties can be "legalised" later, and unregistered properties are worthless investments.
Another less common issue is the Catastro Registry, which contains details on all Spanish properties. It is managed by the Tax Agency and used to calculate bills, inheritance taxes and other fees. If the data in the Land Registry and the Catastro Registry do not match, the registration of the new owner may be withheld.
Generally, problems arise from property size discrepancies. If significant enough, they must be corrected before your title is recognised. Such inconsistencies can also cause tax surcharges. Your lawyer should carefully check and inform you about the legal status of the property and its correspondence with the data records before signing any preliminary documents.
2. Financial Issue
Foreign buyers gravitate towards secondary market properties, often favouring those with a shared pool, garden, and other amenities. Have you ever considered the additional costs of owning an apartment in Spain?
One example of unexpected fees often applies to metropolitan areas, where a building complex shares selected facilities – such as swimming pools, elevators, playgrounds, and gardens. As a result, owners must pay a portion of the costs to maintain these common areas.
The Owners' Community oversees this process, and any debts found at the time of purchase become the new owner's responsibility. In addition, future investments in the common parts of the property (such as new elevators, building and equipment maintenance) will be shared proportionally among the owners. The more properties you own within the complex, the greater your share of current and future common costs.
Your lawyer should meticulously review the relevant documentation from the Owners' Community, ensuring that the property is unburdened by debt and future liabilities for common costs. Alternatively, they can notify you of these potential costs, allowing you to begin property price negotiations. It is also important to note that the property's value price is not everything. The costs associated with buying an apartment can be as much as several per cent of its price. They consist of fees related to formalities, commissions, and taxes.
3. Problems with Title
In Spain, it is common for relatives of the deceased to sell their newly inherited property. Your lawyer should ensure that the seller presents you with a valid property title and that consent has been acquired from all beneficiaries for the sale and registration of new ownership. Failure to do so could result in high legal costs for you.
In some cases, the property may also be subject to a lifetime housing easement (in favour of the deceased's spouse, for example). There may also be a court claim for debt collection, or the transfer of title may be restricted if the estate is "Officially Protected Property" with maximum resale potential.
Finally, under Spanish law, the property's current tenant may reject any sale offer made by the owner. Tenants can technically stay on the property for 3-5 years, but you will be entitled to any legally agreed rental income as the new landlord.
4. License Issue
Permits are required to build any legally functioning property. These vary in type and nature, and it is important to ensure that the property was built in accordance with the relevant regional regulations. In the past, entire settlements have been built based on a dubious legal status, leading to resale problems and resulting in the loss of investment funds.
Another common example is when a property has been expanded or equipped with additional features (such as a swimming pool) without the previous owner obtaining the required permit. This will not show up in the Land Registry certificate, and the Technical Office of the City Council must investigate the legality.
Local planning regulations can be difficult to understand. However, an experienced lawyer - who may seek additional guidance from a local architect - will assess and ensure the financial security of your desired investment.
5. Contractual Issues
One of the most common mistakes foreign buyers make is assuming that Spanish laws work similarly to their own. This is rarely the case, and the existing differences can drastically affect an investor. It is always best to consult a local lawyer to avoid additional costs. For instance, foreign buyers often agree to pay the notary fees in full when, in fact, they are only responsible for the cost of obtaining a copy of the deed. When the total fees can exceed 1000 euros, this is an expensive assumption! It is also important to remember that a buyer must only pay utilities from the date they officially own a property, not the entire year. Unfortunately, stipulations in the notarial deed often impose unreasonable fees on unsuspecting new owners. Therefore, it is good to be wary of this practice.
The property seller must also provide a valid Energy Certificate. An exception to this rule is when a buyer declares that they will make significant property renovations in the purchase deed. In most cases, your lawyer will insist on a preliminary agreement (known as an "arras"). This provides a buyer with protection, for example, the seller loses double the deposit amount if the contract is not concluded due to their own fault. Furthermore, this prevents confusion and the eventual loss of money invested in expensive, time-consuming activities, such as making several visits to Spain. In addition, this agreement will give you time to perform all the necessary legal actions before registering the property.
The final contract or "Escritura" signifies the transfer of ownership and from its closing, the new buyer can be registered in the local real estate registry. The contract signing takes place at the Notary's office. Before signing, your lawyer should check the regional government's building valuation. It may be higher than the agreed-upon price and lead to future claims from the tax authorities. All of this can be resolved if you insert an additional clause with the Notary, specifying that the purchase price was lower due to the poor condition of the building. Keep the invoices from the architects and other expenses to defend against fiscal claims.
Do not accept the model contract offered by the agency. It is usually in Spanish and uses a generic template – only the buyer and seller's names and property details are changed. However, a lawyer can create a personalised contract for your specific situation/property and translate it into English.
6. Items Included in the Contract That Are Missing
When you've reached a final price agreement, discuss which items the owner will leave on the property. Spanish houses are often sold with furniture and even boats, jet skis and similar luxury items. Conduct a meticulous inventory of belonging (either yourself or through a legal representative) and attach it to the sales contract. This step will avoid unnecessary disputes over missing items, allowing you to enjoy your new property quickly and without undue stress.
7. Buy to Let and B&B licenses
Suppose you plan to use your new property for commercial purposes. In that case, your lawyer should discern local restrictions - both at the municipal and regional level, as illegal property rentals in Spain carry fines. A tourist license is usually required, but obtaining one in some regions may be virtually impossible.
There may also be additional municipal restrictions due to local policies - for example, some apartment buildings may be used only for tourism (and not long-term residence).
For a B&B, you will also need an architect report to confirm that the property is suitable for this purpose. Then, your lawyer must apply for the appropriate license and present it to the local city hall. This process is time-consuming and expensive, especially if renovations are necessary to meet health and safety regulations.
All of the issues mentioned above are well worth considering before making an offer to the owner, as it may turn out that the property is simply unsuitable for your needs.
8. Construction Errors
Before buying a property in Spain, carry out a comprehensive technical inspection. Looks can be deceiving, and the perfect investment opportunity often proves too good to be true! In the 1960's, many Spanish city builders added aluminium to concrete as the process was faster and cheaper. This short-sighted scheme led to an increase in the incidence of so-called "aluminosis" - a lung disease caused by inhaling aluminium dust. In addition, aluminium made structures more porous and therefore unstable.
Due to their central location or architectural style, older buildings in Spain are often attractive to foreign investors. As a result, such properties are presented as real estate bargains and available at a relatively low price to attract foreign attention. Yet the low price often masks potential problems behind the picturesque facade. Local lawyers, architects and surveyors will be aware of such practices, so seek their advice before purchasing a property.
Many investors believe that the best projects are ruins, because there is a lot of potential for improvement. Pigeons can be an expensive obstacle, as they often nest in abandoned and decaying buildings. Special work teams must sometimes be commissioned to clear the area, significantly increasing the renovation cost. Pigeons carry microorganisms that cause dangerous diseases, such as European thrush, histoplasmosis, and mites. The first symptoms are usually headaches, chest pains, coughing, weakness, and feeling ill. It's worth reading up on the subject and asking for a quote for such services before renovating a property.
9. Off-Plan Purchases
Since 2016, interest in buying off-plan property in Spain has seen a noticeable increase. A major difference from the Polish primary market is that houses and apartments are completed on a turnkey basis. This encourages many to reach out to developers, even though prices are usually higher and a longer wait time exists.
A whole host of potential risks are caused by developers who cannot complete the construction of apartments. As a result, a growing number of individuals and families are forced to pay a mortgage for a home they cannot enjoy. This is such a common and disturbing issue that the Spanish parliament has introduced additional legislation to increase buyer protection.
When buying an off-plan property, your lawyer should ensure the developer has adequate bank guarantees to protect your deposit. If there are any doubts, the best advice I can give is to walk away. If you decide to proceed, it may take several years to recover your money and, in the worst case, you will completely lose the invested funds.
In conclusion, if you seek advice from local experts, the process of buying Spanish property can be easy, quick, and trouble-free.
To avoid the risk of a legal or structural defect in your desired property, have a lawyer who specialises in real estate sales acquire:
The registration data on the property (including the correspondence of the property with the physical description in the records and their consistency).
Confirmation of non-liability for taxes (in Spain, taxes are collected by three levels of government: the central government, autonomous regional governments, and local municipalities) and their amounts.
A certificate from the Community of the building or complex confirming that the Community's payments on the property are up to date and what the amounts are.
Confirmation of the current owner's title to the property (and the absence of claims by others, including tenants).
Absence of mortgage or other burdens on the property (such as easements).
Possibility of obtaining licenses, allowing commercial use of the property.
In the case of "off-plan" properties - confirmation that your developer has the necessary bank guarantees.
If you have doubts about the structure or technical aspects of the property, you should have it thoroughly examined by a local architect. Using experienced local lawyers and architects is like preventive health care: it is easier, more affordable, and less stressful to prevent a disease than cure it. In most cases, the cost of "salvaging" your investment burdened by legal or construction defects far outweighs the cost of legal care before and during the purchase.
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