The more research you do before buying a property the better, which should (if possible) include advice from those who already own a home there, from whom you can usually obtain invaluable information (often based on their own mistakes).
Although it’s a common practice, mixing a holiday with a property purchase isn’t advisable, as most people are inclined to make poor decisions when their mind is fixed on play rather than business.
Some people make expensive (even catastrophic) errors when buying a home, often because they don’t do sufficient research and are simply in too much of a hurry – often setting themselves ridiculous deadlines such as buying a home during a long weekend or a week’s holiday.
Publications & Exhibitions
Property exhibitions are now commonplace in Spain, and are increasingly popular with prospective buyers who can get a good idea of what’s available and make contact with estate agents and developers. You may be charged an admission fee.
Outbound Publishing (1 Commercial Road, Eastbourne, East Sussex BN21 3XQ, 01323-726040, www.outboundpublishing.com ) publish World of Property, a quarterly publication containing many properties for sale in Spain (and other countries). Property is also advertised in many newspapers and magazines in Spain and abroad.
Advice & Information
A useful source of information for foreign property buyers in Spain is Ciudadanos Europeos, Apartado de Correos 418, 03590 Altea (Alicante), 966-880 798, www.c-euro.org ). Ciudadanos Europeos offers several useful (and free) factsheets about various aspects of buying property in Spain including building a home, the buying process and inheritance. Members of Ciudadanos Europeos benefit from valuable additional information, including notification of whether property owners have failed to pay taxes and their properties are therefore subject to official charges, and services such as help in choosing an estate agent or lawyer. Membership costs €80 for the first year and €60 for subsequent years.
Another useful source of information is the Spanish Property Insight website (www.spanishpropertyinsight.com ) which provides up to date information on the property market as well as useful resources.
This chapter is designed to help you decide what sort of home to buy and to help you avoid problems (see below). It also contains information about renting, estate agents, cost of property, fees, buying a resale or a new home, community properties, timeshare and part-ownership schemes, retirement homes, buying for investment, inspections and surveys, renovation and restoration, and building your own home.
Avoiding Problems
The problems associated with buying property abroad have been highlighted in the last decade or so, during which the property market in many countries has gone from boom to bust and back again. From a legal viewpoint, Spain isn’t one of the safest places in which to buy a home, although buyers have a relatively high degree of protection under Spanish law. In the last few decades, buying property in Spain has been the subject of much adverse publicity, both in the foreign and Spanish media. Some people have even gone so far as to advise foreigners not to buy in Spain! However, although the pitfalls must never be ignored, buying property in Spain needn’t be a gamble.
There are more than 2m foreign property owners in Spain and many millions of Spanish owners, the vast majority of whom are happy with their purchases and encountered few or no problems when buying their homes. This should be borne in mind when you hear or read horror stories concerning foreign buyers in Spain. The possible dangers haven’t been highlighted in order to discourage you, but simply to ensure that you go into a purchase with your eyes open and to help you avoid problems – many foreign buyers encounter problems because of their own lack of judgement or foolishness, particularly when buying off plan. If you plan to buy in Spain, make your maxim: if you wouldn’t do something in your home country, don’t do it in Spain!
Legal Advice
It cannot be emphasised too strongly that anyone planning to buy property in Spain must take expert, independent legal advice.
Tip: Never sign anything, or pay any money, until you’ve sought legal advice in a language in which you’re fluent, from a lawyer who’s experienced in Spanish property law.
If you aren’t prepared to do this, you shouldn’t even think about buying a property! It has been estimated that some 80 per cent of buyers in Spain don’t obtain independent legal advice. Most people who experience problems take no precautions whatsoever when purchasing property and of those who do take legal advice, many do so only after having already paid a deposit and signed a contract (or when they hit problems).
You will find that the relatively small price – in comparison with the cost of a home – of obtaining legal advice to be excellent value for money, if only for the peace of mind it affords. Trying to cut corners to save on legal costs is foolhardy in the extreme when tens or hundreds of thousands of euros are at stake. However, be careful whom you engage, as some lawyers are part of the problem rather than the solution (overcharging is also rife)!
Don’t pick a lawyer at random, but engage one who has been highly recommended by someone you can trust.
There are many people who claim to be lawyers (often estate agents or accountants), although this is highly illegal and leaves you with no protection should anything go wrong.
You should check that a lawyer is a member of the provincial lawyer’s association (Colegio de Abogados) – membership of which is compulsory and all members are covered by professional indemnity insurance. You can easily telephone the association to check, simply by giving the lawyer’s name.
The only professionals legally qualified and permitted to give legal advice in Spain are lawyers and you should take legal advice from no one else. Some estate agents will work hard to dissuade you from employing a lawyer on the grounds that they’re not necessary, that they’re expensive and hold purchases up.
Other estate agents claim you should use their lawyer who usually represents the estate agent’s and the seller’s interests rather than yours so it’s advisable to always use an independent lawyer. It isn’t advisable to use the same lawyer as the vendor, even if it would save you money, as he’s primarily concerned with protecting the interests of the vendor and not the buyer.
Although legal advice may seem expensive and legal checks on a property may mean you must wait longer before buying, you shouldn’t attempt a purchase without independent legal advice and in any case, the lawyer’s fees will be a fraction of the estate agent’s commission!
Gestores
A gestor is an official agent licensed by the Spanish government as a middleman between you and bureaucracy. It isn’t compulsory to employ a gestor, but without one you must usually speak fluent Spanish (or have an interpreter), possess boundless patience and stamina, and have unlimited time to deal with the mountains of red tape and obstacles. A gestor’s services aren’t generally expensive. Note, however, that the quality of service provided by gestores varies and that they cannot always be relied upon to do a professional job (some have been known to take money from clients and do absolutely nothing).
Employing Professionals
There are professionals speaking English and other languages in most areas of Spain, and many expatriate professionals (e.g. architects, builders and surveyors) also practice there. However, don’t assume that because you’re dealing with a fellow countryman that he will offer you a better deal or do a better job than a Spaniard (the contrary is often true). It’s wise to check the credentials of all professionals you employ, whatever their nationality.
It’s never advisable to rely solely on advice proffered by those with a financial interest in selling you a property, such as a developer or estate agent. Avoid ‘cowboy’ agents and anyone who does property deals on the side – such as someone you meet in a bar – as dealing with them often leads to heartache and it could also be dangerous!
Problems
Among the many problems experienced by buyers are properties bought without a legal title; properties built illegally without planning permission; properties sold that are subject to embargoes; properties sold with forged deeds; properties with missing infrastructure; builders or developers going bust; developer’s loans being undischarged after completion; undischarged mortgages from the previous owner; intermediaries disappearing with the seller’s proceeds; overcharging by vendors (particularly when selling to foreigners); properties sold to more than one buyer and even properties sold that don’t exist!
On the other hand, buyers must also accept their share of the blame. It’s a common adage in Spain that many buyers ‘leave their brains behind at the airport’ and it’s true that some people do incredibly irresponsible things, such as (on occasions) literally handing over bags full of cash to agents or owners without any security. In cases such as these it’s hardly surprising that people are defrauded!
In the past, many properties were built without planning permission, weren’t constructed according to the approved plans or were built on land that wasn’t zoned for building in the first place. Even when planning permission was obtained, developers often built more homes than were approved. A system of ‘legalising’ unauthorised constructions by fines is used by many municipalities, although in extreme cases illegal buildings or extensions have been demolished.
In some cases, areas have even been retroactively re-zoned as green zones ( zonas verdes) years after planning permission was approved and homes were built! In most cases, the property owners were the innocent parties and received derisory compensation, while the crooks got away scot free. Some municipalities turn a blind eye to (or even collude in) the building of illegal urbanisations and then levy owners (sometimes thousands of euros) for improving the infrastructure (e.g. roads, sewage, water), which was already paid for in the cost of their homes. Local officials have dictatorial powers in planning matters and some municipalities treat the victims of crooked builders and developers like criminals.
Mistakes
Common mistakes made by buyers include:
- Buying in the wrong area (rent first!).
- Buying a home that’s difficult to resell.
- Buying a property for renovation and grossly underestimating the restoration costs.
- Not having a survey done on an old property.
- Not taking legal advice.
- Not including the necessary conditional clauses in the contract.
- Buying a property for business, e.g. to convert to self-catering accommodation, and being too optimistic about the income and taking on too large a mortgage.
It’s common practice to declare a lower price in the title deed ( escritura) than actually paid, although you must take care that you don’t declare too low a price. Checks must be carried out both before signing a contract ( contrato privado de compraventa) and before signing the deed.
If you get into a dispute over a property deal it can take years to get it resolved in Spanish courts, and even then there’s no guarantee that you will receive satisfaction.
Subrogation
One of the Spanish laws that property buyers should be aware of is the law of subrogation, whereby property debts, including mortgages, local taxes and community charges, remain with a property and are inherited by the buyer.
This is an open invitation to dishonest sellers to ‘cut and run’. It’s possible, of course, to check whether there are any outstanding debts on a property and this should be done by your legal advisor and/or the notary when signing the preliminary contract and again a few days before the completion, although the system isn’t foolproof. The notary should always obtain an up-to-date notification from the property registry office ( Registro de la Propiedad) on the day of completion.
Buying Off Plan
Many problems can arise when buying off plan, i.e. unbuilt properties, or a property on an unfinished development (urbanisation). Because of the problems associated with buying off plan, such as the difficulty in ensuring that you actually get what’s stated in the contract and that the developer doesn’t go broke, some experts have advised buyers against buying an unfinished property. However, this isn’t practical, because in a seller’s market it’s essential to buy off plan if you wish to buy a home in a popular development. It’s worth remembering that although there are many satisfied buyers of off-plan property, the process is generally more time-consuming and stressful than buying a resale property.
A ‘finished’ property is a property where the building is complete in every detail (as confirmed by your own lawyer or architect), communal services have been completed, and all the infrastructure is in place such as roads, parking areas, external lighting, landscaping, water, sewerage, electricity and telephone services. A builder is supposed to provide buyers purchasing off plan through stage payments with an insurance policy or banker’s ‘termination’ guarantee, which protects them against the builder going bankrupt before construction is completed.
However, some builders fail to obtain insurance and it has even been found to be forged!
Buying Land
Before buying building land, ensure that it has planning permission or that planning permission will be a formality. Don’t take the vendor’s word for this, but make it a condition of the purchase of a building plot.
Take Your Time
Many people have had their fingers burnt by rushing into property deals without proper care and consideration. It’s all too easy to fall in love with the attractions of a home in the sun and to sign a contract without giving it sufficient thought. If you aren’t absolutely certain, don’t allow yourself to be rushed into making a hasty decision, e.g. by fears of an imminent price rise or of losing the property to another buyer who has ‘made an offer’ (note, that estate agents often pressurise by claiming there are several other clients about to make an offer).
Take time also to do your sums to make sure you really can afford the purchase. Too many people have been tempted by a cheap down-payment on an off-plan property only to find they cannot afford to complete the purchase several months later.
Although many people dream of buying a holiday or retirement home in Spain, it’s vital to do your homework thoroughly and avoid the ‘dream sellers’ (often fellow countrymen), who happily prey on your ignorance and tell you anything in order to sell you a home.
Legislation
The authorities have learnt a few lessons from the many disasters that have befallen many foreign (and Spanish) buyers, although changes in the law are painfully slow and the authorities have been slow to close loopholes. In the last decade, changes have included better planning controls, tighter laws concerning urban matters, compulsory checks by notaries, and new rules requiring developers to provide full financial guarantees before beginning construction. New regulations concerning building in the vicinity of the coast and green belts, population densities and the height of developments have also been introduced.
Although planning infringements still occur, they’re generally dealt with more harshly than before. However, prosecutions of corrupt or incompetent officials, professionals, developers and builders are still extremely rare. Despite the improvements, the authorities and everyone concerned with the property industry in Spain still have some way to go to match the security provided in most other western European countries.
Fraud
In line with Spain’s compliance with European Union (EU) directives and in an attempt to reduce the country’s black market (one of the largest in Europe), new regulations against money laundering (particularly in property transactions) were introduced in 2003. Under these regulations, any professional involved in a property transaction (e.g. lawyers, notaries, bankers, tax advisors) is now obliged to report any ‘suspicious activities’ from their clients to the Spanish tax office.
‘Suspicious activities’ include transactions involving large amounts of cash, underdeclaring a property’s price, non-payment or evasion of capital gains tax or using an offshore or Spanish company to buy a property. This legislation is mainly aimed at large-scale money laundering, but most property transactions are affected by it to some extent – don’t be surprised if your lawyer is reluctant to allow you to underdeclare a property’s price.
Valencian Urbanisation Regulations
The Urban Development Legislation ( Ley Reguladora de Actividad Urbanística/LRAU), introduced in 1994, in the region of Valencia is currently the centre of a highly-publicised dispute between developers and hundreds of property owners, who are being forced to pay huge sums of money for infrastructure development or for the repurchase of their own land. If the owners don’t (or cannot) pay, developers can legally seize the land and pay owners compensation at a fraction of the market price.
When it was introduced in 1994, the LRAU’s objective was to promote urban development in the region where town planning faced continual obstacles mainly from landowners who refused to participate in development projects. As a result, towns and cities could not expand or build low-cost housing or essential public services. Under the LRAU, landowners must participate in development projects backed by town councils by paying for contributions towards infrastructure such as roads, mains supplies and street lighting. In the city of Valencia, the LRAU has worked well and the city and suburbs have benefited hugely from new development for housing (relieving the chronic shortage), green areas and public services such as hospitals and schools.
Control in and around the city has been strict and development highly regulated. However, in other parts of the region, particularly the Costa Blanca, the LRAU has been systematically abused by corrupt local authorities and developers who stand to make huge profits by developing rural land for villas. Most of the development plans in this area carried out under the auspices of the LRAU provide little or no public benefit.
Many owners, Spanish and foreign, of semi-rural or rural properties in the area are affected by the LRAU, particularly as developers now move further inland away from the coast where there’s a shortage of building land. As a result, many owners are facing large bills (up to €75,000) or are being forced to sell their property. The LRAU has been challenged before the Spanish Constitutional Court as a breach of essential property rights, although a decision by the court isn’t expected in the near future.
The matter has been taken up with the European Court of Justice and the EU has opened an infringement procedure against the Spanish government. After the European Parliament’s report in late 2005 condemned the LRAU and demanded compensation for victims and a moratorium on LRAU projects, the Valencian government passed a new law ( Ley Urbanística Valenciana/ LUV), intended as an ‘improvement’ but opposition groups and legal experts claim that the LUV is merely a new excuse for the same practices, an end to which – and compensation for victims – is yet to arrive.
Meanwhile and until there’s a court ruling against the LRAU, you’re advised not to buy rural or semi-rural land in the region of Valencia without taking comprehensive professional advice, preferably from a lawyer who can thoroughly explain all the implications of such a purchase. The LRAU affects only property situated on land that hasn’t been developed. Comprehensive information about the LRAU and associated problems is available in English from the ‘Abusos Urbanísticos No’ pressure group website www.abusos-no.org ).
Rural Land in Andalusia
In December 2002, Andalusia’s regional authorities (the Junta de Andalucía) passed new legislation affecting building work in most of the region’s rural areas in an attempt to preserve Andalusia’s unique countryside and to prevent it being spoilt by uncontrolled construction such as that seen along much of the coastline. Under the new law it’s now extremely difficult to build on a rural plot (known as a parcela rústica or parcela no urbanizable) unless the land already has a ruin or building on it, or you intend to make your living from agriculture.
Rural Andalusia is very popular at the moment mainly because foreign buyers find the property prices too high on the coast or are looking for a quieter area. However, many foreigners buying plots inland have been caught out by this new legislation and there are numerous stories of foreigners who have found they can do nothing with the rural plot they bought – except enjoy the views. In some cases foreigners who bought the land several years ago have since discovered that their applications for a building licence will be refused.
Some agents and owners will try to tell you that local authorities aren’t imposing the regulations, but it would seem they’re taking the legislation seriously – building projects on rural land are often stopped by local councils and police helicopters regularly scan rural areas looking for illegal construction. Illegal projects have to be abandoned and demolished (at huge costs to the owners), as it’s no longer possible to pay a fine and continue building.
There are exceptions to the ruling, although these are difficult to fulfil, as you can currently only build on a rural plot if you intend to live there and make your living from farming the land (you must prove this). Even if you buy a plot with an existing building or ruin, permission to extend the building or restore the ruin may not necessarily be given. It’s also virtually impossible to build a swimming pool or garage.
Steer clear of rural plots unless you have official confirmation in writing (preferably from the regional authorities themselves) that you can build on the land. Don’t be taken in by promises made by owners (anxious to sell their land to foreigners at a high profit) or estate agents (anxious to get their commission) that a building licence can be obtained. Check yourself, or better still, employ a lawyer in the area to check for you. If there’s any doubt about whether you can build then it’s advisable to look at other properties.
This law affects only rural plots and doesn’t affect land classed as ‘ urbana’.
This article is an extract from Buying a home in Spain. Click here to get a copy now.