If you were buying property in the UK or elsewhere, you would have a surveyor check its condition and you would have a lawyer check the title deeds and take full legal responsibility for the transaction. So why not do the same in Spain?
The most important thing we would stress is that you must NEVER SIGN ANYTHING until you have had it checked by your lawyer. If you do you may be committed to a contract that you did not understand, that may be totally unfair or unsafe and which could have been structured in a way that is totally unsuitable for you as well as tax inefficient.
Once the terms of the purchase-sale have been discussed, it is submitted to the real estate agent who in turn will inform the other party of the details of the offer. If it is accepted, a binding agreement is created. It is normal practice in Spain to include with the purchase offer a sum of money to reserve the property prior to the exchange of contracts in order to show the seller that there is a genuine intention to purchase.
The amount deposited at this time, to take the property off the market, usually ranges between 3.000 and 6.000. Several consumers protection acts become automatically applicable in respect of what you have signed and will very much determine the legal position of the parties, regardless of whether you have waived the mandatory protection granted by Law. According to the Supreme Court of Spain, a reservation deposit document, deposit slip, offer and deposit receipt, must be construed as being either a true purchase-sale agreement or a pledge to buy or sell. Typically this means that the pre-contract agreement (called contrato de arras) provides that if the buyer backs out of the contract, he loses the deposit; if the seller backs out, he has to pay back double. Of course, the buyer and seller may choose to alter this by agreement.
The pre-contract agreement means that both parties agree that, upon completion of certain conditions either will be entitled to force the other to sign a proper purchase or sale contract. Basically, it is an interim documents to set out the lines on which the purchase-sale contract will eventually be drawn.
For example, in the case where the developer has not yet obtained the building license or is pending authorisation by regional authorities. Likewise, the buyer might be in the process of raising funds or realising funds. Once these events take place, the parties are bound to instruct their respective lawyers to prepare the completion contract for signature. If the legal representatives of both parties deem it necessary, the exchange of private purchase contracts is supported by a payment of normally 10% of the purchase price, to includes any money already paid.
The contract sets out the agreed terms and conditions of the transaction and the date for final completion before the Notary Public.
After the reservation deposit has been lodged with the real estate agent and prior to the signing of the private purchase contract, the appointed lawyer will have completed the legal searches and investigations of the property.
Any debt or charges attached to the property will be stated in the purchase contract. These will have to be settled by the vendor prior to completion. If not, the buyer will be entitled to either withdraw from the proposed deal and claim damages or deduct the amount of the debt together with the all redemption costs, if any. The lawyer needs to check the vendors Escritura Pública and see a nota simple. The last word in property ownership is the Property Registry, the final proof of ownership, where the property history can be tracked back to its first owner. Any liens, embargoes or encumbrances will be shown in the nota simple obtained from the Registry. It is an excellent way of recording titles which has become even more secure due to recent changes in legislation.
The purchasers lawyer will of course check the Registry before doing anything else. If you are buying a resale you need a paid-up receipt for the IBI (Impuesto sobre Bienes Inmuebles), the annual council tax, you must see proof of paid-up community charges and a copy of the Rules. You need to check on back taxes and you need copies of the sellers paid electric, water, and waste collection bills.
If you are buying off plan you need to investigate the legality of your urbanisation and you need the guarantee of a building permit as well as a banks guarantee for monies paid. The property transfer must be certified by a notary and the deed of purchase will be given to the buyer after the notary reads it and all parties present agree to its contents. The following need to shown at the Notary: proof of identity (or power of attorney) for both parties, the sellers title of property (a form reporting the change to the Central Register) and the buyers payment. The buyer and seller sign the contract, which is followed by the notarys signature using his firma protocolizada. The deeds are then ready for taxation.
If you want to be sure that your rights to the property are fully protected, your title must be registered with the local office. Your lawyer will prepare the documentation required for the transfer of ownership. On the appointed day buyer and purchaser, and/or their legal representatives, meet at the notarys office to sign the official transfer of title (escritura). The witnessing of the documentation by the notary is your legal safeguard in that the change of ownership will be recorded at the official registry and it completes the process, leaving you safe in the knowledge that your property purchase is official and free of encumbrances.