Spain has a unique appeal to foreigners. With its enviable climate and year round sunshine, coupled with the relaxed, easy going Spanish life style, makes it quite tempting. But, if you have the intention of moving here to live, you need to know all that is necessary so that your dreams do not turn into nightmares. Spain, as we know, is suffering a property crisis, we do not know its roots but it runs very deep. Here is a simplified but concise guide for foreigners considering purchasing a property:
URBAN LAW IN SPAIN IS CONFUSING AND CAN BE HARSH
Why so confusing? There are in general three tears of legislation. A national legislation that covers the whole of Spain, then each autonomous region (county council) also as its own legislation, and lastly, each local town hall. Why so harsh? If faced with a violation or infringement of urban law, (which many foreign buyers have fallen victim to), national, regional and local legislation is not easy to combat all at the same time. Conviction or retribution for an infringement is a time consuming process. Many times, local government officials hold the buyers/owners accountable for the infringements, fines and/or demolitions, without considering that the buyers purchased in good faith, or that the buyers are the ones being defrauded by an unscrupulous builder.
SPAIN’S PENAL LAW FAVORS THE ACTUAL CRIME AGAINST URBAN LAW AND DOES NOT PROTECT THOSE THAT ARE VICTIMS OF IT
Spain has this problem because urban and property crimes committed are difficult to prove, and the fines/penalties against the offenders are low.
This factor acts as an incentive for corrupt and unscrupulous constructors to continue with their illegal activities and defraud innocent foreign residents with almost total impunity. Taking the above into consideration, the question is: even though this problem clearly exists, should one still take legal action (denounce) against urban fraud? The answer is: YES ALWAYS, but better yet, know what to look for in order to avoid making those critical mistakes in the first place.
PROPERTY DEVELOPERS IN SPAIN GENERALLY WORK AGAINST THE PURCHASERS BY NOT MEETING THEIR LEGAL OBLIGATIONS
Without legal representation at the onset to negotiate your rights as a buyer, you could fall shot of securing the following important terms and agreements on the title deeds and contracts:
- Guarantee of deposit and refunds by developers who default on their time of completion.
- Guarantee of imdemnization for possible damage to the premises.
- Building to code regulations as stated by law, concerning noise; humidity/dampness; thermal insulation, handicap access and for elderly people, etc…
- Charging the buyer for builder’s electricity & water supply. This is prohibited by law.
- Providing a license for the work and a license for first occupancy. Without these, the buyer will not be able to contract electricity, water & gas supply.
- Signing contracts that are previously written with abusive clauses against the buyers.
- The use of solicitors that are on the developers payroll, obviously not having the buyers interest as a priority making proof of payment more difficult.
- Handing over of the property without being completed, faults that affect habitability of the house or the whole urbanization.
- Paying for a multitude of extra charges including damage repair, finishing incomplete work, legal action, contracts, disputes and reclamations.
Recently, due to the economic situation in the housing market, developers are declaring themselves bankrupt when they receive judicial reclamations so that the buyer has to then “quita” (which means, be paid less), and also has to “esperar” which means, in most cases, wait various years to recover part of the money.
CRITICAL MISTAKES TO AVOID MAKING:
Our law firm is currently defending such cases at the present time.
I. PURCHASING A NEWLY BUILT RURAL HOUSE ON RUSTIC LAND WITH LESS THAN 10.000 SQUARE METERS:
Don’t trust this, as it is a fraud! The problem: The buyer will be faced with this main problem. A Town Hall can impose high fines because of the urban code violations, and eventual demolition to which the buyer, having bought the property is held fully accountable.
- The Town hall will deny the license of first occupancy (Licencia de Primera Ocupación).
- The Town Hall may not only opt to possibly demolish the property but make you pay the fines and the costs of demolishment as well.
- They will deny your registration on to the padron (similar to the electoral roll). The padron is an extremely important document to have in Spain. Without your padron, you will not be able to transfer your social security benefits, register your children in schools, purchase a vehicle, etc…
- Possible re-classification: If the land is Rustic (country land) and it is decided by the town hall to re-classify the land as an urbanization, then the buyers will be obliged to pay the costs of this procedure. These costs will be registered as debt against the property with the land registry until paid. If the debt remains unpaid, a charge can be put on the property and forced sale is a possibility.
- You will be UNABLE to contract services with the companies supplying electricity, water and gas.
- Problems with the legally registered land owner: Those rustic lands that are passed on from fathers to sons working in agriculture will have problems with the Land Registry Office. They are often missing registration on one or some of the owners. The size of the land is Often times incorrect, and the square meters declared are wrong as the land registered may have more or less area than has actually been sold or, there is no record of the land having ever been registered with the Land Registry.
- Problems with the seller: If the farmer sells the land to a speculator, this being done under the cover of another company can then be sold by private contract to the unsuspecting foreigner, without anything being registered at the land registry and without the knowledge of the actual registered landowner, and in the process, the value of the land that doubled or tripled in price from its true market value, and later the company that has carried out this “speculation” goes out of business.
II. IF YOU PURCHASE A HOUSE OFF PLAN THAT IS NEVER BUILT:
The buyer will have to reclaim the refund of what has been paid in the penal and civil courts. Important judicial costs to consider: If you purchase a property and before it is handed to you, the property the developer declares themselves bankrupt ( for example “Grupo San José”), the buyer will have to try to recuperate their money at the penal & civil courts. The buyer would also have go to the Company Courts (for those that have gone bankrupt) Juzgados de lo Mercantil (los de la quiebra) as soon as possible, because the later you act, the less money you will be able to recuperate and the longer it will take.
III. FLOODABLE AREA:
If you purchase a property and plan to build, the town hall can declare that it is in “floodable area” even though it has more than 10.000 square metres. A little known fact that pertains to the Comunidad Valenciana in particular, is that the area is vulnerable to periodical serious floods. There is a law that defines the level of flood danger in each area, which also specifies what this land may or may not be used for, to avoid deaths and damage. If you are in this situation, you must take out a lawsuit against the Town Hall and against the seller.
IV. PURCHASING A PROPERTY WITH A PRIVATE CONTRACT BUT WITHOUT A PUBLIC DEED OF SALE:
If you purchase a property without the ‘escritura de venta’, it is possible that the seller can resell the property to a third person with whom also failed to sign a deed of sale at the Notary. Spain has three different categories of property ownership.
- The owner by Escritura Pública (PUBLIC DEED OF SALE).
- The owner by contrato privado (Private Contract).
- The owner that does not have a contract or Escritura but for some reason is “owner” as he lives at the property.
The first situation is the most preferable by far because you are protected by the law. The second situation is not ideal but nothing can dispute the information registered at the land registry. The third and last situation obviously not ideal, but you can, (after 30 years time), acquire the property; provided that you prove there is NO existence of a third owner.
Do not trust intermediaries or the solicitors recommended by the estate agent (most likely on salary from the promoters or estate agents) and always consult with independent solicitors and experts in this area. RICOR ABOGADOS offers independent advice and will ensure that relevant searches are rigorously carried out at the local town hall and land registry, tracking all property records and investigating any possible local urbanization plans affecting the property.
We will also check that there are no debts and the vendor, who is selling it, has the permission to sell it-i.e, he is actually the current owner! For more information about this and other legal issues or to contact Mr. Ricor, please send an email to Ricor Abogados: firstname.lastname@example.org