Due diligence, a risk assessment conducted with “due care,” analyses the legal status of the property as well as any potential risks. This preliminary analysis plays an important role both in determining the value of the property and in providing legal protection for the buyer.

Most Spanish lawyers not only assist you during the purchase process by handling matters with sellers, the notary, the Land Registry, etc., but also carry out the preliminary legal review of the property. It is important to check whether the service agreement includes the cost of obtaining up-to-date Land Registry extracts, current graphical descriptions from the Cadastre, etc., or whether these must be paid for separately in addition to the legal fees.

Although it is always advisable to have this review carried out by a professional, below you will find a property purchase and due diligence checklist setting out the most important documents that should be examined before the purchase.

 1. The Land Registry extract

As in Germany, all properties located in Spain, together with any encumbrances and rights affecting them, may be recorded in the Spanish Land Registry. The corresponding extract may be requested using either the property registration number or the names of the owners.

2. The cadastral extract

In addition to the Land Registry, which provides legally binding information about ownership and rights, Spain has another property register: the Cadastre. Although this register only has administrative effects, it is essential to review it, as its records provide information including the exact size of the property (5), its use, year of construction (3), location (2) and cadastral value.

3. The homeowners’ association

If the cadastral extract shows that the property includes common elements—usually apartments or detached houses with private shared access roads—it is also necessary to verify whether all outstanding amounts owed to the homeowners’ association have been paid by the date of the agreement. To avoid assuming existing liabilities after the purchase, it is advisable to obtain a certificate from the president or administrator of the homeowners’ association confirming that the seller has no outstanding debts.

4. The municipal authority

If there are doubts regarding the planning or building legality of the property, it is advisable to request the corresponding planning certificate (Ficha urbanística) from the municipal authority.

This certificate sets out all planning and building circumstances known to the municipal authority. It therefore indicates whether building permits were applied for and granted, whether any other applications may have been submitted but rejected, and whether there are any ongoing proceedings against the property or its owner. If a specific regional development or environmental plan applies, as in the case of protected natural areas, the resulting restrictions will also be shown in the certificate.

 

4. The Autonomous Community

With regard to the Comunidad Autónoma, or Autonomous Community, in which the property is located, particular attention must be paid to any licences that may be required. For example, when renting to tourists—generally for periods of less than two months—different requirements must be met depending on the Autonomous Community, and the corresponding licence must be obtained. Further information about tourist rentals can be found on page 101.

Furthermore, in some cases it is advisable to check the planning and building legality of the property at the Autonomous Community level as well as obtaining the certificate from the municipal authority. The corresponding general urban development plans (Plan General de Ordenación Urbanística or PGOU) can be downloaded from the websites of the individual Autonomous Communities.

5. Taxes (summary)

For tax reasons alone, it is advisable to consult an expert when purchasing a property. In simplified terms, the following taxes may apply:

-Property Transfer Tax (Impuesto sobre Transmisiones Patrimoniales)

-Value Added Tax (IVA), Personal Income Tax (IRPF),  

-Municipal Tax on the Increase in the Value of Urban Land (Impuesto Municipal sobre el Incremento del valor de los Terrenos de Naturaleza Urbana)

-Stamp Duty (Impuesto sobre Actos Jurídicos Documentados), etc.

- Withholding when purchasing from non-residents (3%).

Our law firm will be pleased to assist you in analysing your particular situation, completing the necessary administrative procedures on your behalf and filing the corresponding tax returns. If you are interested or have specific questions about this subject, please feel free to contact us by email or telephone in German.

Author: 

Christoph Sander
Lawyer and Tax Advisor
CEO, Partner, Director
info@sspartners.es
Tel: (+34) 951 12 13 06
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