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Developers
When purchasing a property in Spain, you must make sure that the contract contains a thorough written description of it so once completely built you can confirm that all requirements are duly met. In case there are any irregularities you are entitled to claim before either, the developers or the builders. The developers finance the building works and are usually in charge of controlling the whole process, while the builders actually carry out the building works at the site.
The developers can sometimes be the sellers or even the actual builders of the property. No matter how involved they are with the building works, they will have to respond before any problems that may arise at any stage. Together with the builders, they manage the building site, therefore it is very important to know exactly who the builders and who the developers are before purchasing a property.
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Price
As far as the taxes are concerned, the purchase of a property is subject to the TVA tax; which is a 7% over the property value. When registering the Title Deeds with the Notary, you will also have to pay for the AJD tax, this is a transfer tax of 0.50% over the price as established in the purchase Deeds. Normally, this tax is not included in the purchase price and is included among the Notary expenses.
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Bank guarantees
Developers are obliged to guarantee the refund of the amounts handed on account for the property plus the legal interests incurred through either insurance or bank guarantees in case the building works are not started, the completion date is not met or the cédula de habitabilidad (occupancy certificate) is not granted
This bank guarantee can be either of general application for all the purchasers at the site and for all the payments made or individual. In both cases, the bank guarantees are compulsory and the developers are obliged to grant them even though they may imply an extra cost for them. This is the only way to guarantee that you will get your money back if your property cannot be handed in for whatever reasons.
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Title Deeds
The seller cannot force you to use any specific Notary Office; you have the right to choose the one Notary you wish to use.
If you are getting a mortgage to pay for your property, the developers cannot force you to use a specific bank either and if you wish to use a different Bank to the one proposed by the developers in the purchase contract, they cannot ask you to pay for any additional costs that this change may imply. This same thing happens with the Notary Office.
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CONVEYANCING SERVICES IN SPAIN
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Are you considering to buy a property in Spain? Have you purchased an off-plan property? You must be aware of what your rights as a purchaser are before signing any contract or agreement. Make sure that you ask for the following information:
The Builder must give you a copy of the Architect’s project approved by the local Town Hall plus a copy of the building licence and the cédula urbanística (planning certificate). This will guarantee that the Builders have all the permits in place and you are not running any unnecessary risks.
It is also very important to check with the Spanish Land Registry whether the developers, who are the sellers of the property, are actually the owners of the land and if there are any encumbrances or liens on the property.
With regard to the contract that you will sign with the developers while your property is being built or just before signing the Title Deeds, this must be checked by a Solicitor, who will give you full advice about any possible irregularities that the contract may contain. Unfortunately, it is common to find illegal clauses in this type of contracts, therefore you must pay attention to the following:
The purchase price on the contract must be the final total price, including the V.A.T. The AJD tax (Actos Juridicos Documentados), must also be mentioned.
The total useful area must be well specified in the contract, it is not enough to mention the built area only.
The contract must establish a specific completion date.
The contract must specify that the Bank will grant the required bank guarantees in due course for the amounts handed on account.
Let us just point out that Spanish Law obliges the Developers to bank guarantee the advanced payment for the property even though, unfortunately, the usual practice is to ignore this fact. Please note that this is extremely dangerous as Developers usually ask for the 50% of the purchase price to be paid up-front; in case there was any problem with the building company, etc you would lose your investment. This is something of great importance that we always demand for our clients.
In the other hand, the seller cannot oblige you to sign the Title Deeds before a specific Public Notary of their choice; you have the right to choose the Notary you prefer to use. In the same way, if you wish to get a mortgage, you are free to choose any Bank you like, it does not necessarily has to be the one proposed by the Developers and under any circumstances will you have to pay any extra costs for this change.
Finally, if they were not to meet the completion date established on the contract, you would be entitled to either cancel the purchase contract or claim for compensation.
Our regular form to proceed: We first ask you to fax or e-mail a copy of the contract or agreement you may have been given by the Developers or selling agents to sign. We review this document for you and then send you a short report with our comments, always referred to your specific purchase. You can then take your own decision as to whether you wish to go ahead with the purchase or not. If needed, we then contact the developers on your behalf in order to demand that the contract is amended until it meets your requirements. |
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