Risks buying property in Spain

The hidden risks buying a property in Spain

When buying a property in Spain it should be done several previous researches and take some precautions to prevent future problems arise. The most common checking, which almost everybody does, is the legal exam in the form of due diligence works. But sometimes there are hidden issues that the buyer must check out before the purchase.

Hidden phisical risks

There are two key issues that must be considered in terms of physical configuration and status of a plot: If the site where it is located has developed potentially polluting activities and if the physical reality of it in terms of surface and boundaries coincide with that recorded in the Land Registry and Cadastre.

Soil Pollution

In Spain is not rare that a terrain that has been used for years for industrial purposes, due to changes in the local urban regulations, can change its use, being possible eventually construct dwellings.

Before purchasing a plot on which had been developed industrial activities, always take an environmental study to assess the existence of soil contamination and identify potential environmental liabilities that may arise from it.

This is important because, not being possible to identify the polluter, may be charged to the buyer the legal liabilities (which may incur remediation costs, for example ). Current legislation on contaminated soil includes the declaration of a soil as contaminated may involve the suspension of operation of the building rights and other uses of the land.

Likewise the owners of the estates where has been made ​​a potentially polluting activity, are obliged to report it in public deed when the property is conveyed, and recorded in the Land Registry.

Consequently, before the purchase, in order to identify potential environmental liabilities and avoid significant economic costs that can result from the actions of clean up and recovery of the affected land, it is advisable to hire an environmental consultant to make a research of hidden potential environmental liabilities (Environmental Due Diligence ) in those plots in which it has developed a potentially polluting activity.

Surface and property boundaries

In the cases in which the property is wide enough (buy as it is, or Caveat emptor principle), in order to pay an adjusted price to the surface acquired and avoid future disputes with neighbors, it is advisable to hire the services of a Surveying Engineer to determine precisely the actual land. This is because frequently the real thing does not match with the surface stated at the Land Registry and Cadastre. The information contained in the Land Registry is only legal, but it has not to be actual. The Cadastral information about a property in Spain, although includes maps and graphic information, can provide incorrect data on the surface, due to the mapping is based on digitized aerial photos, which is an imprecise system establishing surfaces and boundaries.

A field measurement by a surveyor will reveal the actual surface of the property prior to purchase and negotiate the price based on that information.

Physical risks of a property built

Whether you are purchasing is a property built, it is advisable to check its condition in order to find construction defects. If we have any suspicion, will be a good idea to be accompanied by a professional (architect), trying to detect "hidden defects" as risks of moisture, cracks, settlements, etc..

If the property is new built or a resale estate with an age less than ten years, the builder, developer and architectare liable for the structural defects that appear on it (foundation, supports, structure, etc.. ). Besides, in the case of defects on constructive elements or facilities that cause a breach of the conditions of habitability (cracks, dampness...), the warranty period is three years.

The Law also give the waranty period of one year for defects or flaws affecting finishes execution of the works.

There is also a period to claim the hidden defects of second hand properties, no matter how old are they,

Hidden legal risks

 

 

Plots

Buying a plot to build there eventually, the first thing to do, is ask for a Nota Simple at the Land Registry to check the ownership (if it is actually registered in the name of who claims to be the owner) and if there are burdens on the property (mortgages, liens, leases inscribed, usufruct, easements, etc..).

In the case of a building plot or land should be checked that the property meets the planning requirements (if it is urban land, developable or not developable and if you want to build, know everything about the urban planning parameters). For that purpose, is a need to obtain a certificate of urban planning use.

Buying property off plan in Spain

The last amendment of the Spanish Building Act (Ley de Ordenación de la Edificación) made on July 2015 threatens to have a great significance for those who decide to buy an off plan property in Spain since the beginning of 2016. The new rule says any amount that a home buyer pays before the house developer or the cooperative have obtained the building license will not be guaranteed by law. (Read more about the subject here)

Newly built dwellings

In the case of a newly built, besides the visit to the Land Registry, must be verified that there are no pending urban charges, the property has the first occupation license or it is on the way to obtain it, and whether the developer has hired the mandatory damage insurance required by Spanish "Ley de Ordenación de la Edidicación" (Building Regulation Act).

Being a property built on a land that was recently urbanized, it is useful to check at City Hall if there is any urban charge on the property to be acquired. When which is developed is the land to make a new neighbourhood, all the works and urban requirements imposed by the local regulations (make roads, sidewalks, street lighting, parks,...) are guaranteed by the plot developed. Therefore, the City hall can foreclose on the property to enforce the unfulfilled urban charges.

"La Cedula de Habitabilidad" (The certificate of occupancy), certifying that the property meets the criteria of quality and livability, is mandatory in some of the autonomous territories of Spain and is needed to sell or rent the property, or to contract with the housing supplies companies. It has a term of fifteen years and must be renewed.

"La Licencia de Primera Ocupación" (The first occupation license) is an administrative document to protect urban legality and verifies that the building and the urbanization have been done according to technical project and fulfilling the conditions imposed in the building license. Furthermore, It should be noted that the developer has assumed a number of obligations with the city hall; so, must deal with urban commitments required and ensure that the builder has repaired the affected urban elements, if damaged (damage sidewalk, road, lighting, etc..).

Until these obligations are not met, the City does not grant the license of first occupation. This may cause the buyer can not contract supplies. Therefore, it is appropriate to require the developer to show a copy of the first occupation license granted by the City hall, prior to the purchase.

It is essential, also, to keep all the information given in relation to the acquisition of the Property, including advertising, conditions relating to the construction, equipment and facilities and payment that are included in advertising. All of them will be enforceable although not included in the contract in case of housing qualities not correspond with offered.

Dwellings resale

In the case of a second-hand property, also could be hidden risks. Seller must obtain the certificate of occupancy in force (where required). It is also important to verify that the property is not leased or occupied.

If it were leased, it should be noted that, despite the change in ownership, the lease will continue for the period specified on the lease contract and for the extensions required under applicable law.

Furthermore, the Spanish Lease Act (Ley de arrendamientos urbanos) give to certain tenants the right of preferential acquisition in case of the property is sold with them living inside. For these reasons, and given that the lease contract probably is not recorded in the Land Registry, it is advisable to state in the purchase contract that the dwelling is without tenants and occupants.

Tourist apartments

In the last years the autonomic governments in Spain have developed rules designed to boost the tourism sector. These rules, among other things, refers to the urban planning and, in addition to hotel facilities, have created a new urban category of property whose use is intended to be tourist. (See the different legal types of property in Spain)

These properties have the appearance of private apartments, but have limitations on the enjoyment of property such as is mandatory be offered on lease a minimum period per year, and have to support the maintenance of the resort where they belong in the form of staff costs or bussines promotion. Be careful with this kind of properties, they probably are cheaper than the rest of the properties with similar qualities and location, but it is due a very good reason.