Top 10 Legal Tips for Foreign Nationals When Buying a Property on the Costa del Sol
1. Obtain independent legal advice from the outset
Prospective buyers should be aware that although there are numerous reputable estate agents and developers on the Costa del Sol, they are ultimately interested in closing a transaction. Therefore, after finding the right property and before placing an offer, the correct step should consist of speaking with an independent lawyer.
Instructing a lawyer who is not independent, for instance, if he is appointed by the estate agent or the seller (or is recommended by them pursuant to a collaboration or a referral arrangement), will not only be a waste of your money, but will be counterproductive and ultimately harm your position, as the lawyer’s in terests will conflict with
2. Buyer beware
Property is one of the few sectors where consumer protection laws do not largely apply. Therefore, in the event that a buyer is not happy with his property or assumes any unwanted legal liabilities following the sale, it is generally not possible for him to sue the estate agent or the seller, or to otherwise undo the transaction.
The main exception to the above applies in the event that the seller made false or fraudulent statements in respect of the state of the property.
Consequently, it is vital for a buyer and his lawyer to undertake a robust due diligence exercise by raising all relevant enquiries in respect of the factual and legal status of the property and duly examining all the documentation.
In addition to the above, buyers should ensure that the due conveyancing process takes place on completion to avoid assuming any liabilities. Basic tasks which should never be overlooked include ensuring that all taxes are paid, discharging any charges and mortgages registered against the property and apportioning expenses.
3. Become aware of your specific challenges and needs as a foreign buyer
Although it is advisable for all buyers to instruct a lawyer before entering into a transaction irrespective of their nationality, a Spanish buyer will generally face less legal risks than a foreign buyer.
For instance, a Spanish buyer will possess better linguistic skills and familiarity with local practices in order to raise relevant enquiries and liaise with the seller, banks and public registries. Foreign buyers usually have different needs and objectives from those of Spanish buyers. For instance, the former may become subject to special taxes (such as Non-Resident Owner’s Tax) and may want to avoid or mitigate the effects of Spanish laws on inheritance (including inheritance tax). In addition, foreign buyers are more likely to purchase a Spanish property for the purpose of owning a second holiday home or as an investment, without necessarily intending to become tax domiciled in Spain.
4. Choose the right lawyer
Your choice of lawyer should not solely be determined by how much he is charging. Fees should not be excessive and should generally be fixed from the outset when dealing with a straightforward conveyance (as opposed to being billed on an hourly basis in respect of matters of which is more difficult to determine the scope of work). However, it is a grave error for a foreign buyer to simply instruct the lawyer with the lowest fees without considering other factors.
Any foreign buyer should make sure that his lawyer possesses ALL the following attributes:
(i) Your lawyer should be fully independent and act solely to protect your interests.
The key reasons for this are discussed above in tip 1. Moreover, a lawyer who acts solely on your behalf will not only safeguard your interests, but may achieve a better commercial outcome. For example, an independent lawyer may be able to secure a lower price as a result of any issues revealed pursuant to a thorough legal due diligence.
(ii) Your lawyer should be a real lawyer.
Sadly, there are numerous individuals on the Costa del Sol who falsely claim to be “legal” professionals, conveyancers or paralega ls capable of advising foreign buyers and providing “legal” advice. Their services may be suitable to Spanish buyers entering into a simple transaction, as they will be more knowledgeable of local practices and will have
less complex tax and legal needs. However, for the reasons discussed herein, foreign nationals should only instruct a real lawyer who understands their needs and objectives. Moreover, it is not uncommon for Spanish law firms on the Costa del Sol to hire paralegals or secretaries who speak English in order to liaise with foreign clients, as their lawyers are not fluent in English or lack the relevant expertise in regards to advising local expats and international clients. This is also not advisable. You should be able to liaise with your lawyer directly and ensure that you are receiving proper and un-channelled legal advice.
(iii) Your lawyer should specialise in advising foreign nationals and international clients.
It is simply not enough for a lawyer to speak English and claim to have advised foreign buyers in the past. You should instruct a lawyer who is knowledgeable of all the legal and tax issues which will affect you as a foreign owner or resident in Spain (and not solely in respect of the actual purchase).
(iv) Your lawyer shoul d be familiar with local practices and procedures.
It is not necessary to instruct the lawyer whose office is closest to the property that you intend to purchase. However, your lawyer should have experience in the area in order to effectively liaise with the relevant registries and
parties to the transaction.
(v) Your lawyer should be capable of becoming your long-term advisor.
After purchasing a property, irrespective of your planned residency and tax status, you will require a long-term advisor. It is not enough to instruct a lawyer solely because his secretary speaks English or because he can deal
with the conveyance. You will need a personal advisor to deal with pressing matters following the purchase of your property, such as filing your local taxes (some of which are applicable to non-resident owners), as well as in respect of organising your personal affairs in order to make them tax efficient and compliant with local regulations (including laws on inheritance).
Needless to say, BF Solicitors possess all the above attributes. This makes us the ideal lawyers to instruct when purchasing a property in Spain. We are a boutique law firm of Spanish lawyers (Abogados) and English Solicitors which specialises in advising foreign nationals and international clients on the Costa del Sol.
We are a partner-led practice, meaning that you will receive sound and independent legal advice directly from our partners (all of whom are lawyers, fluent in English and experts in advising foreign nationals) instead of a paralegal, conveyancer or a secretary.
Our Spanish lawyers include professionals with more than 30 years’ experience, who can advise on all local laws and regulations. In addition, our English Solicitors have considerably experience in advising foreign nationals and international clients on cross-border transactions and local matters.
We are fully registered with the Malaga Bar Association and covered by professional liability insurance across Spain. Moreover, our English Solicitors are also registered with the Law Society of England & Wales.
We assume the highest level of professional care and ethics. We will never act in a manner which may compromise our independence, professional duties and confidentiality obligations towards you.
5. Make sure that all transaction costs are clear from the outset
A good lawyer should be able to provide you with an estimate of the total cost of the transaction. This would include the purchase price, applicable taxes¹, legal fees² and anticipated disbursements³.
A buyer should not rely solely on the advice of the estate agent, as he will be primarily motivated in closing the deal and may not disclose all costs in detail. Moreover, an estate agent will not be in a position to provide an exact estimate of the applicable taxes, legal fees and disbursements.
6. Ensure that the funding is in place
If your purchase depends on securing third-party financing, such as a bank loan, or upon the sale of your property, you should not enter into any agreement (whether written or oral) or pay a deposit without first consulting your lawyer.
As a general rule, you should not proceed with a transaction until the funding is in place. However, in the event that it is necessary to place a conditional offer, your lawyer should properly inform you of the risks and ensure that the tr
ansaction is contingent on securing financing, so you are not obliged to purchase the property (and pay the purchase price) if the funding is not in place at completion.
1e.g. land transfer tax, as well as VAT in respect of new properties.
2Legal fees should generally be fixed in respect of the conveyancing in general.
3Disbursements generally include notarial fees, registration fees and miscellaneous expenses.
7. Should you pay a deposit?
It is reasonable for the seller or the estate agent to insist on the payment of a deposit to secure the deal and take the property off the market. However, you should not pay a deposit or agree to any form of commitment without first liaising with your lawyer. You should not commit any money until you are absolutely sure that you intend to proceed with the purchase. Therefore, your lawyer should first make all the relevant legal enquiries to ensure that you are purchasing a property with good title and no liabilities. Moreover, the parties should first agree on the key terms (e.g. completion date, purchase price, apportionment of expenses, status of deposit etc.).
In exceptional cases where a deposit is paid without first securing the relevant funding, your lawyer should advise you of the legal risks and ensure that the retention of the deposit is conditional upon securing financing within a certain date.
8. A site visit is a must
In the light of the current state of the Spanish property market, where prices are stabilising after reaching record lows, it is sometimes tempting for foreign buyers to make an offer on their dream home or an investment property without first viewing the property and surrounding area. This course of action is not advisable under any circumstance. In accordance with tip 2 above, a buyer should be aware of all facts prior to making an offer. A site visit may reveal issues which are impossible to discover by solely looking at the documentation, such as onstruction defects, incongruences between the title deeds and the actual state of the property or the presence of occupants at the premises.
It is not common in Spain to instruct a surveyor, but this is advisable if any defects are apparent which may relate to the structure of the building. In the event of any structural and construction defects, a good lawyer should be able to advise you on the available options, such as walking away from the deal, renegotiating the purchase price or ensuring that the relevant insurances and warranties are in place.
9. Look at the bigger picture
Most properties on the Costa del Sol (and in particular those purchased by foreign buyers) are located in communities or urbanisations with communal gardens, swimming pools, parking, etc. Therefore, prior to purchasing a property in a community, you should ask to inspect the common areas and the status of the community as a whole.Your lawyer should at the minimum confirm that the property in question is not in arrears in respect of the community fees (i.e. the service charge payable by owners to the community) and analyse the community ́s bylaws and the minutes of the last AGM4 of the general assembly of owners. This should allow a better idea of the legal and financial issues affecting the property and the development as a whole, such as any debts incurred by the community, any restrictions placed on owners, any planned major works which may result in an increase of the service charge and the quantity of owners who are in arrears. In addition, many properties and urbanisations on the Costa del Sol are located in areas which are not managed by the local municipality. Therefore, a good lawyer should analyse the title deeds and local planning regulations in order to advise you in regards to any potential liabilities, such as any mandatory contributions which may apply towards any infrastructure works in the area.
10. Find out what your expenses will be after purchasing the property and plan for the future
A good lawyer should advise on the taxes and expenses which apply after the purchase of your property, such as community fees (service charges payable by owners to their community), IBI (i.e. the Spanish equivalent of council tax), rubbish collection fees, non-residen t owner ́s tax and wealth tax. Before proceeding with the purchase, you
should ensure that that you will be able to afford these outgoings, together with the cost of any utilities and your basic living expenses in Spain.
In addition to considering your future financials, a good lawyer should advise you on the best way to manage your affairs in Spain following the purchase4 Annual General Meeting. of a property, in the light of local taxes and regulations, in particular, those in regards to inheritance and the transfer of properties.
BF Solicitors is a law firm of Spanish lawyers (Abogados) and English Solicitors (registered with the Law Society of England & Wales and as EU lawyers with the Spanish Bar Association).
BF Solicitors specialise in advising private clients on the Costa del Sol on legal and tax matters. Our partner-led practice is able to provide a comprehensive service in respect of property, tax, wills & inheritance, wealth management, cross-border commercial & corporate transactions and yacht sales & registrations.
Disclaimer & Contact Details
The above article is intended to provide a general overview on the purchase of a property in Spain and should not be deemed to constitute legal advice. There are numerous ongoing legal developments in this field. Legal advice needs to be bespoke in relation to one ́s particular needs and situation. Readers are strongly advised to contact us for a free and confidential 30-minute consultation in English with one of our Partners.
Head Office: Av España, 146 – 3A – 29680 – Estepona – MA – Spain
Secondary Office: Calle Cornisa del Sol s/n – Urb Monte Duquesa blq 5 – 29692 – Manilva – MA – Spain. www.bfsolicitors.com / email@example.com / +34 952 000 031
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