Property Nationwide 01.07

Buying in Spain
Property Nationwide Magazine,
Jan 2007

By far the most dangerous step purchasers can take is to give power of attorney to a local estate agent selling the property, says Tom McGrath.

Spain has proved a popular option for many people in Ireland looking for a place in the sun, but buying a property in a country where the conveyancing laws and practice are so different to those in Ireland can prove challenging. One  of the  most common  problems  purchasers encounter is that the Spanish system demands that they pay a deposit and sign a contract before the notary, a public official, registers the property in their name. And, planning or development in the  area  and  how that may affect the property. The buyer acquires the property outlined in the deed but could be leaving themself open to a host of potential problems including not having a survey, rights  of way   issues,   the rights of long-term  tenants and building works planned adjacent to the property. Other pitfalls for purchasers of property abroad  include buying up in the hills away from the beach or away from golf courses when trying to use the property for rental income, or in a busy town with night life if looking for a quiet retirement home.

"Another common problem people encounter is grossly underestimating the cost of renovating a property"

or buying a home that is difficult to sell or in an area with many available properties. Some people buy a property to convert into self-catering accommodation and are too optimistic about the income without taking into account ongoing expenses, the low season, weather, or taking too large a mortgage. Black money (Dinero negro) is a practice in Spain which is slowly being eradicated but could lead to problems for the purchaser when selling the property at a later date. A lower purchase price is declared in the deed than the actual amount paid and the balance paid in cash direct to the vendor. Apart from being illegal, the risk with this is that too low a declared figure will be noticed by tax authorities and severe penalties apply.

Purchasers have to be aware that by declaring a lower purchase sum, they will be perceived to have made a greater gain and thereby attract a higher Capital Gains Tax when selling their property.But by far the most dangerous step purchasers can take is to give power of attorney to a local estate agent selling the property or the builder constructing their property. The only way to really protect your interests when buying in a legally unfamiliar country is to appoint a solicitor who is experienced in this field. Let them worry about protecting you from the legal pitfalls, so that you can sit back and enjoy your new property.

Legal do's and don'ts

Do's

1. Use an independent solicitor who is expert in conveyancing, fluent in English and a member of local Colegio de Abogados to advise and oversee your property purchase. There are firms in Ireland who have associations with reputable law firms and all the work can be done through the Irish law office
   at no extra charge.
   
   
2. Appoint a solicitor to ensure that all licences are in place, planning permission is complied with and that there are no rights of way affecting the property. They will ensure that the developer owns the land on which they propose to build and obtain proper Title.
   
   
3. Check whether your property has planning permission with both the local authority and that it complies with state laws if you want to build onto it.
   
   
4. Protect your money. Ask your solicitor to ensure that money paid over is secure at every stage of the purchasing process, including deposits made to the developer. Bank guarantees are a legal requirement although some developers are slow to provide them.
   
   
5. Obtain an NIE (national identity number). This is a legal document required by non nationals in Spain before you can purchase property. Ask your solicitor to do this.

Don'ts

1. Never sign any contract or pay over money unless it has been cleared with a solicitor first.
   
   
2. Don't buy a property with long-term tennants living there as these tennancies can be protected.
   
   
3. Don't buy a property in an area where there may be plans to construct anything that is adverse to its value or use.
   
   
4. Don't buy from a builder until you have checked they have building permits, planning permission and a building licence.
   
   
5. Don't get carried away by the romance of buying abroad. Keep a level head when deciding how to spend your hard-earned money. Tom McGrath, Notary Public, is the Principal of Dublin solicitors Tom McGrath & Associates.
   
   Tom is a fluent Spanish speaker and five years ago started helping people in Ireland to buy property in Spain. The firm has now extended this service to Portugal, Madeira, Cape Verde Islands, France, Germany, Turkey, Poland and Bulgaria.