Property Nationwide 03.07

Property Nationwide Magazine, March 2007

Q1. What is the role of the Notary Public? A1. The Notary Public in Ireland is a separate profession entirely and has a different function to that of a lawyer. In Ireland the notary provides a service whereby documents can be notarised for use in foreign jurisdictions. This is the main function of a Notary Public in Ireland in relation to foreign property transactions. In addition to obtaining a notary's seal and signature the document must obtain the Apostille of the Hague Convention from the Department of Foreign Affairs. Abroad however and particularly in France, Spain, Portugal, Italy and Germany the role of the notaire is entirely different. In many of these countries a notaire is a semi-official appointed to ensure that conveyancing transactions are completed in accordance with legal requirements i.e. they will ensure that the proper parties are named with the details of the property and that the title deed is signed correctly. However in most jurisdictions the notaire will not be there to advise on matters to protect the interests of either a vendor or purchaser and will not give advice on the method of purchase or in other matters such as tax and inheritance.

Q2. What fees should someone envisage to pay for the services of a solicitor when purchasing an overseas property?

A2. Usually the fees can vary somewhat from country to country but on average fees can be anywhere between 1% to 2.5% when purchasing abroad. In general we advise clients to factor in approximately 11% when buying property overseas. This usually takes into account tax such as VAT, legal fees, notary fees, registration fees and possibly even local taxes.

Q3. What can Irish Buyers do to prevent getting caught out by corrupt developers when buying abroad?

A3.There are many reputable developers selling overseas properties. There are however unscrupulous ones, those that take short cuts and the dodgy ones. Irish buyers should only deal with professional people, with people that they can trust. You would never dream of buying a property in Ireland without using the services of a solicitor to ensure that everything is done correctly. Why on earth would you do so abroad where the language, tax, currency and legal systems are different. Get legal advice and sign nothing nor pay over any money before doing so.

Q4. What is the worst nightmare story you have heard of a person buying abroad?

A4. We have had many cases of people coming to us after losing vast sums of money or properties while investing abroad. People have signed Powers of Attorney in foreign languages only to have their properties sold without their knowledge and not receiving a penny from it.

We have had people come to us who have paid over to purchase a property abroad only to discover that the same property had been sold twice.

Q5. What do you find to be the most popular countries at the moment for investment?

A5. Spain, Portugal, France and Italy will always be popular destinations for the holiday home buyer. Portugal in particular is quite popular at the moment with the Irish as indeed is Bulgaria, the Cape Verde Islands and slowly coming on stream is Morocco and Montenegro. For the investors they are buying in Poland and Germany and South America is also emerging as a popular choice.

Q6. How would you describe the property market in Spain for Irish people at the moment after the recent events there?

A6. Traditionally Spain has always been at the forefront of the investment market abroad. With its ease of access, joyous weather, good food, tremendous infrastructure, warm people  and terrific diversity, what more could you   ask for. In recent years however there has been a slow down in the market due principally to overpricing and corruption. Corruption has been rampant for many, many years and it is only in the last two years that the authorities are doing something about it. I believe that they are serious about this in that many local authorities and mayors have been arrested and are awaiting trial. I do not believe that there will be a full scale demolition of properties. I expect that there will be a small number of token demolitions and eventually when the process is cleaned up I am of the opinion that there will be a highly efficient and effective system in place.

People continue to buy in Spain particularly the holiday home maker and lifestyle buyer. There are many new areas waiting to be developed such as Cadiz area, the Valencia area and the north of Spain.

Q7. Is the conveyancing system a far cry in Ireland to Spain?

A7. Yes, the conveyancing systems are entirely different. The legal systems are different. However having said that the conveyancing system in Spain is probably more user friendly. There is only one document or title deed, which is called the Escritura and all properties are registered in local Land registries. Mind you it is not obligatory to register your title but you fail to do so at your peril.

Investigation of title can be carried out on a similar basis as in Ireland where your lawyer will carry out investigation to ensure that the developer owns the land on which they are building, that there are licences in place, that planning permission is complied with, that there are no mortgages or charges on the property and in effect that there are no surprises at the end of the day.

Q8. What the most common complications in buying overseas property?

A8. The most common problems when people are buying properties overseas is that they rush in. People need to take their time; they need to do their homework. There is an enormous variety of property available in a vast array of countries. People need to decide why are they buying overseas, for what reason is it as an investment only or is it a mixture of investment and use for holiday home. Is it for retirement? If so have they been there? It is amazing the amount of people who buy properties overseas without actually seeing the property. Only deal with reputable people, reputable estate agents and instruct professional people such as a lawyer to act on their behalf.

Q9. Is it common practice in Bulgaria to under-declare the purchase price of the property so as to avoid paying VAT. What are the implications of this?

A9. Yes. this is a common practice in Bulgaria and indeed in other countries. As lawyers we advise clients not to participate in this practice. Apart from it being illegal and fraud on the local revenue people who get involved in this are doing themselves no favours. I am aware that in Spain for example the authorities now have inspectors studying declarations and if they find that there is a property with an under value not only do you pay the difference but you pay a heavy fine as well. In addition, when you go to sell the property there will be a higher capital gains liability because of the perceived greater gain. Further complication arises in that if during the course of the purchase transaction there is a dispute you will only be entitled to sue on the declared value in the contract. Remember also that you will not obtain a receipt for the cash that is paid illegally.

Q10. Can you see the industry being regulated any time soon? What are the problems of it not being so?

A10. The industry is crying out for regulation. Good estate agents will welcome this with open arms. Whether it happens soon or not, I cannot say. It will probably only come about through EU intervention but the sooner it happens, the better for all.

Q11. And finally, what do you expect for 2007?

A11. For 2007, I think South America is going to be big. Particularly watch Brazil, the Dominican Republic, possibly even Argentina.