Sunday Business Post 10.07

The Sunday Business Post ,
October 2007
Know your rights
Various countries have different arrangements regarding the sale of property to investors. Brush up on local rules to avoid long-term financial issues, writes Diarmaid Condon.
While there are few enough rules and regulations governing the sale of property in one country to citizens of another, all countries have regulation bf some description governing their own local industry.

While the scope of this regulation and how rigorously it is applied can vary substantially. it does mean you should be are of what that country's laws may dictate concerning what you can and cannot do. Invariably this means investing in the services of a solicitor. preferably.. early in the process as possible.

The first point to make is that if you purchase ,within the EU your rights are largely the same in the overseas country as they are in Ireland. Where this is not the case. the EU is working on haring the playing field levelled. Last year tot instance, it forced Spanish authorities to reduce the penal 35 per cent capital gains tax burden levied on foreign sellers to 18 per cent, which is considerably more in line with the local rate of 15 per cent.

French inheritance tax and capital gains tax rules have also been substantially altered to bring them into line with EU norms. The situation isn't perfect yet. and you'll find some of the more recent additions to the EU have the most work to do, but it is some comfort to know that within EU countries it is likely that, even if it isn't yet the case, you will eventually be given the same rights as local buyers.

There are still, however, vast differences between the legal systems of various countries. and this will never change.

The EU is not going to force each country to adopt a single EU law. therefore the best you can hope for is that the country in question will treat you in the same manner as its own citizens. Of course. this doesn't help much if it doesn't protect its own citizens very well.

Again. you will generally run into far less, trouble within the EU or in countries with a mature market and a long history allowing its citizens. and foreigners. to own freehold property.

One of the main differences we as Irish citizens will notice with some of the more popular destinations in Europe - such as Spain, Portugal and France - is the notarial system of title deed transfer. The notaire performs a number of checks, including checking the vendor's title to the property. whether there are any liens or easements on it. and the applicable town planning laws.

The notaire is an official employed by the state to ensure that both parties follow the correct procedures as prescribed by that country's law. It is important to note that the notaire is not there to represent the interest of either party to the transaction. As the notaire is. in essence, acting for both parties, it is recommended that purchasers instruct their own lawyer to represent them.

While you will often not he treated any differently overseas in terms of your rights to purchase and own a property, you may well be treated differently in terms of financing. This has become more prevalent recently with volatility in the financial markets.

Loans to foreign nationals are often categorised as high risk. so it may he necessary to take certain actions to remedy this. In Germany, for instance, the use of a company known as SPV is recommended. so that the bank can lend as if it is doing so to a German national.

Wills are also something you should address at the time of purchase. This is a particular problem in certain countries, which will over-ride the laws of the purchaser's country of domicile.

France is a case in point; while changes have been drafted this year to alter its pretty archaic inheritance and capital gains tax rules, it is still advisable to make a French will to deal solely with your French property.

With recent scandals in the Irish overseas property market. the issue of deposits - and their safety - has become a hotly discussed topic. Essentially, you should only pay a deposit with the agreement of your solicitor. This solicitor should be entirely unconnected to the company from whom you are purchasing the property.

Your solicitor should insist that your deposit is either paid into a regulated and insured client account, or held by the solicitor until the transaction is complete. If the deposit is refundable, this should be specified in writing.

Bulgaria is, according to overseas property lawyer Tom McGrath, one of the biggest problem areas at the moment, despite its accession to the EU earlier this year "The problems are generally not a question of foreigners rights being different to locals, it is that contracts are very often meaningless, with sellers often looking for more money on completion to transfer the property." he said.

It is also regular practice not to quote Vat in the purchase price, so buyers are often faced with paying it on completion. This can cause terrible problems, as most purchasers are completely unaware that it is not obligatory to include it in the price to begin with."

According to McGrath, it is particularly important to obtain in writing that your deposit is refundable should you decide not to proceed. You cannot own land in Bulgaria as a foreigner; you will have to purchase a Bulgarian company to do so. This is irrelevant for apartments. but is still an issue for property with land.

In Portugal, it is a legal requirement that all non-resident owners are represented by a Portuguese fiscal representative. This person, usually an accountant or lawyer, must ensure that tax returns are filed correctly and on time. This representative will also receive all correspondence in your name regarding any taxes which you will have to pay.

Spanish legislation makes it compulsory for anyone buying property in Spain to have it NIE or Foreigner's Identity Number. The number is required by every person who is to be registered on the title deed, and without it you will be unable to receive services such as water electricity and refuse collection.

Recent legislation passed in Spain has made it necessary to obtain your NIE in person, by appearing at the local Spanish police station or applying at the Spanish Embassy in Dublin.

However in some regions, the NIE can still be obtained by the purchaser's lawyer through a power of attorney.

Spanish legislation also requires that all new properties are issued with a licence confirming that the property is fit and ready for habitation. Your solicitor should insist that this hr been issued prior to your signing the title deed.

The biggest legal issue in our industry is not really a legal matter at all - the greatest danger buyers face is their own short-sightedness in not using a lawyer when buying overseas, or contacting one too late. said Pail Owen of the Association of International Property Professionals.

It seems that a number of people think that not using a solicitor will 'save' them a few euros, when it could actually cost a fortune in the long run.

Owen said that good legal advice and its costs should just be seen as part of the purchase costs.

I bought in France myself last year; I know the market pretty well and it's also considered one of the safest and best regulated markets in the world, but I still used a solicitor." he said.

You may be fine without one, but it is simply not worth the risk.