Everything you need to know is included in our Spain Property Pack
Spain remains a top choice for foreign real estate investment, offering a Mediterranean lifestyle and diverse property options.
Buying property in this area can be a complex journey though, particularly if you're not a local. There are many potential challenges and surprises to be aware of.
Our community of property purchasers, in conjunction with our nearby experts, has identified a multitude of problems. We've listed them all in our Spain Property Pack.
We’re going to take a closer look at a few of these in this article.
Is it safe or risky to invest in real estate in Spain?
Historically, Spain has witnessed phases where the rush to cater to foreign demand led to the construction of properties without adhering to proper legal procedures.
For example, in places like Almería, unsuspecting foreign buyers have seen their dream homes demolished due to the lack of proper building licenses, a fiasco that originated in the early 2000s property boom.
The tragic tales of these homeowners underline that while Spain's property sector is generally safe, potential buyers should be wary of legacy issues.
The "Ley de Costas" (Coastal Law) of 1988 is one regulation that has startled many foreign buyers. Designed to reclaim public access to the country's coastlines, properties within 100 meters of the sea can technically be taken down by the government without compensation.
While the implementation has been sporadic, the existence of such a law can be unsettling.
The Spanish legal system is designed to protect buyers. The involvement of notaries and the Land Registry in transactions underscores this intent.
Yet, the experience of many in the "Costa del Sol" saga, where off-plan buyers lost their investments due to developers going bankrupt, is a reminder that system robustness can sometimes be theoretical.
The protracted legal battles that followed highlighted the Spanish judiciary's sluggish pace, leaving many disheartened.
While Spain does relatively well in terms of transaction transparency, regional variations can be baffling.
Take the Balearic Islands for instance, where specific local regulations on property rentals and sales, designed to curb excessive tourism, exist. This means what's permissible in Ibiza might be forbidden in Mallorca, highlighting the importance of localized research.
Post the 2008 financial meltdown, the Spanish government implemented stricter regulations, particularly on bank lending practices for property purchases.
While this stabilized the market and avoided reckless lending, it also meant that buyers, especially foreigners, now faced more stringent scrutiny and sometimes lengthier processes when seeking financing.
There are myriad experiences: from British couples enjoying their retirement villas in Alicante to those still embroiled in legal disputes over an apartment in Marbella.
Common among the latter group's grievances is a feeling of being blindsided, often by unexpected regulations or unscrupulous agents.
Buying real estate in Spain can be risky
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Potential real estate buying mistakes in Spain
The concept of "Nota Simple"
One significant pitfall you might not be aware of when buying residential property in Spain is overlooking the importance of the "Nota Simple."
This is a document unique to Spain, issued by the Registro de la Propiedad (Property Registry). The Nota Simple provides critical information about the property, including the legal owner, any debts or liens against the property, the property boundaries, and whether there are any legal proceedings affecting it.
As a knowledgeable buyer, you're likely aware of the basic steps in purchasing property, but the Nota Simple can often be overlooked by foreigners unfamiliar with the Spanish property system.
This mistake can lead to significant legal and financial complications.
For instance, if the property has undisclosed debts, you could become responsible for them post-purchase.
To avoid this pitfall, you should always request a Nota Simple before proceeding with any property transaction in Spain. It's not just a formality; it's a crucial step in ensuring the legal safety of your investment.
While not every property will have hidden issues, the frequency of such problems is significant enough that skipping this step could be very risky.
The concept of the "Plusvalía Municipal" tax
Another less-known but significant pitfall when buying residential property in Spain, especially as a foreigner, is not fully understanding the implications of the "Plusvalía Municipal" tax.
This is a local tax applied by Spanish municipalities on the increase in the value of urban land at the time of its transfer. It's unique to Spain and can catch many foreign buyers off guard.
You should be aware that this tax is not based on the actual sale price of the property but on the cadastral value (valor catastral) of the land and the number of years since the last transfer. The responsibility for paying this tax traditionally falls on the seller, but it is not uncommon in Spain for negotiation to shift this responsibility to the buyer, especially in a buyer's market.
The Plusvalía Municipal can be a significant expense, and if you're not aware of it during negotiations, you could end up paying much more than anticipated.
It’s crucial to clarify who will bear this tax before finalizing the property purchase.
Also, since the calculation of this tax can be complex and varies from one municipality to another, you are advised to consult with a local property expert or lawyer who can provide specific advice based on the property’s location.
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Issue of "Afectaciones Urbanísticas"
A further unique and often overlooked pitfall in buying residential property in Spain is the issue surrounding "Afectaciones Urbanísticas."
This term refers to urban planning restrictions or obligations that can significantly impact your property.
In Spain, each municipality has its own "Plan General de Ordenación Urbana" (PGOU), which is the urban planning framework setting out how land can be used, what can be built, and how developments should be integrated into the environment.
As a property buyer, you should be particularly careful about this, especially if you are considering buying land to build on or a property that you may wish to modify.
For instance, the property you are interested in might be in an area designated for future urban development, which could mean you'll face restrictions on renovations or extensions. Alternatively, there might be plans for new infrastructure like roads or utilities that could impact the property.
The frequency of issues related to Afectaciones Urbanísticas is not negligible, especially in areas undergoing development or regeneration.
Therefore, it is advisable to consult the local town hall or a knowledgeable local lawyer to understand any urban planning restrictions or obligations attached to the property. This step is crucial as such restrictions can affect the property's value, your ability to make changes to it, or even lead to legal issues if overlooked.
Remember, in Spain, urban planning laws can be complex and vary significantly from one municipality to another.
Being proactive in understanding these local nuances can save you from future headaches and financial losses.
"Viviendas Ilegales" or illegal houses
Another unique and critical pitfall to be aware of when buying residential property in Spain is the potential presence of "Viviendas Ilegales" or illegal houses.
This issue is particularly prevalent in rural areas or regions like Andalusia, where many properties have been built without proper legal permits or in violation of local zoning laws.
In Spain, it's not uncommon to find properties, especially in the countryside, that have been built or modified without the necessary permissions. This can lead to serious legal complications, such as fines or even demolition orders. As a foreigner, you might not be familiar with the local zoning laws or the process of verifying a property's legality, which makes it easy to fall into this trap.
You should be particularly cautious if the property price seems unusually low or if the seller is pushing for a quick sale.
These can be red flags indicating potential legal issues. It's crucial to ensure that the property has all the necessary building permits and is compliant with local land use regulations.
Before proceeding with any purchase, you should request a "Licencia de Primera Ocupación" (First Occupation License) or check with the local town hall to confirm that the property is legal.
This step is essential, especially in rural areas or regions known for having many illegal constructions.
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The issue regarding "Embargos"
Another specific and often overlooked pitfall when purchasing residential property in Spain, particularly relevant for foreigners, is the issue of "Embargos."
An embargo in the context of Spanish property law refers to a legal claim or lien placed on a property due to unpaid debts by the current owner.
The existence of an embargo can be a complex issue for foreign buyers to navigate, as it's not always immediately apparent and can have significant legal implications. For example, if you purchase a property with an existing embargo, you may become responsible for the previous owner's debts attached to the property. This situation is particularly common in cases where the previous owner has unpaid taxes, community fees, or mortgage debts.
To safeguard yourself against this, you should insist on a detailed examination of the property's legal status, specifically asking about any existing embargos.
This information can typically be found in the "Nota Simple," a document you should already be familiar with as a crucial part of the property buying process in Spain.
The frequency of properties with embargos is not insignificant, especially following economic downturns when people are more likely to default on debts.
Therefore, it's crucial to be vigilant and ensure that your legal representative thoroughly investigates the property's financial and legal standing.
"Cédula de Habitabilidad" or "Licencia de Primera Ocupación"
A further unique and potentially significant pitfall when buying residential property in Spain is the issue of "Cédula de Habitabilidad" or "Licencia de Primera Ocupación" (Occupancy Certificate).
This is particularly relevant if you're buying a newly built property or one that has undergone major renovations.
The Cédula de Habitabilidad is a certificate that confirms a property meets the local government's habitability standards. It's a requirement for newly built homes and is often needed for reconnection of services like water and electricity if the property has been vacant for a long time or has been extensively renovated.
As a foreigner, you might not be aware of the necessity of this document, as it is specific to Spain.
The lack of a Cédula de Habitabilidad can lead to significant issues, such as difficulties in accessing utilities, legal challenges, or problems when trying to sell the property in the future.
When considering a property purchase, especially if it's a new build or has been recently renovated, you should ensure that the Cédula de Habitabilidad is in place and up to date. The absence of this certificate can be a red flag indicating that the construction or renovation may not have been completed to code or without the necessary permits.
While not every property transaction will involve issues with the Cédula de Habitabilidad, the frequency of problems related to this certificate is notable, especially in areas with a lot of new development or refurbishment.
To avoid this pitfall, you are advised to verify the existence and validity of this certificate as part of your due diligence process.
Consulting with a local property lawyer or expert can provide you with the necessary guidance and assurance.
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The complexities of "Servidumbres" or easements
An additional and often overlooked pitfall when purchasing residential property in Spain, which is particularly relevant for foreigners, involves the complexities of "Servidumbres" or easements.
These are legal rights that allow someone other than the property owner to use part of the property for a specific purpose. In Spain, servidumbres can be quite common, especially in rural areas or older properties, and can significantly affect how you use your property.
For example, there might be a servidumbre that allows neighbors to access a water source on your property, or a right of way that permits people to pass through your land.
Sometimes these easements are not formally registered or are based on long-standing local customs, making them difficult to identify without thorough research.
As a buyer, especially if you're not familiar with local property laws, it's crucial to investigate any existing servidumbres on the property.
Overlooking them can lead to unexpected limitations on your use of the property and potential disputes with neighbors or others who have rights to the property.
To avoid this pitfall, you should conduct a detailed review of the property's title deeds and consult with the local land registry (Registro de la Propiedad).
It's also advisable to talk to neighbors or local residents, as they may provide valuable information about existing easements based on local customs or history.
The concept of "Usufructo" or usufruct
Yet another nuanced and often overlooked issue when purchasing residential property in Spain, particularly for foreigners, is the concept of "Usufructo" or usufruct.
This is a legal right unique to certain legal systems, including Spain, which grants someone the right to use and enjoy the benefits of a property that they do not own. This can be particularly tricky in property transactions.
Usufructo often arises in situations where property is inherited.
For instance, a parent might leave the ownership (nuda propiedad) of a property to their children but grant the usufruct to their surviving spouse. This means the children own the property, but the spouse has the right to use it for their lifetime.
If you're buying a property where usufruct is involved, you need to be aware that while you may be purchasing the physical property, the usufructuary (the person with the usufruct right) retains the right to use it, which can limit your ability to occupy or alter the property.
It's crucial to understand the status of usufruct rights when considering a property purchase.
Failure to recognize an existing usufruct can lead to legal complications and restrict your use of the property. This is especially important in Spain, where multi-generational living arrangements and inheritance practices commonly give rise to usufruct situations.
To safeguard against this pitfall, ensure that a thorough legal check on the property is conducted, specifically asking about any usufruct rights attached to it.
This check should be part of your due diligence process and is best handled by a local lawyer who is familiar with Spanish property and inheritance laws.
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"Derecho de tanteo y retracto" or pre-emption and retraction rights
Another specific pitfall to be aware of when buying residential property in Spain, particularly for foreigners, is the potential issue of "derecho de tanteo y retracto" or pre-emption and retraction rights.
These are rights that can be held by third parties or local authorities, giving them the first option to buy a property before it can be sold to someone else, or to retract a sale that has already been made under certain conditions.
This situation is most common in properties that are subject to some form of public interest or social housing regulations.
For instance, if the property you are interested in is classified as Vivienda de Protección Oficial (VPO), which is a type of social housing in Spain, the local government may have the right to buy the property back before it can be sold to you, or they may be able to retract the sale if certain conditions are met.
As a foreign buyer, it's crucial to be aware of this potential complication.
Overlooking derecho de tanteo y retracto can result in a sale being delayed or even annulled after you've made a commitment, leading to significant inconvenience and potential financial loss.
To avoid this pitfall, it's important to verify whether the property is subject to any pre-emption or retraction rights. This can be done by consulting the property registry or seeking advice from a local lawyer who is familiar with Spanish property law.
They can help you understand any restrictions on the sale of the property and advise you on the best course of action.
The concept of "Division Horizontal"
Another subtle yet crucial pitfall to consider when buying residential property in Spain, which is particularly relevant for foreign buyers, is the issue surrounding "Division Horizontal" or the horizontal property regime.
This is especially pertinent if you are purchasing an apartment or a property within a community of owners.
The Division Horizontal is a legal framework that applies to properties in a building or complex with multiple owners, such as apartments or townhouses.
It outlines the ownership structure, detailing what parts of the property are privately owned (such as your apartment) and what parts are commonly owned (like gardens, pools, and hallways). This regime comes with its own set of rules, community fees, and obligations that can significantly impact your use and enjoyment of the property.
As a foreign buyer, you might not be fully aware of how this system works or its implications.
For example, there might be restrictions on altering the facade of your apartment or specific rules about using common areas. Additionally, community fees can vary greatly, and unexpected increases in these fees can impact your budget.
Before finalizing your purchase, it's important to thoroughly understand the Division Horizontal documentation for the property.
This includes reviewing the community bylaws (Estatutos de la Comunidad), the minutes from recent community meetings, and the status of community fee payments.
It's also advisable to consult with a local lawyer or property advisor who can help you navigate the intricacies of the Division Horizontal.
They can provide insights into the community's financial health, any ongoing disputes, and specific rules or obligations that may affect you.
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