Who can make a Real Estate purchase contract in Spain?

In Spain, the process of buying and selling property is governed by a set of legal regulations that ensure the authenticity, legality, and integrity of real estate transactions. Understanding who can make a real estate purchase contract and the roles of various parties involved is crucial for anyone looking to engage in property transactions in this country.

 

The Fundamentals of a Real Estate Purchase Contract

According to Article 1445 of the Spanish Civil Code, a real estate purchase contract is a consensual agreement where one party (the seller) commits to delivering a property, and the other party (the buyer) agrees to pay a specific price for it​​. This contract is:

  • Consensual: Formed by the mere expression of consent by the parties.
  • Onerous: Involves an exchange of assets.
  • Bilateral and Reciprocal: Requires the will and obligations of both parties.
  • Commutative: Equivalence in the obligations of both the buyer and the seller.

 

Key Elements of the Contract

The real estate purchase contract in Spain must include:

  • Signatories’ Information: Names, ID numbers, and addresses of both parties.
  • Property’s Financial Obligations: Including non-payments, debts, or community dues.
  • Completion Date and Down Payment: Agreed terms for finalizing the sale and any advance payments.
  • Cancellation Penalties: Conditions for withdrawal from the contract by either party​​.

 

Payment Obligations

As per Article 1500 of the Spanish Civil Code, the buyer is obliged to pay the price of the property at the time and place stipulated in the contract. If not specified, payment should be made upon delivery of the property​​.

 

Formalization of the Contract

The contract can be formalized either through:

  • Private Document: Without a public official, giving the document evidentiary value.
  • Public Document: Authorized by a notary, making it effective against third parties upon registration with the Spanish Land Registry​​.

 

Additional Considerations for Foreign Buyers

Foreign buyers must have the NIE (Número de Identificación del Extranjero), which is essential for any transaction in Spain. Having a Spanish bank account, though not mandatory, is advisable for smoother transactions. Non-resident property owners in Spain are also required to appoint a tax representative​​.

 

Taxes and Costs

Buyers are generally responsible for:

  • Property Transfer Tax: 6–10% for existing properties or 10% VAT for new properties.
  • Notary Costs, Title Deed Tax, and Land Registration Fee: 1–2.5%.
  • Legal Fees: Approximately 1–2% including VAT​​.

 

Role of Legal and Real Estate Professionals

When searching for properties, it is important to ensure:

  • Professional Qualifications: Of attorneys or real estate agents.
  • Property Legitimacy: Adequate planning approval and no outstanding obligations.
  • Property Condition: Verified by a surveyor or an architect​​.

 

The Essential Role of Notaries

In Spain, notaries play a crucial role in real estate transactions. Their responsibilities include:

  • Verifying Identity and Legal Capacity: Of all parties involved.
  • Ensuring Legality: Of the transaction and compliance with legal requirements.
  • Advising Parties: On legal, administrative, and tax implications.
  • Overseeing Document Signing: Ensuring clear and unencumbered ownership and understanding of transaction terms​​.

 

The involvement of notaries in real estate transactions in Spain is indispensable. They not only ensure the legality of the transaction but also safeguard the interests of both buyer and seller, providing preventive legal certainty and aiding in the smooth execution of the contract.

 

Property Registration

The Spanish Land Registry is critical in real estate transactions. This government-run database tracks property ownership in Spain and should be updated whenever a property is sold and transferred. This process ensures ownership rights and prevents a property from being sold multiple times​​.

 

Specific Contract Clauses

Beyond the basic elements of the contract, it’s common to include specific clauses to address particular situations, such as:

  • Guarantees on Property Condition: These clauses ensure the property is in the agreed condition.
  • Penalty Clauses: Set penalties for breaches of agreed terms.
  • Earnest Money Deposit (Arras): An initial payment as a guarantee of contract execution.

 

Due Diligence Process

Before signing the purchase contract, conducting due diligence is crucial. This includes:

  • Property Title Verification: Ensuring the seller is the legitimate owner.
  • Checking for Liens and Encumbrances: Verifying no mortgages, liens, or other burdens are on the property.
  • Property Inspection: A physical check to ensure the property matches provided descriptions.

 

Insurance and Warranties

  • Ten-Year Insurance: In Spain, residential properties with a building license applied for after May 6, 2000, must have a ten-year insurance policy to protect against structural defects​​.

 

The Importance of Legal Advice

Given the complexity of the process, seeking the advice of a real estate law specialist is highly recommended. A lawyer can:

  • Review and Prepare Documentation: Ensuring all documents and contracts comply with Spanish law.
  • Represent Buyer or Seller: In all stages of the purchase process, from due diligence to contract signing.

 

Buying or selling a property in Spain involves numerous legal and administrative steps. Involvement of notaries, compliance with specific legal requirements, and thorough due diligence are vital to ensure a successful and secure transaction.

 

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