Due Diligence on Spanish property

Before signing any contracts that commit you to buy property it is important to confirm that the property belongs to the seller in its totality and that it is free of debts and charges (in Spain mortgages, tax obligations, and other charges are ascribed to property rather than individuals).

It may also be prudent to carry out a number of other checks related to land classification, urban development plans, the condition of the property, maintenance costs, and community obligations.

Your agent and lawyer can advise you on the appropriate level of due diligence in any particular case. However never accept advice to forego due diligence entirely, especially not when purchasing resale from a private individual.

Due diligence can involve some or all of the following checks:

Property Registry Report

Obtained from the Property Registry (Registro de Propiedad) for a small fee this certificate – know as a Nota Simple Informativa – states who owns the property and indicates if there are any debts and/or charges, such as a mortgage, attached to the property.

Title Deeds

Check that the seller has the title deeds, know as the Escritura Publica.

Official Plan of the Property

It may be prudent to confirm exactly what is included in the property, and the urban classification of the land. An official plan of the property is contained in the zoning plans (plan urbanistico) which can be obtained from the planning department (Departamento de Urbanismo) of the town hall.

The plan urbanistico also shows the development plans for the land around a property. When buying out of town property that is not part of a planned residential estate (urbanizacion) it is important to know what will be built around you in the coming years.

Property Survey

There is always the option of having a chartered surveyor evaluate the property. This is advisable if there are any doubts as to the condition of the property. A survey can also be carried out on new build property to confirm that it is delivered in the condition promised.

Tax Check

The seller can be asked for the latest municipal tax certificate to demonstrate that there are no unpaid municipal taxes associated with the property which would become a problem for the buyer.

The municipal tax is known as the Impuesto sobre Bienes Inmuebles, or IBI for short.

For resale property, a check can also be made on the local capital gains tax (Plusvalía) that will become due when the property changes hands. In theory this tax is paid by the seller, however, sometimes it is assumed by the buyer. It is important to know how much it is and who will pay it before committing.

Utilities

When buying resale property it may be prudent to ask the seller to demonstrate that all utility bills are up to date, and to specify in the deposit or private contract (if you enter into any such contracts) that they will be up to date at the time of granting of the public deed of sale.

Community by-laws and fees

When buying property that is part of a community of owners (Comunidad de Propietarios) it is important to know what the by-laws governing the workings of the community are, and what the financial obligations are per period. A copy of the community by-laws can be obtained from the land registry. It may also be necessary, in the case of resale, to obtain confirmation from the president or secretary of the community that the previous owner is up to date with community bills.

Developer insurance

Developers that sell property under construction are legally required to have a bank guarantee or insurance policy that protects any payments you make to the developer before the property is completed. This ensures that you get your money back if for whatever reason the developer fails before completion. If there are any doubts about the developer it may be necessary to see proof that the appropriate insurance is in place. Note that developers are also required by law to hold an insurance policy which guarantees for 10 years eventual damages occurring due to defects affecting groundwork, supports, beams, reinforcement bars, retaining walls, or other structural elements.

As has already been stated, each due diligence should be considered on a case by case basis and should be managed by a lawyer. Depending upon the circumstances some or all of the checks may be required, along with further checks in special cases. Your lawyer will advise you as to what is appropriate in your case.

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