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Free of all charges and liens
Another extremely important item in your contract is the clause stating the property is sold free of all charges, liens and mortgages. Fine, you say, but how do you really know this is true?
This is where your lawyer comes in. He can make a check at the property registry, the Registro de Ia Propiedad, where any such mortgages or liens must be registered against the escritura. The Registro de Ia Propiedad is an extremely important office for the property purchaser.
Any mortgage on the property must be registered there, and the true owner of the property is listed. For a small fee, the registro will give you a nota simple for any property This is a summary of the property’s entry into the registry books, which would include a reference to any mortgages pending on the property.
Such a check-up can avoid problems. One horrible case occurred when a British owner returned to Spain to find that his new house had been seized by court order and auctioned off to pay an outstanding mortgage left by the seller The locks had been changed and the house, for which he had paid, was no longer his.
His only remedy was to sue the fraudulent seller for breach of contract and fraud. That is, if he could find him.
He could also have solved the problem if he had been aware that his property was under threat. If he himself had been present in Spain to receive legal notice of the coming seizure and auction, he could have arranged with the court to pay the mortgage, which attaches to the property itself, not to the previous owner.
Paying the mortgage would have been an unpleasant experience but much cheaper than losing the entire property.
Notices of such legal actions appear by law in the I3oletIn Oficial, the official legal gazette, and often in the local newspapers as well. If the new owner cannot be located by the court, these published notices constitute sufficient legal notice to make the seizure of the property correct in law. Overworked Spanish courts have been severely criticised for failure to make sufficient attempt to locate the absentee owners, but the practice continues.
Your lawyer will also check to make sure that no back taxes are owed on the property and that its original registration is in ordet Back taxes must be checked with Hacienda or the Town Hall. They are just about the only debts not listed at the Property Registry.
The Contract
Let’s suppose that you have found a property that suits you, that all of the pre-purchase checks have satisfied you, and you have negotiated the price down to what you can pay Terms of the sales contract will be your next concern.
Because most buyers take some time to assemble the cash needed for the purchase, it is usual for the buyer and seller to make a “private contract” first, with the buyer putting down a non-returnable deposit of, say 10 per cent. This reserves the property while the buyer brings his money into Spain or perhaps obtains a Spanish mortgage.
If the seller finds another buyer willing to pay more and sells the property, the first buyer can claim twice the amount of the deposit back. If the buyer fails to complete the sale, he loses his deposit.
Remember never to pay the deposit directly to the seller. Make sure that it goes into an escrow account, a blocked account, called a Bonded Client Account, from which it will not be released until the sale is final. Insist on this.
The seller, through the estate agent, will certainly have a prepared private contract all ready for you to sign. The contract they offer may suit you perfectly, but it is quite likely that it will contain some clauses more favourable to the seller than to you, the buyer. This is when you want your lawyer to read the contract and make suggestions.
It is a very good idea to have the contract made in Spanish, with a translation into English or German or your native language, so you can be absolutely sure about what you are signing.
Although most property sales between individuals follow this system of private contract and deposit, followed by closing and final payment, there is nothing binding about it. If you like the property and have the price ready, you can proceed directly to the Notary, pay over the full price, and get your title deed.
This private contract, although it sets out all the details of the agreement, such as payment terms and who pays what share of the taxes, is not the final document for the sale.
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