The Role of The Notary When Buying A Property In Spain
Notaries handle many matters when buying and selling Spanish Property and the profession engenders great respect among the local citizenry. The role of the notary or notario in Spain differs from that of notaries in other European countries and the United States. Notaries in Spain review official contracts, witness signatures, make sure taxes get paid and bear responsibility for recording sales on the property registry, which the Spanish call the Registrio de la Propriedad.
The Spanish Economic Problems Generate Opportunities For Buying Properties Cheaply
The Spanish property market values have plummeted since the beginning of the worldwide economic crisis, falling by between 40% and 70% in some areas. The Spanish economy has shrunk dramatically in recent years, so foreign real estate buyers can often find great bargains when buying property in Spain. Investors need to understand the role of the notary to negotiate successful Spanish property deals.
In Spain, notaries occupy high positions in society and enjoy status similar to the respect given to doctors and priests. Although paid by private contractual arrangements, notaries function as public officials and play neutral roles in arrangements between buyers and sellers. The notary makes sure that each party understands the terms of contracts, ensures that contracts don't contravene Spanish law and that taxes related to the contract will get paid.
Elevating Private Deals to The Public Registries
Many properties in Spain still exist without official registration in the tax office and land registry. In Spain the tax office concerning the buying and selling of property is known as the Catastro and the land registry is known as the Registro de La Propiedad. This common practice suits Spanish residents because they are able to avoid paying the taxes associated with buying and selling a property. However this can generate legal entanglements for foreign investors. Spanish law requires a notary's signature to elevate private contracts into legal public deeds before official registration, this of course means that one or more parties to the contract have to pay money to the notary. If a property is not registered in the land registry a buyer cannot easily get mortgages or enjoy the full security offered by a fully registered property, although a competent lawyer acting on the buyer's behalf can overcome these deficiencies.
Despite the reluctance of many Spanish to register their property, particularly in rural area, oddly enough, more Spanish property appears on the registers than really exists, but the oldest legal registration takes precedence, so title searches and legal registration become extremely important. Notaries do make legal checks, but each region has different standards. Search efficiency varies among the local jurisdictions, so buyers most definitely need private legal representation to research titles.
Notarios write official letters to inform tenants about changes of ownership and their need to vacate the premises when necessary. Spanish notaries also handle wills, company charters, and official filings from groups of Spanish property owners. Buying Spanish property doesn't entitle non-Spanish buyers to live in Spain, but buying businesses and opening bank accounts with certain minimum deposits does allow foreigners to live in the country.
The government sets notary fees, which range from 0.1% to 0.4% of the declared Spanish property prices. These fees also apply to mortgage deeds. The client or buyer pays the fee when signing the property contract. Notaries keep original copies of all contracts or escritura, but both parties can request authorised copies from the notary to satisfy legal business purposes.
Some property purchasers feel they can dispense with legal representation because notaries make sure that legal procedures get followed, but non-resident buyers should never negotiate deals without their own experienced attorneys. Even though buyers pay notary's salaries, the officials owe their loyalties to the government, making the Spanish notary role unique.
Notaries receive their authority from the Ministry of Justice after passing official examinations dealing with Spanish legal issues. Certified notaries become members of the Colegio de Notarios, which was originally authorized by law in 1862 and upheld By Decree on June 2, 1994. Buyers and sellers can negotiate deals, but Spanish property transfers have no official standing unless they get recorded in the property registry.
The Buying Process Outlined
A preliminary contract usually starts the process as an intent to buy, which typically requires a 10% deposit from the buyer. If the buyer changes his or her mind, the deposit is forfeited. If the seller defaults, he or she must return the deposit and match it as a punitive assessment.
Before the final closing, a buyer's lawyer should research the Spanish property for title legitimacy and to guarantee that it is free from encumbrances. Property inspections and other details also occur between preliminary contracts and final closings. Buyers must make arrangements for final settlements with Spanish bank-certified checks or bank transfers to notaries' escrow accounts. Buying property in Spain becomes highly ceremonial at the notary's office.
Typically, notaries will keep all parties waiting to impress upon them the occasion's solemnity. Bank drafts from outside Spain could be rejected, so buyers need to confirm all the details with notaries and vendors before the closing. The notary will read the terms of the deed in Spanish, and a buyer should have a Spanish lawyer or translator present when buying property in Spain. The notary could reject the deal if both parties don't understand the agreement.
If there are no objections to the terms, then the notary will pass the contracts and deed for signatures by all the participants and confirm that the buyer has paid the sales price and taxes before delivering the keys. Many sellers and buyers make under the table arrangements to avoid fees and capital gains taxes, but these arrangements must take place after official closings when the notaries have left the offices. The Spanish tax authority has cracked down on this practice and could fine participants when properties seem undervalued by 20% or more. Regardless, the notary will insist that the buyer (or their lawyer) witholds 3% of the sales price of foreign sellers as a guarantee that tax obligations get paid.
Power of Attorney
Buyers can grant Powers of Attorney under Spanish law to appoint personal representatives to handle real estate closings. The Power-of-Attorney agreement must be translated into Spanish and be signed by an authorised notary. Spanish lawyers make ideal choices to handle these services because the sales agreements often take place over several weeks, and having a trusted local representative speeds up the closing process.
Spanish notaries play unique roles in European business, so foreign buyers or sellers should understand how these officials could accelerate or slow the buying and selling property in Spain.
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