The purchase of a property implies the need to know the legal requirements regarding the purchase and sale transaction, for both the seller and the buyer. An accurate knowledge in relation to the legal framework applicable is necessary, on the one hand, to guarantee that the acquisition of the ownership over the relevant property is carried out in accordance with the provisions of Spanish law and, on the other hand, due to the fact that there are some requirements that have to be met before the public administration.
In this regard, the assistance of an attorney who is familiar with the procedures provided by Spanish law and the established practice of the Spanish real estate sector is highly recommended. In the following lines, we will take a look to four relevant elements in the framework of the acquisition of a property in Spain (i.e. price, private contract, essential documents regarding the purchase and other relevant issues).
1. The price
One of the most relevant matters at the time of closing the acquisition of a property is, in broad terms, the price agreed between the parties.
Although the determination of the price is not the main specific task to be carried out by a lawyer, it has to be stressed that the aforesaid determination may have a relevant impact from a tax-related point of view. Thus, it is necessary that the price agreed is not below the “minimum value of sale”.
This amount is calculated based on the cadastral value of the building, which shall be multiplied by the corresponding coefficient set forth by the relevant municipality.
Through his intervention, a specialized lawyer shall verify that the amount agreed between the parties is not below the aforesaid minimum value of sale. Thus, the risk of an eventual tax inspection will be reduced (but not fully avoided).
2. The private contract
Once the price negotiations are concluded, the parties usually sign a private contract, by means of which the buyer usually proceeds with the payment of a deposit. Depending on the contract modality chosen by the parties, it can be convened that in the event that the eventual public deed of purchase is not granted due to the buyer, he (as defaulting party) will lose the amount(s) paid. On the contrary, it can be also provided on the private contract that if the aforesaid public deed is not granted due to the seller, this shall pay to the buyer double the amount of the deposit agreed.
The private contract is not always necessary. The parties may directly sign the public deed of purchase before the Notary Public, although this is not sufficient to acquire the title to the property, but necessary in order to register the purchase carried out before the relevant Land Registry.
However, the prior execution of a private contract allows the parties to ensure, in a higher percentage, the success of the transaction, due to the fact that the parties have the chance to obtain all the necessary documents and to determine the essential elements of the final agreement (which is normally the public deed of purchase).