PROPERTY buying IN SPAIN. TO KNOW BEFORE SIGNING ANYTHING...
Property Deposit contract (PDC) in Spain is not just about giving some money out for the reservation of the property out of the market.
In many occassions, PDC contains very important agreements of the sale, specially of you are not signing any private purchase contract before Notary deeds.
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Initially, a deposit contract is an agreement by which the buyer commits to pay the seller an amount of money as a guarantee for the fulfillment of a property purchase. The seller, in its turn, commits to the sale of the house to that person within a determined deadline and according to the conditions agreed thereby. This is where all importance of Deposit contract comes in.
Penalties: Deposits contracts generally follow the rule of provision 1454 of the Civil Code which establishes:
Article 1454 of Spanish Civil Code:
“If earnest money or a deposit should have been provided in a contract of sale and purchase, the contract may be rescinded by the purchaser by agreeing to forfeit the earnest money or deposit, or the seller to return it in duplicate”.
Other penalties can be agreed by free will of parties, always provided they are not against the laws, the morals or public policy.
Contents of the deposit contract depends on if you are signing a Private Purchase Contract (PPC) or not.
A) If you ARE SIGNING a PPC
It just needs to contain main aspects of the agreement that has been reached in previous negotiations such as:
1. - Personal data of seller and buyer
2. - Full Property data
3. - Main aspects to sale: agreed price, method of payment with clear expression of the nature of money which is being paid ( guarantee, part of price, refundable, non refundable, under which circusntances....)
4. - Penalties attached to breaching of this contract
5.- Expenses and taxes involved
6. - Date for signing of deed.
B) If you ARE NOT SIGNING a PPC
Almost every detail of the purchase needs to be identified there as Deposit contract will actually be then, your PPC.
Our tips:
1) If you don’t speak or understand Spanish sufficiently, ask the owner to provide translation of the contract or look for a translator. Ask the seller to oay half of this cost.
2) Revise date and place of deposit contract.
3) Check on parties legitimation for the transaction::
- If sale is between two individual parties, the document must be signed by all the registry owners, themselves or through sufficient representatives.
-If the property is part of the marital community, the document must be signed by both husband and wife. The character of the good (either marital or privative 50/50) is mentioned in the Nota Simple.
-If it is signed by a proxy, the authorized person will have to present the authorized orginal notary copy and the power of attorney (POA) document must contain all necessary faculties for the sale
-If sellers are heirs of the Land Registry owner, it is necessary to check on the probate documents together with the sales one themselves. They will have to adjudicate the Inheritance before you signing the final Notary deed for the transmission of ownership.
4) If the house has a recent refurbishment baeing made, make sure this was done with the required Work License from the Town Hall and that the “ Declaracion de Obra Nueva” has been made and registered. Check on coincidence between Catastro, Reality and Land Registry. There are many discrepancies among these three that should be covered before signing Notary deed.
5) If buying a country house, check on water, phone and electricity utilities. Check on legals of the well, river rights....
6) Charges on the house: All of them contained on Land Registry info. It is easy to check them out.
7) Community of owners’ fees. House backs unpaid community fees for a period of previous 3 years plus year of purchase. Get copies of the Statutes and internal rules of the building too.
8) Price, deposit and payment method: There is no VAT to be paid on resales. You will have to pay the Transfer Tax. Transfer tax rates vary by autonomous communities in Spain.
9) Official protection Houses: they have got official value, check the Nota Simple to see that your house is not VPO. (Official protection housing)
10) Public deed signing date: determined and clear date for signing the Public deed before a Notary, extension conditions and penalties involved.
11) Related expenses. What are them and who pays them? Plusvalia tax, Notary deeds and Registry Fees.