Increasingly our clients are seeking help and advice about how to purchase a property from a bank in Spain, due to the well known fact that Spanish banks have accumulated in recent years a large amount of properties that are now being sold at very interesting prices.
In relation with this type of purchase; normally properties allocated to a bank by mortgage defaults after a public auction, we recommend our clients to make the same general searches that would be done in any other type of property purchase i.e. checking the property’s rights and burdens in the Land Registry; verifying property’s description and ownership at Catastro, Town Hall planning building permission, year of construction, existence of any disciplinary measures or penalty proceeding against the property from the Town Hall, occupancy / habitation license, debts with community of owners etc.
But in this article we aim to highlight some of the problems our firm has sometimes faced when dealing with properties purchased from a Spanish banks (houses foreclosed). These problems listed below should be very carefully considered by buyers:
Water and electrical contracts: It is quite common to find that the properties coming from a public auction and for sale by the bank, have pending debts with electrical and water suppliers, normally left behind by the previous owner.
It is very important to check the water /electrical contracts as we have often come across important high debts on properties being sold with a valid utility contract and a running meter. We should ask the bank to pay any pending debts before completion date.
Some other times we find that the property owned by the bank does not have a water or electricity contract, because it has either been cut off for non payment or the bank has simply cancelled the contracts in order to avoid extra monthly expenses. In these cases we must take into consideration the in order to have a new contract registered the suppliers could demand a second occupancy license, electrical bulletin, etc.
We advice to negotiate with the bank so that the property is handed over with updated paid water / electrical bills and contracts, and if necessary to ask the bank to request the occupancy license and the rest of the necessary documents, to insure the supply of drinking water and electricity to the property, which is of vital importance.
-Ghost developments and problems with the community of owners: It is very important for the potential buyer to check the conditions of the community of owners; how many other neighbours live there, etc. Sometimes the bank sells properties in empty /ghost urbanizations, which can make living there very difficult, that is; a normal community of owners does not exists, and thus, if for example the lift does not work it will take a lot more time to get it fixed as there is no one else interested in repairing it.
Besides in this type of communities normally there is a very high non payment rate in the community fees. It is quite common for the bank and the previous owners to leave unpaid community fees, therefore it is very important to request a certificate from the administrator stating that the property is up to date on the payment of these fees.
As per the above we can say that this type of purchase can represent a great opportunity, but we advice to seek the appropriate legal advice in order to make sure that these and other interesting aspects of the purchase are checked before completion to avoid any unpleasant surprises in the future, in a very important investment as the purchase of a property in Spain.
Should any reader be in this situation or similar please do not hesitate to contact us and the appropriate advice will be provided.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.
This article is available in English and Spanish at our Web site: www.white-baos.com
Carlos Baos (Lawyer)
Tel: 966 426 185
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