In Part 1 of our Barcelona Property Buying blog we examined the initial process regarding property searches, price, and locations. Discussing how negotiation is a key factor, as transfer tax is high. We finalised with an introduction to the abogado’s role and a breakdown of their responsibilities.

In this continuation, we’ll delve more into the legal process. Examining the contracts required, the deposits to be paid and purchase fees which are payable. We’ll also give some advice about estate agent tricks, informing you who to trust and who to be wary of!

Once the price of the property has been agreed and your abogado has started the conveyance, the next stage focuses on the legalities of the property leading to the contracts. Your abogado will deal with any discrepancies and legal issues.

Photo of 1 euro coinsSome points to note :
  • Be wary of any information given during the negotiation by the estate agent, seller or their legal representatives. It may be true and honest but it’s your abogado’s duty to check all the details thoroughly. A good abogado will make certain there are no binding issues.
  • Never deal with the seller’s contracts or paperwork. This will naturally be biased in their favour. Your lawyer should draw up the initial relevant paperwork to protect you, and the final deed is a neutral contract overseen by a notario.
  • Never transfer any money before signature. The seller can change their mind or simply not turn up to the first signing.
  • Don’t feel pressured to make any irregular payments. There is always a phantom third party making another offer – according to the estate agent.

Illustration of a business headMany estate agents here will try to get you to pay an initial 1% to secure the property. This is a throw back to the boom years where sellers held the power and multiple buyers were chasing the same illustrious property. Our advise would be only agree prices or offers verbally, and your abogado can do that for you.

(In the rare situation where you do however need to secure a property quickly and you are willing to pay the 1%, ensure you have checked the details and building with a property consultant, builder or architect. The money is usually returnable but the process is awkward and over complicated).

The Contract Process // Las Arras

Similiarly to the UK, the contract process in Catalonia is usually divided into two stages. The first being ‘las arras’, and the final process the ‘compraventa’. Las arras is a private legal contract between the two parties, agreeing to the sale. On signing this document a payment will be made to the purchaser. Usually 10 percent of the purchase price, however this is negotiable, therefore in some circumstances this can fall to 5 percent. This payment acts as the deposit and is non-refundable. If the purchaser changes his mind, he loses the deposit. Interestingly if the seller changes their mind they pay the purchaser double.

One point to note, when purchasing property here in Catalonia you are not legally constrained in paying a deposit and carrying out this initial stage. We have worked on examples where no money has exchanged hands until the ‘compraventa’ – the final stage where the property is legally transferred and witnessed in the notario’s office.

Our example was a distressed sale where the property had a bank repossession order. If a deposit had been paid, this could have been lost if the property was suddenly repossessed before exchange could take place. This obviously opens the risk of losing the property to another buyer as the property is not legally reserved, however the alternative could have been financially much worse.

The ‘Compraventa’

Image of KeysOnce the date has been set for the ‘compraventa’ both parties will meet in the notario’s office where the official transfer of the property will be signed and witnessed. The balance of payment will also exchange hands at this point. Spain does not operate a system of bonded client accounts. Whereas in other European countries you will pay the deposit and final payment to a trusted third party, only released once both clients are happy with the legalities. In Spain all payments are made directly to the seller. Therefore banker’s drafts, which equate to cash, are usually the payment of choice, as money needs to be exchanged on signature.

The request for ‘black money’ is still fairly common in Spain and Catalonia. This is an ‘off the record’ payment made to the seller. The property will then be undervalued by the same amount on the paperwork.

We don’t advise a purchaser to consider this option, for the simple reason that an undervalued property incurs higher tax charges when sold in the future. You will gain in the short term by paying a lower transfer tax (currently 10% of the purchase price in Catalonia) but if the property does increase in value over time, the capital gains payment may be substantial.

In general, the buying process should be relatively straight forward. Make sure you do your homework, establish good contacts and have all your finance and registrations in place.

Remember Barcelona is currently a buyer’s market and and you hold the power. Good Luck!

What are your thoughts on buying property in Barcelona, have your say by leaving a comment.