Spain property and Spanish Banks– reasons for optimism?

February 6, 2013

There has been a subdued feel about Europe for some time, so it is always welcome when there is something positive to say.

Spain seems to be getting its house in order and is said by the International Monetary Fund (IMF) to have put most of its financial reforms in place, although they will evidently take a while to work through the system. So for those who are unemployed in Spain, it might not feel like progress on the ground, just yet.

Spanish Banks- getting property finance in Spain

The clean-up of Spanish banks is well-underway, according to the IMF, with many measures it set out having now been put in place.

  • Bank recapitalization is being addressed to make them stronger, re-ignite confidence and be in a better position to be able to lend to home buyers
  • Difficult-to-sell properties on the books of Spanish Banks are now being transferred to a so-called “Bad Bank” SAREB, which is putting in place a business plan establishing how it deals with these properties moving forwards
  • ”Cajas”  savings banks, and the loose governance around them, are being  reformed, to reduce exposure to unnecessary risks  and so create greater financial stability in Spain

It is unclear how long it will take to notice the difference “on the ground” but things are heading in the right direction.

Spanish Property – Buyer protection

Spain Costa propertyIn an attempt to persuade foreign national home buyers and British property buyers in particular, various initiatives have been launched by the Government and the Regions to encourage a return to buying property in Spain.

These range from trying to increase transparency of property buying in general, introducing new services like: enabling expat buyers to go to their local town hall to request a translated land registry certificate “nota simple” which include the seller’s details, a property description and any charges or embargoes against it. In order to support off-plan buyers, it is no longer possible for a new home to be registered on the Land Registry unless it has the Licence of First Occupation, a Construction Licence and a technical certificate stating that the building corresponds to the plans for which the Licence was granted.

To other local initiatives like on the Costa del Sol, the Living in Costa del Sol project. The local developer trade body, ACP (Málaga Association of Builders and Developers) and Costa del Sol Tourist Board, will have a dedicated section on its website listing only properties with “development and registration documents required by Spanish law, in order to guarantee transactions within a framework of legal security.”

But with any of these initiatives it is always worth bearing in mind, a good local lawyer, with no conflict of interest, should be able to verify the validity, of documentation, if there are any gaps, if everything is up-to-date and the detail of an individual contract. So these type of initiatives are all well and good, so that property sellers and developers are seen to be doing the right thing, but there is no substitute for getting someone to verify the detail and act on a buyer’s behalf.

Proper property legal due diligence checks should include:

  • land ownership, the correct land classification
  • developer due diligence e.g. legal existence of the company, company registration details,  the administrators and/or their representatives,  fiscal identity number, absence of unregistered bankruptcy proceedings and claims, lawsuits which might affect the development.
  • Construction Permit/Building Licence (off-plan) verifying that the building matches both the Licence granted by the town council and the project originally approved
  • Habitation Licence in the case of a ready-built property (first occupation ”Cedula de habitabilidad”) or Second Occupation Licence in the case of a resale
  • checking that all running costs (utilities: electricity, water, gas, telephony) and local tax payments are up to date with the local town hall, so no debt, or other charges are inherited
  • entry of the property ownership in the Property Register

Co-written by Raquel Perez of Perez Legal Group  and Louise Reynolds of Property Venture®

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