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The purchase of a property is probably the most important investment we will make in our lifetime. To avoid future conflicts, it is essential that, before signing the deed of sale, we make sure that the property we want to buy is in order.
In this article we explain, in ten points, which documentation is essential to check before buying a property.
- Checking for encumbrances
It is essential to check the state of encumbrances of the property we are going to buy. In other words, we must check if the property has i) a previous mortgage, ii) if there are any registry charges that are still pending administrative cancellation or, iii) if there are any easements or other charges that we should be aware of before deciding whether or not we want to buy the property.
To check the state of encumbrances, we will request a simple note from the Land Registry where the property is registered. In this simple note we can also check who is the current owner of the property to verify if the person who is selling us the property is really the registered owner.
- Verification of previous mortgage
If the property is already mortgaged, we will have to decide whether to take over the existing mortgage or, on the contrary, negotiate and contract our own mortgage with the bank, in case we have to apply for financing from the bank.
If we decide not to subrogate in the existing mortgage, we must have a Certificate of zero balance and cancellation of the registration which certifies that the mortgage is paid off at the time of the purchase.
- Current community expenses and utility bills
In those cases in which the property forms part of a community of owners, it is important to check that the seller is up to date with the payment of the community expenses, both ordinary and extraordinary, as well as of any possible overcharges. On the day of signing the deed of sale, the seller will have to provide a certificate signed by the Administrator of the community of owners stating that there are no community fees or charges pending payment.
On the other hand, it is advisable to verify that the supplies of the property have been paid for, the seller being obliged to pay until the corresponding public deed of sale is executed
- Review of the community statutes.
Before proceeding with the purchase-sale, it is advisable to check whether the Community Statutes and Internal Regulations exist. These two documents can be requested from the administrator. These documents will allow you to know important aspects of the property you are about to buy.
- Review of the urban situation
It is important to check the town planning situation of the property at the corresponding Town Hall where the property is located, as well as to consult the cadastral information in the corresponding land registry.
- Verification of current payments of Real Estate Tax (IBI)
It is advisable to verify that the seller is up to date with the payment of the Property Tax, and must present the last IBI receipt duly paid.
In accordance with current legislation, the person obliged to pay the Property Tax is the owner of the property on 1 January, and it may be agreed that each party will pay the Property Tax in proportion to the months during which he/she is the owner.
- Certificate of habitability and Energy Efficiency Certificate
The certificate of habitability guarantees that the property complies with the minimum habitability requirements and that we will need it if we want to sell the property again in a few years. This is a document that the seller must present to us, together with the energy efficiency certificate, which has been compulsory since 1 June 2013.
- Minimum sale value set by the community in which the property is located.
It is important to know this, as it is the basis for the tax that is generated ITP (transfer tax), especially if the purchase price is lower than this.
- ITE Certificate
If the building is more than 50 years old, the law obliges its owner or owners to carry out and pass a Technical Building Inspection (ITE) every 10 years, which is nothing more than an evaluation of the safety conditions of the building.
The Building Evaluation Report (IEE) is a document that accredits the situation of the buildings in relation to their state of conservation, compliance with universal accessibility regulations and the degree of energy efficiency.
Local councils may have administrative sanctions in order to ensure that owners comply with their duty to inspect their buildings. Local councils with an enforcement ordinance have established penalties ranging from €600 to €3,000 per dwelling or premises for non-compliance with ITE regulations.
- Last step: earnest money contract and title deed
In the price of the property, it is common for a part of the price to be dedicated to the payment of a deposit, known as arras. The earnest money is a deposit, usually used so that, if one of the parties does not want to sell/buy the property, the other party will keep the earnest money. In addition to the earnest money, which would be part of the purchase price, there are different expenses for the purchase of the property. The purchase and sale costs must be made clear who is responsible for paying them in the purchase and sale contract, either by indicating that the contract will be governed by the current law or by agreeing who assumes each of the costs derived from the purchase and sale. By law, the payment of VAT or ITP corresponds to the buyer, while the seller will be responsible for the payment of the capital gain, if any, the payment of the IRPF and the expenses derived from the cancellation of the mortgage, if any.
Most people are probably not familiar with the documentation that must be reviewed before making any purchase decision, which is why it is highly advisable to have the appropriate advice to avoid future problems and to ensure that the effectiveness of the transaction is not diminished by issues unrelated to the property.
If you are in the process of buying a property and would like us to advise you, do not hesitate to contact us. In addition to reviewing the aforementioned documents, we will analyse the tax implications in order to avoid any surprises during the process.