Buying property in Spain via bank repossession is considered strange by many clients. Not only are there several parties present on the selling side, but also the property may be taxed as new construction. This article discusses some of the unusual circumstances associated with buying via bank repossession.
The parties involved
The first party involved in the sale is the legal owner of the property. Usually this is a property developer that went bankrupt during the 2009 crisis. The receiver (or a trustee) of the bankrupt company then still manages the various properties in the portfolio.
The second party is a bank. The developer has taken out a mortgage loan on the land to finance construction. This makes the bank an involved party and necessary to terminate the mortgage on the property.
The third party is SAREB. The Sociedad de Gestion de Activos Procedentes de la Reestructuración Bancaria is a national public company of Spain created in 2012 to support the banking sector. In essence, it is a bad bank with worthless mortgages. SAREB buys and manages unpaid debts and mortgages. So in practice, a SAREB representative will be present at the notary's office to receive payment. You will then also hand him a Spanish bank cheque.
Read more about the possible costs of a Spanish bank cheque.
Because of the various parties involved in a sale through bank repossession, there is little room for negotiation. Importantly, the costs associated with settling the mortgage will not be passed on to you. After all, these are for the bankruptcy estate.
Ten-year-old new building
If the bank repossession stems from a bankrupt property developer, you should note that the property qualifies as new construction. After all, even though the property may be ten years old, it was never occupied. This results in you having to pay VAT on the purchase instead of registration duty. In addition, there is a stamp duty to pay. The cost of registering your titles in the land registry is also usually higher.
Read more about additional taxes and costs when buying a property in Spain.
Also, the same routine surveys as for new construction should be done. This includes comparing the finished house with the submitted permits. After all, there is a risk that the house was not (fully) finished in accordance with the initial plans, as a result of which you cannot obtain a conformity certificate. A certificate of conformity is necessary for new construction in order to finalise the sale.
Read more about buying new construction in Spain.
First utility connection
A consequence of long vacancy of the new building is that in most cases there will be no connection of water and electricity. Know that you can only arrange this after the notarial deed has been executed. Electricity installations also need to be inspected before a connection can be provided (certificado de instalación eléctrica). We will assist you with this, but keep in mind that processing the application may take some time.
Buying bench hardware: too cheap
Finally, it often happens that the purchase price of the property is considered too low by the tax authorities. This is because the tax authorities use a certain market value for every property. If it considers that you have bought below the market value, the tax authorities will ask you to pay additional registration duties or VAT. This system is similar to the control estimate in Belgium.
Read more about control estimation in Spain.
Decision
Buying a Spanish property via bank repossession can certainly be a good deal, but remember that bank repossession is a special transaction. Buying via bank repossession is completely different from buying a property in Belgium. There are also a number of additional risks.
Read more about the pitfalls in bank repossessions.
Update January 2021
