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The sale and purchase of a property and its stakeholders

One of the most frequently asked questions faced by our clients in that context are related to the allied parties – and those who will be standing at the other side, depending on the which party to the contract we are...

Are we the developer, the private individual, the investor of a large property exchange, the bank, or the public notary?

Who we are and the reasons for our activity will make a notorious difference and the point of view for handling the subject will very much vary; but in all cases we will have to be aware about the legal premises that we must ALL comply with as part of the construction business in which all STAKEHOLDERS must participate. Depending on their good faith, the actors will make the business grow or not, so as to avoid further real estate bubbles.

The statistics and the market are currently in a growth phase along the Spanish coast and in the major Spanish capitals. The price of housing in our country is still booming, so that investing in property is still a profitable business, in any of its variables (either property or rental), as in the current course and in Spain as a whole it has accounted for 3.64 of the Spanish GDP. Following these data, in the Region of Murcia it is almost 5 points of the total wealth only with this sector. Considering that it demands more qualified labour would mean a drop in unemployment in the real estate sector.

Key-points while selling a property off plan?

For the last 5 years, the jurisprudence of the Supreme Court has been applied in cases of off-plan sales, in which the property is not delivered due to the lack of professional commitment of the developer. The Supreme Court stipulates: "In the sale and purchase of real estate governed by Law 57/1968, credit institutions that accept deposits from buyers into an account of the developer without requiring the opening of a special account and the corresponding guarantee, will be liable to the buyers for the total of the amounts advanced by the buyers and paid into the account or accounts that the developer has opened with said institution".

Therefore the LEGAL TIPS are:

  • Examine the promoter’s know-how and expertise.

  • Verify their solvency and liquidity.

  • Require the bank guarantee.

  • Study the land ownership.

Among others that can obviously be determined by a lawyer, before signing the contract. The earnest money (as an example), would also bind us.

How about the case of the sale of a property between individuals?

What should we keep in mind? Read more and make a note:

  • It will not be necessary to sign before a notary, except in the case of payment by mortgage.

  • The seller must provide documentation accrediting ownership and exemption from debts.

  • The buyer will have to justify his identity and the origin of the money that is to be paid.

  • Regarding taxes, we have already talked about them in another post, Taxes in the purchase and sale of real estate.

  • If you want legal certainty, then we recommend to count on legal professionals, please do not sign just any contract.

Abusive clauses most frequently seen in contracts for the purchase of a property

Finally yet importantly, a few TIPS about the most frequently seen Abusive Clauses in sale and purchase contracts:

  1. Lack of reciprocity of the benefits of considering the withdrawal from the contract. The principle of equivalence of benefits must preside over any contractual link and must not favour one party over the other. In the field of property development, usually the developer unilaterally draws up the contracts and predefines their content without, in most cases, accepting any negotiation on the terms of a given clause. Be careful! Abusive clauses usually deal with penalties or cancellation.

  2. Levy of Tax on the Increase in Value of Urban Land “PLUSVALIA” on the buyer. This issue has been the subject of a lot of case law in recent years.

  3. Compulsory subrogation in the mortgage requested by the developer. The purchasers are free to subrogate themselves in the mortgage previously constituted by the developer or choose another financial entity.

  4. The establishment in the contracts of an indeterminate delivery period. Royal Decree 515/1989, establishes that in contracts for housing under construction, the delivery date should be reflected in the contracts "in full transparency"; so we recommend to reject signing contracts without an explicit and definite date.

  5. Assignment of a specific notary by the seller.

  6. The developer’s exoneration from his legal responsibilities according to the Building Regulations Law, such as construction faults and defects, etc.

  7. The Building specifications, is, in fact, a clause which is the subject of many litigations in terms of price changes. We recommend a specific clause with consensus between both parties.

Finally, if you are young and you are looking to buy a property, here we offer you the link of public aids for the acquisition of a property that are currently in force in the Region of Murcia. If you are a foreigner, we have already given you some advice in our post How to buy a property in Spain if I am a foreigner.

And for any other decision prior to the purchase of a property, we suggest you to contact our Legal Department, we are committing to assure that you are succeeded in all this process with proper counselling.

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