Once you've decided to purchase a property and you've agreed the price that you'll pay, you need to prepare for completion of the transaction.
Unlike in England & Wales, in Spain there's no legal requirement that a contract of sale and purchase be signed prior to signature of the purchase deed. In essence, there's no reason to make a deposit payment at all. The transaction must be completed in the presence of a Notary. A document will be prepared that's called an Escritura. In fact, its full name is Escritura Publica de Compraventa, meaning a public sale and purchase deed. But most documents signed in the presence of a Notary are knowns as Escrituras. The Escritura will be a very detailed document setting out all of the rights and obligations of the parties.
That said, it's often the case that for whatever reason the purchaser or the seller wants to commit to the transaction but there's not yet been time to arrange for completion. Sometimes the purchase funds are not yet available. Sometimes the purchasers have yet to obtain their Spanish tax number or open a Spanish bank account. Although less prevalent in the current economic climate, a purchaser may want to pay a deposit to hold the property until he's obtained the finance that he needs to complete the transaction. What's very important to remember is that if a deposit or reserve payment is made prior to completion of a purchase, a private agreement must be signed at the same time specifying the same rights and obligations of the seller and the buyer as both parties will expect to appear in the Escritura at the completion of transaction. That means that it's not sensible to see a property in the morning and pay a deposit in the afternoon, or the next day.
Of course, you may take the view that you are prepared to forego the deposit if, once you've received the results of enquiries into the legal and structural state of the property, you decide not to go ahead with the transaction. But not many people can afford to behave in that way. The estate agent may assure you that paying a reserve deposit is the way in which business is done in Spain. That's true if the agent is managing the transaction, as once the deposit's been paid most purchasers will end up completing the transaction. If you expect to be viewing a property that you may wish to purchase, and you want to move very quickly indeed if you decide to go ahead, you can instruct a lawyer to carry out all of the enquiries and agree terms with the seller very quickly indeed. That may mean the lawyer or one of his colleagues has to visit the town hall personally to check the planning status of the property rather than to wait for correspondence to be answered, but may also mean that more time will need to be spent ensuring that immediate responses are received to other enquiries and that a private agreement is drafted straightawawy. If the buyer's lawyer needs to negotiate with the seller's representative then phone calls will need to be made and emails exchanged without any delay at all. Hence the need to take legal advice before you visit the property.
It takes time to be certain that you're happy with a legal adviser who you'll use for the transaction, so give yourself sufficient time. Above all, don't proceed with the completion of any property purchase without taking suitable legal advice from an adviser who you can trust. You wouldn't proceed without legal advice in the UK, so please don't fail to take legal advice in a foreign country in which you may not speak the language very well or at all, you're uncertain as to the relevant law, and the business culture is very different indeed to what you're used to at home. Taking advice from the estate agent is not taking legal advice even if he is a lawyer as well.
Jonathan Eshkeri, E&G Solicitors in Spain
