Real estate due diligence before buying property in Spain

Buying a home or any other property involves a significant financial commitment.

Before paying a deposit, signing a reservation or deposit agreement, or attending the notary, it is advisable to review the actual legal position of the property and identify any circumstances that may affect the transaction.

Real estate due diligence allows this review to be carried out before important contractual obligations are assumed.

At SP Abogada, we provide legal advice throughout property purchase and sale transactions in Spain, for both Spanish and foreign clients.

What is real estate due diligence?

It is a legal review of the property and the documentation connected with the transaction.

The aim is to establish what is being purchased, who is entitled to sell it, what charges exist and whether there are matters that should be dealt with before the transaction moves forward.

The exact review will depend on the characteristics of each property and each transaction.

What can be reviewed before buying a property?

Depending on the circumstances, legal assistance may include:

• reviewing the Land Registry position of the property;
• checking ownership, charges, mortgages and other encumbrances;
• reviewing cadastral information and identifying possible discrepancies;
• analysing the legal documentation relating to the property;
• reviewing and negotiating reservation and deposit agreements;
• drafting deposit agreements and private purchase contracts;
• coordinating with the estate agency, bank, gestoría, notary and other professionals involved;
• preparing and reviewing documentation related to mortgage financing;
• dealing with legal issues that may arise before completion;
• reviewing documentation before execution of the public deed;
• legal assistance through to completion of the transaction.

Not all of these steps are required in every case.

The scope will depend on the property, the available documentation and the way the transaction has been structured.

The Land Registry position

One of the matters that may need to be reviewed is the information recorded at the Spanish Land Registry.

Among other things, it may be necessary to check:

• who is registered as owner;
• whether mortgages exist;
• whether there are charges or other encumbrances;
• whether the registered description is consistent with the property documentation.

Identifying these matters before signing allows the buyer to understand the legal position of the property more clearly.

Land Registry and Cadastre

It may also be necessary to review cadastral information and check whether there are differences between the Cadastre, the Land Registry and the available documentation.

Where discrepancies exist, they should be analysed before the transaction is completed.

Reservation and deposit agreements

Before attending the notary, buyers and sellers often sign preliminary documents.

These may include a reservation agreement, a deposit agreement or a private purchase contract.

These documents may create important obligations.

For that reason, it may be necessary to review:

• the price;
• the amounts already paid;
• deadlines;
• the conditions of the purchase;
• the consequences contemplated if the transaction does not proceed;
• the financing position;
• the documents to be provided before completion.

Where necessary, the agreement may also be drafted or negotiated to reflect the specific circumstances of the transaction.

What if there is an existing mortgage?

An existing mortgage is one of the matters that may need to be reviewed as part of the transaction.

Its position should be understood and the way it will be dealt with should be properly coordinated before completion.

Coordination with estate agent, bank, gestoría and notary

Different professionals and institutions may be involved in a property transaction.

Depending on the case, legal assistance may include coordination with:

• the estate agency;
• the bank;
• the gestoría;
• the notary;
• other professionals involved in the transaction.

The aim is to review the documentation and deal with legal issues that may arise before completion.

Buying property in Spain as a foreign buyer

Buying property in Spain from another country can involve additional practical difficulties.

Issues may arise in relation to language, documentation, representation, financing and the way the Land Registry, Cadastre, banks and notaries operate in Spain.

For this reason, it is especially important for the buyer to understand what is being purchased, what is being signed and what matters need to be reviewed before significant amounts are paid.

Legal assistance through to the notary

Legal assistance may continue throughout the transaction.

This can include the initial negotiations, review or preparation of contracts, coordination of documentation, resolution of legal issues and final review before execution of the public deed.

The aim is for the transaction to reach completion with the relevant legal matters reviewed in advance.

We also advise sellers

Reviewing the documentation in advance can also be useful for an owner who wishes to sell.

Identifying Land Registry, cadastral, mortgage or documentary issues early may help prevent them from arising when a buyer has already been found or completion is approaching.

Preparing the transaction legally from the outset can facilitate the process.

When should the legal review be carried out?

It is most useful before important commitments are made.

For example, before significant amounts are paid, a deposit agreement is signed or specific contractual conditions are accepted.

The earlier the documentation is reviewed, the more time there is to identify issues and decide how they should be addressed.

Conclusion

Buying or selling property involves more than signing a public deed before a notary.

Before that stage, it may be necessary to review the Land Registry and cadastral position, charges, contracts, financing and the transaction documents.

Real estate due diligence allows these matters to be analysed in advance and provides a clearer understanding of the legal position of the transaction.

Frequently asked questions

What is real estate due diligence?

It is a legal review of the property and the documents connected with the transaction before completion.

Can a deposit agreement be reviewed before signing?

Yes. The review may include reservation agreements, deposit agreements and private purchase contracts.

Are charges and mortgages reviewed?

Yes. The review may include ownership, charges, mortgages and other encumbrances.

Is this service also for foreign buyers?

Yes. SP Abogada advises both Spanish and foreign clients buying property in Spain.

Can sellers also receive legal advice?

Yes. Reviewing documentation in advance can also help prepare a property sale.

Note: This content is for information purposes only. The checks required depend on the specific characteristics of the property and each transaction.