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Buying a home on Ibiza: the legal side

In part two of our two-part series, we go through all the legal issues when buying a house on Ibiza.

In this article, the second part of a two-part series, we go through the process of helping you seal the deal, with details of the legal processes once you have found your dream Ibiza home.

If you missed the first article, Buying a home on Ibiza: getting started, do head there first to get an idea of what your first considerations should be.

So, now it's time to drill down into conveyance, the legal process of transferring property from one owner to another. It's important to know how this works in Spain as it can differ from that of other countries, so read on.

Negotiate, negotiate

Your agent will help both parties to reach an agreement over the sale price, confirm the terms in writing, then begin the task of drawing up the contract. A good agent will take a very active role in negotiating a price and terms that are suitable for both parties. Now is the moment to drive your hard bargain.

Drawing up a contract

Although not a legal requirement, most sales are usually pledged and secured by a private contract - called a contrato de arras - between the buyer and seller – the terms of which are arrived at by negotiation between the respective parties' solicitors. The seller agrees to deliver the property and the buyer will pay the agreed price for it. Upon signature of the contract, the buyer will make a down payment deposit of 10% and a minimum period for completion is set (typically three months).

Make sure that all financial arrangements are in place before embarking on this stage. If you are not in a position to complete the purchase in the allotted time, you stand to lose your entire deposit.

Similarly, it is essential that the seller ensures the property will comply with any enquiries likely to arise from the due diligence process, as failure to complete in time would result in returning the buyer's deposit and equal amount of compensation paid on top. If you are in doubt, we can recommend you speak to a local expert such as Denise Klischan, a real estate law specialist.

Escritura (deed of sale)

Modern sea view villa in Vista Alegre from CW Luxury Villas' website

Once all the terms have been fulfilled with and the finances are in place, the final signature of the deed of sale takes place in front of a public notary (a person that endorses legal agreements and contracts) and the legal representatives of all parties. Most notaries will have a reasonable command of English and will satisfy themselves that each clause of the contract has been clearly understood by each party before proceeding to the next.

Doing your due diligence

Before the final signature of the contract, the buyer should check certain aspects of the legal standing of the property. Houses on Ibiza tend to have unique identities; it is rare, especially in the case of older dwellings, to find two that are identical. Many were built, and sometimes added to, over a considerable period of time and under less stringent political regimes. Consequently, the likelihood of missing legal documents or inaccurate reporting in the land registry is very high.

Most of the legal enquiries are typical of other countries and a comprehensive search will check the title deed and ensure it is free of charges; consult the land registry certificate (catastro) to outline the location and boundaries and review building licences if relatively new.

Also, the certificate of occupancy, the Cedula de Habitabilidad, will be examined to ensure it meets the requirements of current legislation, then an energy certificate confirmation and a check that local rates payments (IBI) are up to date. Finally any leases or rental agreement will be looked at to ensure they are free of any outstanding management fees.

Many older properties may have never been issued a cedula when they were built or it may not reflect accurately the current condition of the property. You don't actually need to have one of these but most lawyers are demanding it these days.

Christian Wolf of CW Luxury Villas cautions paying careful attention to the cedula because, without one, you may have difficulty raising a mortgage (although banks will also carry out their own valuations) and a tourist licence will not be issued for a house without one. If it's not already in place, and you're not prepared to take a view, expect to wait up to 18 months for a new one to be granted.

Philip Gould and Rene Heinz of GHL Ibiza believe a flexible approach is essential to successfully concluding the due diligence process, as it is very hard to find any house on the market which could be said to be 100% legal.

Ten years ago, when a finca was selling for €800,000, people took a view on parts of it not being legal and lawyers didn't require as much paperwork. That same property may now be worth €2 million in the current market, so lawyers are now being much more vigilant. Also, the present government is putting many extra hurdles in the way.

Another villa from CW Luxury Villas' website

Many agents on the island are doing the hard work selling the property and when begin due diligence with the lawyer, they find only half of its legal or cannot be made legal. However, there are lawyers and lawyers: some try to stall every deal because they will find something wrong whereas other lawyers will look for solutions. Philip Gould believes a good agent should be able to recommend you a flexible lawyer.

In most cases the solution comes down to the buyer having to take a realistic view. Ten percent of your desired dwelling may be illegal and may never be legalised but, if it's more than ten years old, the statute of limitations kicks in and it cannot be pulled down. At this point negotiate hard for the price to get the deal done.

Additional costs

When considering your dream of owning a home on Ibiza it is essential to factor in the rather sobering additional costs of property conveyance and taxation.

The Balearic Island rate of Property Tax is 8% of the dwelling's value on properties up to €400,000, rising to 11% on properties over €1 million. This obviously represents a considerable extra payment and will have to be settled with 30 days of purchase.

Going forward, the Spanish Government imposes an annual wealth tax, known as the Patromonio, for non-resident home owners. We would recommend that anyone considering buying property in the Balearic Islands familiarises themselves with the current levels of wealth taxation, as the implications can be considerable for those buying an expensive second home. Blevins and Franks produce a very .

Ibiza truly is a wonderful place to find a home and to raise a family. We at Ibiza Spotlight wish you the best of luck in your property search and hope that you find your own little corner of paradise here on the White Isle.

With all that in mind and to find a property on Ibiza, head to our real estate section, where you'll find a host of respected local agents.

MAIN PHOTO | Prestige Properies

All information correct at the time of publishing.

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