Buyer Completes on Purchase of Spanish Property but does not Receive a Copy of the Deeds (Escritura) from his Spanish Lawyer

Some fourteen months ago we purchased an apartment in Costa Blanca. We are very happy with the apartment although it wasn't purchased without its problems and it is proving nigh on impossible to get the builder to rectify certain problems or to satisfactorily finish certain areas - as a result the community have decided to take the builders to court to get this work undertaken.

On a personal basis we now want to obtain the deeds to our property (we have no mortgage) and this is also proving very difficult. We have consulted our solicitor (who incidentally is the solicitor through whom we purchased the property and who we feel should have protected our rights to receive the deeds from the builder upon completion of the purchase - a matter which the solicitor denies is his responsibility!).

The solicitor informed us that he has endeavoured to obtain the deeds of other properties in our community to no avail and has therefore advised us to take the builder to court in order to obtain our deeds. This solicitor has advised us that he has no reason to suspect that the builder is in financial difficulty but we are led to believe that should the builder go into liquidation we would be liable to pay the re-mortgaged amount that the builder has taken out. We are told that the builder has re-mortgaged our property for approximately three quarters of its worth in order for him to finance future building work - a practice which we are given to believe is quite normal in Spain!

Hopefully this problem will be a warning to others seeking to buy a property in Spain. Had we known, we would have had a small mortgage which would have meant that the builder was compelled to pass the deeds to the lender; we could have then paid off the mortgage and would have been given our deeds.

We understand that, if we take the builder to court, all expenses will be reimbursed but we can ill afford these costs in the first place and would welcome your advice as to the best way forward in this matter, in particular:

Should our solicitor have secured the deeds of our property for us? (we did what Des Sparkes in your January/February issue warned against, ie used the solicitor suggested by the company through whom we brought the property.

Do you have any idea of the cost of such court proceedings - we were not helped here by the solicitor?

Would it be wise to change our solicitor and find an independent solicitor?
Is this a common problem?

Would we be best to just wait until the builder decides to send us the deeds in his own time (not at all sure about this option but perhaps this problem is more widespread and normal than we realise)?

Would we really be liable to pay for our apartment again if the builder did go into liquidation having re-mortgaged our property?

We look forward to hearing from you - should you consider this worth printing we would appreciate our names not being printed at this stage.

Des Sparkes reply:
Your Spanish lawyer appears from the information you have provided not to have acted in your best interests in the way he has handled your purchase of the property. I have answered below the specific questions of your letter.

Your Spanish lawyer should have guaranteed that the title deeds were prepared and signed by the developer at the Notary office at the same time you paid the completion money on your purchase. Then on the completion day he would be able to provide you with an official copy of the deeds (escritura).

With the purchase of a new property, after your lawyer has completed his legal checks, it is usual to pay a 10% deposit when the purchase contracts are signed and exchanged. Then there is normally a second stage payment of approximately 30% at a later date, while the property is being built. Then finally once the property is built the outstanding purchase money is paid to the developer at the same time as the title deeds are signed by both the seller and the purchaser at the Notary office.

It is your lawyer's duty to ensure that the title deeds are signed by both contracting parties, and a copy given to his client at the time the full purchase price is paid by his client. It not common practise in Spain for the buyer to pay the full purchase price without receiving the executed title deeds in return.

The estimated cost of applying to the Spanish Courts to compel the developer selling the property to issue the executed title deeds are 10% of the purchase price of the property. If you win your legal action in the Spanish Courts the developer would be liable to pay all your legal costs in the action. Prior to any legal judgement by the Spanish Court you would need to provide the Spanish lawyers acting for you with funds in order that they can proceed with the claim.

It appears from the facts provided that you should change your current Spanish lawyer for the following reasons:

(a) He cannot be independent and act only in your interests as he is also the lawyer of the developer, and so clearly there is a conflict of interest which would prevent him from acting as your lawyer in Court action against the developer.

(b) The lawyer has not acted to protect your interests in the purchase according to the normal conduct of a buyer's lawyer. I therefore strongly recommend that you appoint another Spanish law firm to represent you, and to take action on your behalf to resolve your current situation.

This type of problem is more likely to arise in Spain for the following reasons:

(a) It is common practise (but not beneficial to a buyer) for developers or agents to recommend either their own lawyers, or lawyers to whom they regularly supply clients. Unfortunately due to the conflict of interest in this type of situation these lawyers will not wish to find fault, or confront the developers, for fear of "biting the hand that feeds them". Therefore a buyer cannot rely on these lawyers to act solely in the interests of the buyer, and carry out thorough legal checks on the property, the contracts and ensure that the conveyancing procedure is carried out correctly. (In effect it could be argued that in some cases these lawyers are being used by the vendors to assist them in getting the buyers to sign the contracts, and pay them the purchase money, which is of course not what the buyer is paying his or her lawyer to do!)

(b) Foreign buyers in Spain seem reluctant to search for an independent Spanish lawyer at the same time they are looking for a property. If they did they would not need to make the classic mistake of choosing the developer or agent's lawyer once they have found their property. In the UK buyers normally would not dream of using the seller's lawyer when they buy a property and for understandable reasons. But when they come to Spain they seem to forget this and by doing so are putting themselves at greater risk of having a problem in their purchase.

It is not advisable that you take the approach of waiting to see if the developer eventually sends you the deeds. In order to obtain the title deeds both you (the buyer) and the developer have to sign the title deeds at the Notary office. It is at that point that legal ownership has been transferred by the title deeds into your name. Then your lawyer will be able to send these deeds to the Spanish Land Registry to have your new ownership registered.

Upon completion of your purchase of the property at the Notary Office the buyer's lawyer should ensure that the developer pays off any mortgage he has on the property, and that the details of this mortgage are removed form the Land Registry details of the property. It is clear form the information that you have given that your lawyer has not done this. Your lawyer can check whether there is a mortgage on the property by doing a Land Registry search. If there is a developer's mortgage on the property and the developer fails to make his mortgage payments, the property could eventually be seized by the bank. If there is a mortgage on the property your lawyer will need to take immediate action to protect your position and to try and resolve the situation.

In conclusion I recommend that you instruct an independent Spanish Lawyer to take immediate steps on your behalf in order to rectify the current situation, obtain your title deeds and the removal of the developer's mortgage form being registered on the property.

(The above answer was written by Des Sparkes (Solicitor) who works in association with Spanish property lawyers in Marbella , Malaga , Spain and who writes the Spanish lawyer answers to readers letters in Living Spain Magazine.)