Our legal audit process considers the following essential points:
• Legal status and registration of titles
• charges and levies
• preferential rights and purchase options
• urban aspects
• construction contracts
• services and supplies
• Control of real estate taxation
Legal status of registration and title deeds
To prove the seller’s domain, we verify the good title provided, if it is registered in the correct Property Registry, and if there are special acquisition rights, or other rights, in favour of third parties (right of trial or right of Retraction, the right of option, etcetera). We also examine whether any restrictions affect the seller’s title and may, in any way, limit their ability to execute the transaction.
Through the analysis of the registry information and public deeds, we verify the existence of charges and encumbrances that may constitute a limitation of the domain (mortgages, easements, regulatory restrictions, prohibitions to dispose of, and so).
As far as fiscal circumstances are concerned, the rules of the transfer tax establish a real security consisting in the affection of the goods and rights transmitted to the payment of the corresponding debt about the transmission. The tax warranty is pointed out:
• by notaries’ warning in the documents they authorise;
• Through the entry in the Property Registry: the Registry records the condition of the self-liquidation made by the taxpayer, to guarantee the possible complementary liquidation that, in the case of official verification of the self-liquidation, must pay in the future, within four years since the transaction.
For the acquirer of property, the condition implies that it is assigned as security, both the debt that causes its purchase and the debts produced by the previous transmissions, when it is expressly stated. it is not its purpose to register a right in favor of the tax authorities, but to make opposable against third parties acquiring a right of the Tax Administration to claim a debt on the property, even if the owner is not the taxpayer of the unpaid tax, as a consequence of the subsidiary liability for derivation of responsibility.
The term of fiscal affection is of 4 years, although the registry entry of fiscal affection expires to the five years.
Preferential rights and purchase options
During the legal audit, we examine the preferential rights and purchase options that the seller may have granted to third parties concerning the property.
We also verify the existence of legal rights of preferential acquisition. Essentially:
• those derived from leases in force at the time of the operation, and which have not been waived by the tenants;
• the right of pre-emption of co-owners;
• the right of pre-emption of neighbouring owners; and
• the pre-emptive acquisition right on urban development over the property.
The analysis of the public deed creating the horizontal property division (in particular, the statutes registered in the Property Registry), the Internal Regime Regulation, the approved Acts of the community of owners, and the budget of income and expenses for the current year and the previous year, allows us to check:
• how to adopt agreements;
• what are the participation fees regarding ownership and expenses; and
If the seller is up to date on the payment of all the community expenses.
We proceed to the examination of the leases signed, concerning the property object of the transaction, and its modifications.
Checks on urban planning rules
As a general rule, buyers of real estate acquire the obligations or limitations of urban planning that apply to these properties, regardless of whether or not they are reflected in the Land Registry. That is to say, the transmission of farms does not modify the situation of its owner about the urbanistic duties.
The new owner replaces the previous one in his rights and obligations of urban planning, as well as in the commitments previously agreed with the City Council (and that have been the object of registration, provided that such commitments refer to a possible effect of legal real modification ).
If the property to be acquired is a non-constructed land or lot, it is necessary to examine:
– Urban planning, and the municipal ordinances regulating the building;
– urban development agreements validly approved and published;
-The land division project,
– documents of reception by the municipality of urbanisation works (if such reception has already been carried out), and
– Authorisations from non-municipal administrations (for example, the Regional Administration about the environment, approvals of roads, the coast service, etc.).
If it is the purchase of a building currently built, when the management of the land is concluded, control is more limited. In particular, it focuses on verifying building permits, building extensions, renovations, activity licenses, first occupancy license, building facilities, etc.),
During our legal audit, we verify if the property (built or under construction) is adequately insured, by examining:
– the general and particular conditions of the insurance policies and their modifications,
– the payment of insurance premiums by the seller,
– damage covered by insurance,
– the franchises,
– exclusions of risk,
– ongoing legal proceedings or claims to the insurance company, etc.
Besides, the developer of a building under construction usually contracts two insurance: ten-year liability insurance, and civil liability insurance under construction. The contracting of ten-year liability insurance is mandatory in the construction of buildings whose primary destination is housing.
We determine the deadlines for the responsibility of building agents, if the building needs the correction of defects, and if the building had the required licenses.
Core services and supplies
The control of the services and supplies contracted by the seller for the property (electricity, water, ..) serves to confirm:
• if such contracts are in force;
• whether the sale of the property can lead to the resolution of the same; and
• the procedures for the change of ownership for the new owner and therefore receptive to the services and supplies.
Control of real estate taxation
We verify the fulfilment of the fiscal obligations of the property. The most significant taxes to check are:
• property tax;
• the tax on buildings, facilities and works;
• charges for garbage collection and use of solid waste treatment centres, for the provision of urban services, for the entrance of vehicles; and
• fiscal guarantees (afecciones fiscales).