Legal Due Diligence for Property in Spain

Legal Due Diligence for Property in Spain

What should be checked before buying an apartment, house or villa?

Legal due diligence is one of the most important stages of a safe property purchase in Spain. An attractive property, an agreed price and a seller ready to complete quickly do not necessarily mean that the transaction is free from legal risks.

Before signing an arras agreement and paying a substantial deposit, the buyer should confirm that the seller has the legal right to dispose of the property, that there are no problematic debts or restrictions, and that the actual condition of the property corresponds with the Land Registry, cadastral and municipal records.

This process is particularly important for foreign buyers who may not be familiar with the Spanish property registration system and local transaction procedures.

What is legal due diligence?

Legal due diligence is a comprehensive review of the property, the seller and the documents relating to the future transaction.

Its purpose is to identify legal risks before the buyer assumes binding obligations and transfers a significant amount of money.

The review may include:

The scope of the review depends on the type of property.

Verification of the owner

The first question is who legally owns the property.

The seller's details should be compared with the information in the Registro de la Propiedad — Land Registry.

If the property is jointly owned, the buyer should verify the ownership shares and ensure that all owners participate in the sale or are properly represented.

If the seller is a company, the review may also include:

Signing an arras agreement with someone whose authority has not been verified creates unnecessary risk.

Nota Simple

One of the first documents obtained during due diligence is an updated Nota Simple from the Land Registry.

It provides information about the registered owner, legal description of the property and registered rights and encumbrances.

The document may show:

However, a Nota Simple is only one part of legal due diligence and does not reveal every possible issue affecting a property.

Mortgages and encumbrances

The existence of a mortgage does not necessarily prevent the sale of a property.

In Spain, properties are often sold before the seller's mortgage has been fully repaid.

In such cases, it is important to establish:

Other registered burdens may include seizures, court orders, usufruct rights, easements and other third-party rights.

The buyer should understand the consequences of each registered right before signing a binding agreement.

Comparing the Land Registry and the Cadastre

Spain has two separate systems containing information about real estate:

Each property has a referencia catastral, or cadastral reference number.

The due diligence process should compare:

Any discrepancy between the Land Registry, Cadastre and actual physical condition of the property should be investigated before purchase.

Actual area and layout of the property

One common issue is that the actual property does not correspond with the registered documentation.

For example, an owner may have:

Not every alteration is necessarily illegal, but it is important to determine whether the relevant works were properly authorised and documented.

This is particularly important for villas, houses and extensively renovated properties.

Urban planning and municipal checks

The Land Registry does not always contain all relevant information about the planning status of a property.

Additional checks with the municipality may therefore be necessary.

These may include:

Urban planning due diligence is particularly important for plots of land, villas, buildings requiring renovation and investment projects.

Building and renovation licences

If a property has been built, extended or substantially renovated, the relevant permissions should be checked.

Depending on the asset, the review may include:

A recently renovated and visually attractive property does not automatically mean that all works were legally authorised.

Debts to the community of owners

When buying an apartment or a property within a residential complex, it is important to determine whether there are outstanding debts to the comunidad de propietarios.

The seller should provide a certificate confirming the state of payments unless the buyer expressly waives this requirement.

This is important because, within certain legal limits, the property itself may remain liable for unpaid community fees relating to the current year and several previous years.

The buyer should therefore avoid waiving the certificate without understanding the potential consequences.

Derramas and future community costs

Even if there are no outstanding community debts, the minutes of owners' meetings should be reviewed.

Particular attention should be paid to derramas, or extraordinary contributions for major works.

These may relate to:

The buyer should understand not only existing debts but also approved future expenses.

Checking IBI

IBI is the annual municipal property tax.

As part of the transaction, the buyer should check recent payment receipts and confirm the cadastral reference of the property.

It is also useful to know the annual IBI amount because this becomes part of the buyer's ongoing ownership costs.

Valor de referencia

When purchasing resale property, the buyer should also check the valor de referencia, where one has been assigned.

This is an official reference value established by the Cadastre and may be relevant when determining the taxable base for ITP and certain other taxes.

It does not indicate whether the property is legally clean, but it can materially affect the financial consequences of the transaction.

If the valor de referencia is substantially higher than the agreed purchase price, this should be identified before signing arras.

Energy efficiency certificate

When residential property is sold, the seller is generally required to have a valid certificado de eficiencia energética, subject to legal exceptions.

This document provides information about the property's energy performance.

It should not, however, be confused with a technical inspection of the building.

Checking the permitted use of the property

Legal due diligence should also consider how the buyer intends to use the property.

If the buyer plans to:

the legality of such plans should be confirmed in advance.

The fact that the previous owner used the property in a certain way does not guarantee that the buyer can legally continue doing so.

Tourist rentals

Properties purchased for short-term tourist rental require additional checks.

The review may include:

A seller's statement that a property “has a tourist licence” should always be supported by documentation.

Tenants and other occupants

If the property is sold with a tenant, the lease and the tenant's legal position should be reviewed.

This includes:

The buyer should not rely solely on an oral statement that the tenant “will leave soon”.

New-build properties

Legal due diligence for a new-build purchase differs from that of a resale property.

The review may include:

The buyer should understand how any amounts paid before completion are protected.

Villas and detached houses

Due diligence for a villa is usually broader than for a standard city apartment.

Additional points may include:

For such properties, legal due diligence should often be combined with an independent technical inspection by an architect or engineer.

Legal and technical due diligence are not the same

A lawyer checks the legal status of the property and documentation.

An architect or technical specialist assesses the physical condition of the building and construction-related issues.

Legal due diligence may not reveal:

For villas, houses and high-value properties, both reviews are often advisable.

When should due diligence be carried out?

The main legal review should ideally be completed before signing an arras agreement and paying a substantial deposit.

If all documents cannot be obtained beforehand, the arras agreement should include appropriate protective conditions.

It is risky to pay 10% of the purchase price unconditionally and only then begin investigating whether the property has legal problems.

What should be checked before signing arras?

Before arras, the buyer should ideally:

  1. identify the owner;
  2. obtain an updated Nota Simple;
  3. review the principal encumbrances;
  4. compare the property with cadastral information;
  5. check IBI;
  6. obtain information from the community of owners;
  7. identify obvious planning risks;
  8. determine whether a technical inspection is required;
  9. verify the authority of the signatory;
  10. agree the conditions for refunding the deposit if a serious issue is discovered.

The arras agreement can then be used to formalise the agreed transaction terms.

What should be checked before notarial completion?

Due diligence continues between the arras agreement and the signing of the final escritura.

Before completion, the buyer should confirm that:

Is the notary's review sufficient?

The Spanish notary plays a fundamental and independent role in the transaction.

However, the notary is not the buyer's personal lawyer and does not normally perform the full scope of individual legal due diligence that a particular transaction may require.

For example, detailed urban planning analysis, investment structuring, technical surveys and negotiations over arras terms may fall outside the notary's standard role.

The roles of the notary and the buyer's independent lawyer should therefore not be confused.

Can the buyer rely only on the seller's estate agent?

The estate agency may provide important information and documentation, but the buyer should understand whose interests it represents.

If an agent acts for the seller, its role is to facilitate the sale.

An independent buyer representative should analyse the documentation specifically from the buyer's risk perspective.

This becomes especially important in high-value and complex transactions.

Main risks of buying without due diligence

A purchase without proper legal review may result in discovering after completion:

Some issues can be corrected after purchase, but doing so may require significant time and money.

Others can fundamentally change the economic value of the acquisition.

Common mistakes made by buyers

The most frequent mistakes include:

The purpose of due diligence is to identify these issues before the buyer becomes financially committed.

How to check a property safely before purchase

Before buying, it is advisable to:

  1. obtain the seller's documentation;
  2. order an updated Nota Simple;
  3. confirm ownership and authority;
  4. review mortgages, seizures and other encumbrances;
  5. compare the Registry, Cadastre and actual condition;
  6. check IBI;
  7. obtain the community debt certificate;
  8. review approved derramas;
  9. check licences and urban planning where required;
  10. carry out a technical inspection for complex properties;
  11. verify the intended use of the property;
  12. only then agree the final terms of the arras agreement.

The scope of due diligence should be proportionate to the type and value of the asset.

Conclusion

Legal due diligence in Spain is not merely an administrative formality before the notary. It is one of the main tools for protecting the buyer.

The review should cover ownership, the Land Registry, encumbrances, the Cadastre, IBI, community debts, possible derramas, planning status, licences and whether the actual property corresponds with the documentation.

For villas, houses, extensively renovated properties and investment assets, legal due diligence should often be supplemented by a technical review.

The key principle is to identify legal risks before signing unconditional obligations and transferring a substantial deposit.

GG Real Estate Barcelona represents buyers and provides comprehensive assistance with residential and investment property acquisitions in Barcelona, Catalonia and other regions of Spain.

We coordinate legal and technical due diligence, review seller documentation, the Registry, Cadastre, debts and licences, prepare the arras agreement and accompany the buyer through notarial completion and registration of ownership.

Frequently asked questions

What does legal due diligence include when buying property in Spain?

It normally includes verification of ownership, Nota Simple, mortgages and other encumbrances, cadastral information, IBI, community debts, planning documentation and the terms of the transaction.

Is a Nota Simple necessary?

It is one of the key documents used to verify the registered owner and principal registered rights and encumbrances.

Can I buy a property that still has the seller's mortgage?

Yes. The repayment procedure and cancellation of the mortgage in the Land Registry should be agreed in advance.

Should community debts be checked?

Yes. Outstanding debts and approved future contributions can affect the buyer and should be reviewed before completion.

What if the property's area does not match the documents?

The reason for the discrepancy should be established and any required correction of the Registry, Cadastre or planning documentation should be assessed before purchase.

Is the notary's review enough?

Not for every possible risk. The notary performs essential legal checks, but independent buyer due diligence can cover a much wider range of issues.

When should due diligence be carried out?

Ideally before signing the arras agreement and paying a substantial deposit.

Is a technical inspection also necessary?

It is particularly advisable for villas, houses, older properties and extensively renovated homes.

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