Reducing the risk of buying property in Mallorca
Since Easter this year, the demand for real estate in Mallorca has increased dramatically. The island is currently attracting many foreigners who want to invest their money in real estate. A careful check before buying can protect you from unpleasant surprises. The market for holiday properties, especially in the high-priced segment, has been booming on Mallorca since the pandemic. Although it’s easy to get the feeling of missing out or being too late if you don’t act immediately, it’s still worth keeping a cool head. After all, a rash purchase decision can have extremely negative consequences in the long run. A careful pre-purchase check by an independent, trusted third party is essential to keep the risks as low as possible.
The following aspects should be well prepared and carefully considered:
1. necessary documents
Do you have all the necessary documents at hand that entitle you to purchase a property? Among other things, you must have a foreigner identification number NIE. Experience shows that this process takes several weeks. At best, this must also be registered with the Spanish tax office before the purchase. You also need a Spanish bank account.
2. tax structuring of the life cycle of the property
Do you want to use the property as your main residence or as a holiday home? Do you want to rent it out, either long-term or as a holiday rental? Do you plan to sell the property again or is it to be inherited or given away? Do you want your children to become co-owners of the property? It is worth discussing these matters before the purchase so that a solid tax structure can be established. Depending on the value of the property, the issue of wealth tax can also play a role, where prior planning can bring many advantages.
3. tax advice on the purchase
Depending on the type of property, land transfer tax or VAT may be payable in the Balearic Islands. There may also be other taxes such as stamp duty.
4. the preliminary contract
Once you have found your dream home, the preliminary contract is often signed very quickly. But even here it is worthwhile to have the contract legally checked. Not all preliminary contracts offer the buyer security. For example, is there a right of withdrawal, when and for what reasons? When are the down payments made? When will the prospective buyer get his deposit back? Can the seller sell to someone else? Do taxes have to be paid on the preliminary contract?
5. building law check
Does the information in the land register and the property register match? Which building regulations apply in the municipality? Do all parts of the building on the property have a permit? What are the obligations, risks and possibilities in the absence of permits?
6. building inspection
Do all the details in the property register and land registry correspond to reality? Is there any illegality and what effect does this have under certain circumstances?
In the best case, you will also receive the following support from a third party during the purchase:
Lawyer’s drafting and review of the deed of sale (incl. translation of the essential building blocks of the contract into english).
Calculation of cheques/transactions and payments for the notary appointment - at the appointment the full amount must be paid
Accompaniment to the notary appointment
Application for electronic mailboxes at the tax office
Registration of the deed with the authorities and offices
Re-registration of the utilities with regard to the already existing contracts
Payment of applicable taxes after the purchase
European Accounting will be happy to assist you with the “all-round carefree package” of due diligence when buying a property. Feel free to contact our partner on +34 971 67 94 18 or firstname.lastname@example.org.