Real Estate Purchase Due Diligence and Contract

Due Diligence

Property Verification

• Concordance between the property description in the Land Registry and the physical reality.
• Verification of charges and encumbrances on the property in the Land Registry (mortgages, usufructs, easements, seizure notes, etc.).
• Confirmation that the property is free of tenants or occupants.
• Review of the Community of Owners' agreements.
• Verification of no administrative infringements or penalty procedures.

Documentation

• Public deed of property ownership and registration.
• Certificates/Single Notes from the Land Registry to verify title, charges, and encumbrances.
• Cadastral Value.
• Receipt of I.B.I. (Property Tax) for the last fiscal year.
• Documents proving payment of the Property Tax (IBI) and the Rubbish Tax (Tasa de basura).
• Deed of conveyance.
• Certification of ownership and charges.
• Simple note or certification of the community statutes.

Mortgage Contingency

• Inclusion of a mortgage contingency in the Purchase and Sale Agreement, making the sale conditional upon the buyer obtaining financing.

Rights and Warranties (R&W)

• Confirmation of payment of all types of taxes.
• Guarantee that the purchase and sale is perfected free of charges and encumbrances.

Clauses in the Purchase Agreement

Object

1. Price: The buyer undertakes to deliver the agreed-upon amount, specifying the method of payment and deadlines, including the deposit and the remaining amount upon the granting of the public deed and handover of the keys.
2. Date of execution of the public deed.
3. Energy efficiency certificate.
4. Confirmation that the purchase and sale is perfected free of charges and encumbrances, occupants, tenants, or squatters, and up to date with the payment of all types of taxes and expenses.
5. All expenses and taxes resulting from the granting of the public deed of sale will be paid by the buyer.
6. Condition precedent.
7. Penalty clause: Establishing the seller's responsibility after signing or closing for contingencies that appear later, for a period of 2 years, for the amount of xxxxx euros, which will be held in a bank deposit.

Jurisdiction

The parties, for any matter arising between them in relation to this contract, its execution, interpretation, and/or performance, expressly submit to the Courts and Tribunals of the city where the property is located.

Differences Between Commercial and Residential Properties

Tax Implications

• In sales and purchases: in relation to VAT.
• In real estate rental/tenancy of property: in relation to IRPF (Personal Income Tax).

Tenant Eviction

Preferential Right

Tenants have a preferential right to purchase the property. This right must be exercised within 30 days of being reliably notified of the decision to sell and the price and conditions of the sale. The right of preferential acquisition cannot be exercised when the rented property is sold together with other properties of the building and premises by the same buyer.

Seller's Right of Withdrawal

The seller may not withdraw from the sale without reimbursing the buyer for the sale price, the costs of the contract and any other legitimate payment made for the sale, and the necessary and useful expenses made on the sold property.

Glossary

• Eviction: Desalojo
• Earnest Money: Arras
• Encumbrance: Gravamen
• Guaranty
• Landlord-Tenant
• Seller-Buyer
• Land Register
• Notary
• Public Deed