When you’re buying property in Spain this is the price which appears on all the official documents, and hence on which all the taxes are based.

The Spanish don’t seem to like paying tax much, so anything they can do to pay less is fair game.

They avoid tax on buying and selling property by simply declaring a lower price to the authorities than the actual transaction price! The difference is paid in cash.

Let’s say you are in the process of buying a property for €100,000. The seller would prefer not to declare the full price to the authorities because the more they declare the more Capital Gains Tax (CGT) they will pay.

You the buyer may want to declare the full price, because when you sell in the future you too want to minimise your CGT.

But on the other hand, the higher the declared price, the more you will pay now in transfer tax (at a massive flat rate of 7%).

Normally there is a compromise at about 20-25% of the full price. So what happens in the €100,000 case is that at the Notary you’ll hand over a banker’s draft for €75,000 and €25,000 in cash.

This usually happens in the Notary’s building, say in a side office, or even in Reception, but etiquette dictates never in front of the Notary in person.

Sometimes you might all go back to one of the lawyers’ offices to do it.

You have to leave your Northern European conscience out of this – it’s the way they do things here.

There can be problems though; I heard of a cortijo which sold for €150,000 with a declared price of €75,000!  The problem the seller had then was €75,000 in cash; he had to open loads of extra bank accounts, because the maximum cash you can pay in without having to fill in a form to report the transaction to the Bank of Spain is normally €6,000!

The declared price is a fact of property transaction life here.

Like most other elements of buying property in Spain it’s negotiable, so if you’re at all worried about the illegality or immorality of it you can always try to persuade your buyer or seller that you’re only interested in declaring the full price. Just be aware that there’s a possibility you might lose the deal if you try to insist on it.

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Here’s a brief summary and the problems you can get.

The 3 usual stages during the purchase process are:

1. The reservation fee

Often the estate agent or seller will ask for a reservation fee of anything up to 5% of the price. In my experience, both as a buyer and a seller, this is a complete waste of time.

The only instance it’s necessary and useful is when you’re buying off-plan.

If you’re buying, then unless you have a proper contract it’s too easy for someone else to come along and beat your offer. You’ve then got the hassle of trying to get your money back.

If you’re selling it’s the same; without a formal signed contract and at least a 10% deposit you’ve got nothing.

2. The private contract (contrato privado).

This is drawn up by your lawyer, if you’ve any sense (some estate agents will offer to do this for you – forget it, you don’t ask your lawyer to sell your house, do you?)

Basically it states who is buying what; from whom; for how much; what the timescale is; what conditions are attached; what deposit is to be paid.

When the seller and buyer sign this contract the buyer hands over the agreed deposit. Spanish law is good here in that if the seller drops out of the sale they have to pay you back double the deposit.

Unless they’ve spent it of course, in which case good luck to you as you chase them through the courts.

3. The Sale Contract (escritura de compraventa)

This is the important one which both buyer and seller sign together in front of the Notary. This then gets covered in loads of official stamps and stickers, becomes your public title deed (escritura pública), and is registered as such at the Land Registry…eventually.

You don’t have to go through all the stages. Sometimes you can go straight to the Notary; a lot of sales don’t even do this, they’re just private sales completely bypassing officialdom and therefore saving money. The problem here is the property won’t be registered in the new owner’s name.

People do this to avoid tax, lawyer’s fees and Notary fees, but it comes back to haunt them when they want to sell on, because they can’t prove officially and publicly that they own the property.

Most land and village houses are like this. The ones with proper deeds and clean title are the exception, not the rule, which is why you need a lawyer to sort it all out for you.

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Buying a property abroad is one of the biggest decisions you′ll ever make. But don′t worry – your Spanish dream needn′t become a nightmare. From fin (more…)

For instance, in olive harvesting season at the end of the year, you may well wake up to see an old man on his mule, with his little dog trotting happily in front, ambling down your “private” track.

Although there is no “right of way”, nevertheless the old boy has ALWAYS gone that way to pick his olives.

Not much you can do unless you seriously want to alienate your neighbours: relax, crack open a bottle, and ask him for some of his olive oil when it’s been pressed.

Other problems are not what they first appear…

An acquaintance, John, built a house on land bordering an olive grove. Along the border, partly on his land, partly on his neighbour’s (Paco), the previous owner of John’s land had given permission for Paco’s cousin to have access to his olives further down the hillside.

One day a bulldozer arrived and dug out a platform on Paco’s land next to John’s boundary, leaving a drop the height of a double-decker bus along the border.

For safety reasons John then built a wall along this cliffside, about 1.5 metres in from the edge. 1.5 metres just happens to be the accepted width of a path (camino) big enough for a mule with side baskets.

A few days later he noticed a gathering of people outside his gates, shouting and gesticulating heatedly. This ‘meeting’ was made up of: Paco (agitated and redfaced), Paco’s cousin with wife, son and mother (the latter elderly, stooped, dressed all in widow’s black, clearly upset); John’s builder and the builder’s brother; the Land/Property Broker (corredor) who had found John the land in the first place (a welshman, been there before, resigned to spanish dispute arbitration procedures) and of course, arriving late and apparently uninvited, John himself.

The reason for all this aggro was of course the access to the olives. Paco maintained that there had been a right of way for years and years; John had built a wall and not left enough room for a mule, not just a mule on its own, but a mule
wearing side baskets to carry the harvested olives to the mill.

‘But,’ the builder countered, ‘you have made a dangerous cliffside and bulldozed away half the ‘path’ anyway, if indeed any path existed in the first place.’

‘What do you know about anything, you’re not even from round here’,

retorted Paco. (True, but not as if he’s from the other end of Spain, only the next village about 3 miles away; in fact you can see the edge of it on the other side of the valley!)

On and on, backwards and forwards, argument and counter argument, until it was obvious that no agreement would be reached, and by now everyone was getting bored and hungry.

Eventually it was left at something of a stalemate; the only fair outcome being to refer the dispute back to the former owner of John’s land, luckily an upstanding and respected member of the local community, whose family had owned the land for 60 years.

He in fact categorically stated that there was no right of way, and that Paco’s cousin was definitely trying it on. Why? Because he wanted to establish access to his land; not to pick his olives, but to be able to sell his plot for building.

Had John given in to these demands he would soon have heard the unmistakeable sound of a JCB preparing the ‘mule-track’ for the construction lorries!

A year later and Paco’s cousin has managed to get access from another part of his land, so at last the problem has gone away.

Moral: don’t be bullied and bamboozled by crafty locals with tales of ancient rights of way, unless, of course, it’s a vía pecuaria.

Check, double-check and check again.

Watch out too if buying in towns or villages. There can be some peculiar access issues such as shared staircases, roof terraces, passageways and the like.

And as there are 100,000 kilometres (62,500 miles) of these things, wherever you buy there’s a very good chance that there’s one nearby, and an equally good chance that no one knows about it except some bureaucrat miles away in the Regional Government.

When a friend bought land to build on she was determined to do everything above board, to the letter, and absolutely legally. She sourced her professional advisors very carefully, based on recommendation, and where possible, eg the builder, by seeing work they had already done. So far so good. She now had:

• a Lawyer
• an Architect
• a Land Surveyor
• a Builder

She delivered the Project Plans (proyecto) to the Town Hall herself, and on the Mayor’s personal go-ahead, the build started.

After nearly a year the house was finished and she moved in. One day about a month later a little white Suzuki Jeep with official-looking green signs on the doors pulled up at the gates. Two brown-uniformed officals got out, introduced themselves as being from the Department of the Environment (Consejería de Medio Ambiente), and asked if there’d been any trouble with the neighbours recently. That got her thinking, because as it happens, there had been a disagreement about a boundary. This however was not the reason these guys were there; what they were doing was investigating the route of a Vía Pecuaria (VP), and it looked like her brand-spanking-new house was slap bang in the middle of it!

Because she had nothing to hide she invited them in, and when they asked if they could measure the external dimensions of the house and take some photos, she said yes. Why not? As far as she was concerned everything was above board, she had followed procedures to the letter and had nothing to worry about.

3 months later an official letter arrived, recorded delivery, informing her that, according to the records, she had indeed built on a VP, and giving her just 30 days to respond. (This is normal practice , and in fact 30 days is quite generous, it can be as few as 10.)

Just to recap: no-one had picked up this VP issue; not the solicitor, not the surveyor, not the architect. Not even the Town Hall through whose patch the VP runs! The authorities in the regional capital had also approved the project plan,which included a detailed map of the location of the house!

Nor is there any mention of it in theProperty Registry, or the Property Tax Registry! It’s not even visible on the aerial photos on the Ministry of Agriculture website. What chance has anyone got?

Anyway, without further ado she dispatched her lawyer to talk to the authorities. The lawyer came back having had a meeting with a very reasonable and understanding official. The upshot was that my friend had two choices:

a) do nothing, and not know when, or if, theEnvironment Department would act; or

b) ask them to survey and mark out on theground exactly where the boundaries of theVP are.

And as her lawyer very reasonably pointed out it wouldn’t make sense just to do the 50 or so metres next to her house; they’d have to survey the whole length of the VP. That’s where things stand now, nearly 9 months after the meeting.

The good news is they probably  won’t demolish the house because there she has an official project in the pipeline. The bad news is that she can’t legalise her house-build until the VP issue is sorted out. The ugly news is that she could be faced with a fine of between €30,000 and €150,000.Ouch!.

How to avoid this? Well, obviously, you need to ask the specific question of your lawyer, estate agent, surveyor, architect; “Please confirm there are no rights of way through my land”. They are called variously cañadas, cañadas reales, cordeles, veredas, and a host of other regional variants.

You can do some of the checking-up yourself; there are maps available, similar to UK Ordnance Survey, called Mapa Topográfico Nacional de España on which VPs are marked. You can get these, or order them, in bookshops.

You can also try searching the websites of the regional governments. For instance the province of Granada has all its VPs marked on it (see Websites).

What you can’t do is ignore them; they’re a serious obstacle.

If you’re already in the middle of a VP problem, don’t panic. VP’s have different widths, different classifications, and different priorities.

The higher the priority the more trouble you’re in if you’ve builton one. Unfortunately the two most critical legal issues are

1. land on a VP cannot be bought or sold, and
2. there is no statute of limitations, ie there is no time limit: this applies FOREVER.