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Purchasing commercial real estate in Spain - an overview

With the Spanish economy improving and uncertainty over possible restrictions to the UK’s post-Brexit trading relationship with the EU, this could be a golden opportunity to invest in commercial property in Spain.

Depending on the type of investment being undertaken, different structures may be used but generally it is made through a permanent establishment or a Spanish company. Special real estate investment methods can be used, including regimes providing corporate income tax benefits and beneficial tax treatment of dividend distributions, entities providing residential lettings, and funds associated with SAREB – the government-owned company that holds the shares of nationalised banks.

Generally, there are no restrictions on foreign ownership of real estate whether by an individual or company. However, the buyer must fill out a Declaration to the Foreign Investment Register form, which expires after six months, before buying the property if the purchase fund comes from a tax haven.

The buyer must provide bank account details for the source of their funds and obtain an identity card if entering into a transaction with economic or financial implications. Foreign investors will also require an ID card.

Other than money laundering regulations, no special restrictions or limitations apply to foreign mortgage guarantees and loans.

The Land Register provides evidence of title and legal certainty to all parties involved in a transaction. A right or title recorded in the registry prevails over any other. The transfer of real estate or the grant of rights over property should be executed by public deed in front of a Notary before being registered with the Land Registry.

The Notary checks that the rights against the land will be constituted, amended or extinguished in the public deed in accordance with legal requirements. The tax authorities then review the public deed to check that all relevant takes have been paid. The public deed recording the transaction is then sent to the Land Register and is reflected in the index card for the relevant property.

A registered property can subsequently be divided into several separately registered properties. The division needs to be registered by public deed.

The Land Registry registers or annotates contracts and legal or administrative resolutions that affect a property and other real estate rights. It also registers legal decisions that may affect the capacity of the owner and notes changes of use, enjoyment and other rights that affect a property.

The register contains details of the owner, surface area of the property, and a description of the estate, including soil type, and adjoining properties.

Access to information contained in the register must be accredited by the person requesting it and they must show an ownership (legal, financial or personal) interest in obtaining this information.

The main categories of ownership are full property ownership (similar to freehold in the UK), and partial rights of ownership.  An example of the latter is ‘usufruct’, where the owner of the title owns the property but its benefit and use are assigned to a third party.

Spanish law distinguishes between categories of ownership and rights of guarantee that concern property, such as pledges and mortgages. There are an unlimited number of different rights that can be created over real estate but not all are entered onto the register.