Risks of Buying A Property In Mallorca

3 February 2024

The key to happiness is finding the right home.

A while ago, I had a conversation with a foreign client who was thinking about his retirement. He wanted to retire to live in Mallorca and his dream was to buy a small plot of land with a country house that he had seen near the mountain. His question, similar to the most common question that I hear from prospective foreign buyers, “What do you think? Do you think I can buy it?” To which I replied, “Yes, it seems like a great idea, but do you know what you are buying? And above all, what do you want to do with the house?”

Seeing his expression, I continued, “Buying and selling a home is essentially simple. It is like buying anything. But when buying a rustic home, we have to take into account four aspects:

  1. What is your purpose for the property?
  2. Is the property completely legal?
  3. What is your timing to fund the purchase?
  4. What is the process of signing the deed and registering the property in your name?
Rural home on mallorca

What is the purpose of the property? #

Ask yourself if what you want to buy is for a primary or secondary residence or if you want to buy it and have a tourist rental property to provide you additional income. Many of the rustic homes are not zoned or licensed for vacation rentals. That permission varies by jurisdiction or area of the island. Just because someone tells you they have rented out the property and can show income does not mean this is legal in the property location. If it's legal and they have permission for short-term rentals, what is the process of putting this license in your name?

Is the property completely legal? #

Check whether the home is legal or not. Rustic houses can give you more problems than happiness if you don't choose it correctly. The main problem is that, in Mallorca, it is rare to see houses in Rústico that are completely legal. Until a few years ago, the regulations were not stringently enforced By legal, it is necessary to understand that they have a construction license and not rely solely on the details in cadastre and the registry.

To do this, I suggested that we start by knowing

  • Where the house is located?
  • What type of zoning is the property?
  • Does the property have a legal building permit?
  • Is the property is legally connected to supplies utilities? Older homes may have been brought up to the higher voltage standard for electricity but may not have a new meter due to cost and installation schedules. Just because you see new outlets does not mean the property is legally connected to the mains.
  • Does the property have any record of infringement for any illegal construction? This is imperative. If the property has illegal construction, we check with Agencia de Defensa del Territorio de Mallorca to find the status of any demolition order.
  • Then, we would see the cadastre and the property registry.

Obtaining the documentation of the house is usually not a quick process since most of the documents have to be requested from the City Council and can take between two to three weeks.

Rural Home in Mountains

What is your timing to fund the purchase? #

If the home meets our requirements, the next step is to secure the purchase by signing a purchase option contract. In said contract, both parties agree to the sale of the property, for a price, within the agreed term and 10% of the sale price is usually paid in advance. In this way, the Seller agrees to sell the home and the Buyer acquires the right to purchase the home. When the buyer is ready to proceed with the final purchase, he will notify the Seller within the agreed period.

As for the term, I suggest that you put between three to four months to finish processing the documentation and request, and where appropriate, obtaining the mortgage from a Spanish bank. Obviously, agreeing on a deadline does not imply signing it on the last day of the contract but rather having a deadline long enough to process everything correctly.

How to register the deed? #

Finally, once the financing is obtained, the last step is to go to the notary, grant the public deed of sale, pay the property transfer taxes and present them to the property registry so that the property is registered in your name. We will review the documents needed at the notary. You will need to bring

  • a cashier's check
  • identification documents
  • NIE stamped document
  • bank information

If you have an intermediary - a real estate agent, a brokerage firm, or other representative, these costs are paid before or after the sale but are not part of the registration process.

Property deed

Conclusion #

In the end, the purchase process is quite clear to the client. However, I reiterated to the potential buyer that the most important sections were to be clear about what he wanted the house for (to live or to rent) and, above all, its legality.

Because, I think, we will all agree that the purpose of buying a second home is to be calm and not have problems with the administration. Our client was clear on his intentions and understood the process of acquiring his new property. The house was adjusted to fit his needs and, now, he lives quietly. But before buying it, he knew exactly what he was buying and what he can do with the house.

Contact #

If you have any questions or are interested in a specific property, please contact me at [email protected] or +34 669334565 so I can help you.

Xavier lawyer in Mallorca

3 February, 2024


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