Financial Dictionary - Property free of charges
Property free of charges
When we are talking about properties, free of charges means that there are no attachments, debts, resolutory clauses or mortgage charges on it.
This is the first thing we have to consider when buying a property, as when we buy a home we buy it with all the debts it may have. For example, if it comes with a mortgage, we will be responsible for that charge.
For this reason, before a purchase we have to go to the Property Registry to perform this check, requesting a property registry filing (nota simple). We can also do this using the website of the Colegio de Registradores This information is public (everyone can consult it) and costs €4.
If we find that there is a mortgage on the property, we can ask the seller: to repay the mortgage before the sale; to deduct the amount outstanding from the price of the property; or to subrogate the mortgage to change the name of the debtor (to us, in this case), if the bank agrees.
Once we have the nota simple, we also need to check that the residents' association is not in arrears on any payments. For this, it is a good idea to request payment receipts from the administrator or chairman of the residents' association. This will enable us to ensure that the current owner is up to date with all bill payments and any residents' association costs. We can ask for a certificate demonstrating this, as otherwise we might be liable for any debts with the residents' association.
Finally, we need to check that all municipal taxes have been paid, such as Real Estate Tax (IBI).
What does buying a property that is not free of charges involve?
In the first place, this means we have to deal with all of them. When we buy a property, all the debts the seller hasn't settled are transferred to us. If we are willing to accept them, we have to agree this with the seller.
What other types of charges are there?
In addition to the charges we have already seen (mortgages, property on the charges and registry charges, which can all be checked in the Property Registry), a home that is not free of charges may also involve:
A foreclosure margin note, which is a communication from the bank stating that it is going to repossess the home due to non-payment. If we are going to buy the property, we need to request the cancellation of this before proceeding with the sale once we have approval from a judge.
Other charges include usufructs and easements. These do not involve payments, but do impose some restrictions on the property. These involve the rights third parties might have over the property.
Registrations of attachments, these exist if the seller has a debt with a third party and a lawsuit is pending. Their assets could be guaranteeing payment of their debt. Finally, insolvency proceedings.
If the property has become the property of a company, we need to ensure that it is not bankrupt, as we cannot buy the home if there is an attachment on it.