Carlos Baos – Financing real estate purchases

Resolutory condition: An Alternative Approach to Financing Real Estate Purchases in Spain

In the realm of real estate transactions in Spain, the signing of the deed in the Notary’s Office and the payment of the price (by bank transfer, banker’s draft, etc.) use to occur simultaneously. Nevertheless, this customary process is not a rigid rule. When a buyer lacks sufficient funds, it is common to seek financing, apply for a mortgage loan from a bank, etc. But what if securing a mortgage is unfeasible? Are there any other viable options?

Resolutory conditions. What do they consist exactly?

The resolutive clause serves a dual purpose:

• First, provides the buyer with the opportunity to buy a real estate asset, even in the absence of immediate funds to meet the purchase price.
• Second, it serves as a protective measure to the vendor, granting the ability to end the sale, and take back the property if the buyer fails to complete the full payment in the deadline that both set.

In other words, it allows the completion of the sale, making it clear that it depends on the buyer paying the agreed-upon full amount.

What role does the Land Registry play in a purchase with a Resolutory Condition?

For the resolutive clause to function as a tangible guarantee linked to the property, registration in the Land Registry is imperative. Registration ensures its full effectiveness efficacy towards external parties. For this reason, at White-Baos Lawyers we always recommend tying the validity of the sale to the proper the registration of the resolutory condition clause in the Land Registry.

Buyer’s Noncompliance, seller’s fulfilment and Cancellation of the Resolutory condition.

As explained, the buyer failing to meet payment obligations allows the seller to reclaim the property. In this scenario, the buyer typically loses all prior payments, and there’s potential to claim indemnity due to damages suffered by the vendor.

On the other hand, upon the buyer’s full payment, it is advisable to remove the resolutory condition from the Land Registry. Both parties (purchaser and vendor) need to sign a deed in the Notary’s Office, confirming that the debt has been paid. However, this subsequent deed incurs in Stamp Duty Tax, and taxes must be paid. For this reason, many people do not properly cancel the resolutory condition. However, there are alternatives that may allow you to save this expense.

At White Baos Lawyers, we specialise in Property Law, and we have been providing guidance to our clients in real estate transactions for almost two decades. Should you seek further insights into the Resolutive Clause or related matters, feel free to reach out. We’ll analyse your case and offer expert legal advice tailored to your needs.

You may be interested in the following services and articles:

The importance of getting expert legal advice when signing the documents and Initial purchase and sales agreements. Conveyancing. Reservation, deposit, private contract, etc. Expert legal advice..

Legal advice on how to terminate a real estate sale and purchase, due to a breach of contract by the buyer. Failure to pay the price. Special requirements in Spain..

Can I request the termination of a property purchase contract and claim for my money back if I am not able to get finance?.

Carlos Baos (Lawyer)

White & Baos.

Tel: +34 966 426 185

E-mail: info@white-baos.com

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