Carlos Baos – Buying from an heir

Purchasing a property from an heir. Key Considerations.

In today’s article we analyse the main issues to bear in mind when purchasing a property that has recently been inherited. As there are several key points to consider.

Confirming who is the registral owner of the property should always be the first step. In Spain, the ownership of properties is recorded in the Land Registry. However, upon an individual’s passing, the transfer of ownership does not occur instantly. The heirs must undertake specific procedures to be registered as the new owners. This involves executing the inheritance deed before a Notary and addressing tax obligations such as the Plusvalía and the Inheritance Tax (ITH).

Does this mean that I cannot secure the property and pay a deposit or sign the private purchase contract, until the property is in the heir’s name?. Not exactly. It is possible to sign a reservation or purchase contract even if the property remains under the deceased’s name. However, when doing so, prudence is advised. Making the contract contingent upon the registration of the inheritance deed in the Land Registry is highly advisable. Also, setting a deadline for this registration will safeguard you against potential complications or disagreements among heirs.

Careful with the inheritance tax paid by the heirs.

In Spain, when a person inherits a property and pays the Inheritance Tax, the property is “linked” to the tax paid by the heir for 5 years. Let us explain it in simple terms. When the ownership of the property is put in the name of the heir, an “entry” will be generated in the Land Registry, indicating that tax authorities can review the declaration and payment made by the heir for 5 years. If inaccurate information or a larger payment amount is discovered, the tax authorities could act against the property. This entry is known as “fiscal affectation”.

It is important to note that this fiscal or tax affectation persists even if the heir sells the property. Therefore, if you buy a property that has recently been inherited, be aware that the tax agency may review the payment of the IHT of the heirs and claim against you. This is particularly relevant if the heirs apply the deduction for inheriting the deceased’s main home (in Valencia, up to 150.000€) which comes with a catch. It forbids the heirs from selling the property within the next 5 years. If the heir ends up selling before this deadline ends, the tax agency could claim against the property recently purchased by the buyer.

At White Baos Lawyers, we specialise in Real Estate transactions, and we have been assisting our clients for more than 20 years. For this or other related matters, feel free to reach out. We’ll analyse your case and offer expert legal advice.

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

White & Baos 2024 – All Rights Reserved.