You often hear stories about houses whose description in the registers does not correspond to reality. For example, a room has been added or a shed removed. The homes are said to be ‘illegal’, or innocent buyers take on sky-high debts if the description is not changed.
In this article we will discuss this in more detail.
In Spain, there are two main registers that we consult in real estate transactions, the Catastro and the Registro de Propiedad.
Catastro
Not to be confused with the ‘cadastre! The Spanish Catastro is a kind of tax register, managed by the government, particularly aimed at laying down the square metres built and the tax value of urban properties. Municipalities in Spain rely on this register to levy IBI. The certificate from the Catastro includes a map showing the location of the property, as well as the number of square metres, often differentiated between floors and buildings, and typology of construction (residential, storage, swimming pool). Everyone who is listed as the owner on the 1st of January of a year receives an assessment, even if the property is sold to someone else on the 2nd of January. The Catastro is thus designed to collect as much (and as many) taxes as possible.
Registro de Propiedad
In addition, there is a register with a private character which in the Netherlands would be called the Land Registry. This register is particularly aimed at the correct registration of the ownership, the rightful owners of the real estate, and any encumbrances and charges such as mortgages or rights of way. The Registro de Propiedad is therefore intended to protect buyers in particular, so that they do not buy a pig in a poke, but are dealing with the rightful owner-seller and all restrictions on the undisturbed enjoyment of the property are visible.
The Registro de Propiedad dates back to the Middle Ages and the last structural changes were made in 1845. You can imagine that in those days the identification of a property was done by a description of the property. Nowadays it is different; there is a unique identification number to identify the property, but the description of the property is still maintained as a method of identification. This can be useful, especially in the case of rural properties that have been passed from one generation to the next without being recorded in the Registro de Propiedad. However, the description does not go beyond the purpose of the identification. The layout is described, the neighbours, the number of square metres, but not the colours of the walls, the layout of the kitchen or the materials of the facade.
Tacit mortgage
The Registro de Propiedad has -in the context of this part of the matter- a shortcoming. Spain has a number of situations in which a burden or debt rests on a property, but which are not visible in the Registro de Propiedad. We call these ‘tacit legal mortgages’. The term ‘tacit’ is used because they are not visible; they do not appear in any register. The term ‘legal’ is used because only the law determines in which situations these mortgages must be assumed. The term ‘mortgage’ is used, because it is a debt resting on the property, regardless of who the owner is or was!
It is important to know that the debt due to IBI is also regarded as a tacit legal mortgage. That means that if a seller has not paid his IBI, the buyer may be left with the consequences if he is not careful in the buying process. In case of taxes, there is a term of limitation of 4 years; in other words, a buyer could be faced with a debt up to 4 years due to IBI. To avoid this, we therefore check during our research that all IBI has been paid.
A problem also arises if the real number of square metres has not been registered in the Catastro. In that case, the seller may have paid all the IBI for the past few years, but there is a danger that the municipality, upon discovering the excess square metres, will still impose an additional assessment, leaving the buyer, despite his vigilance at the time of purchase, with the problem at hand.
For this reason, we also verify (as best we can, because it is difficult to inspect all the homes in person with a measuring stick) whether the number of square metres registered in the Catastro corresponds to the reality of the past 4 years. If there are any discrepancies, the seller is asked to resolve them and to bear the cost of any additional charges.
Example
With the above in mind, here is an example. Suppose a 100 square metres, three bedroom house has been registered and described for 10 years, but the owner decides to build on it. It might become a 120 square metres property with four bedrooms. The land register is not updated, as the owner does not consider this necessary. The Catastro is not notified either. Of course, the municipal tax authorities don’t like that. They receive tax, IBI, based on the number of square metres. For this reason, the Catastro is regularly updated with aerial photographs. In this way, they ensure that they always receive the correct amount of tax.
Post levy tax
You can imagine in our example that the taxman wants to levy tax on that extra 20 square metres. The owner has not declared it, but is caught in the act during the next round of aerial photos. The owner receives a retroactive levy over the 20 m2. In Spain this is possible up to 4 years ago because of the legal statute of limitations of 4 years.
Suppose that the house is sold before the assessment. As described above, there is a tacit legal mortgage on the house in favour of the municipality which is entitled to the (back) taxes. The buyer will then be confronted with the after-tax assessment and will have to hold the seller liable. We want to avoid this. For this reason, we verify, to the best of our ability, whether the actual number of square metres of the total built-up area of the house and extension corresponds to the Catastro. In this way, we can better assess the risk of an after-tax assessment.
Adjustment Registro de Propiedad
In the case of the description in the Registro de Propiedad it is different. Whether the description is that the house has 100 m2 with 3 bedrooms, or 120 m2 with 4 bedrooms, is of no legal significance. It does not make the property unusable and it still has the same owner. It is no reason to refuse utilities. In other words, there is no tacit legal mortgage in favour of third parties for the extension.
Under Spanish law, you buy what you see, not how it is described. In the opposite situation, where the previous owner has demolished a barn in order to have a larger garden, but the barn is still described, the buyer cannot demand that the barn be rebuilt. In short, the description in the Registro de Propiedad does not matter much. There is no financial risk with an incorrect description.
Yet there are so-called professionals, whether lawyers, solicitors or people who call themselves real estate agents, who will not or cannot understand this. They follow a certain automatism, something they picked up at the bar or from a colleague, without understanding what it is about. They then demand that it be changed without being able to explain on what legal grounds they have reached that conclusion. Making such demands is easier than delving into the law themselves. They shift the problem to the seller and pretend to their client, the buyer, that they have done a good job.
Costs of adapting the description
This is not only annoying, we can get over that, but it is also a very costly requirement. To amend the description afterwards, of an extension carried out by a previous owner or a dodgy property developer who has not done his job well, you have to dig deep into your pockets. You need a certificate from an architect, a notarial act in which that certificate is laid down in a protocol, you have to pay a tax on something that you have not built but has existed for years or has already been paid for, but later has to be registered in the Registro de Propiedad and for which you therefore have to pay registration costs. All this for something that has no added value for the use of the property; only an unnecessary expense.
Roeland van Passel