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A purchase contract can be defined, in general terms, as a contract in which one of the contracting parties undertakes to deliver a certain thing and the other to pay a certain price for it, in money or a sign that represents it.

In our law firm we advise on the purchase and sale of many types of real estate, so that in the case of a sale of this type, at the time of signing, the delivery of a certain amount on account of the price may be agreed, whose name may vary, depending on the effect intended by the parties, are the so-called “arras”, whose types and effects may be different.

Thus, the contract of sale obliges the seller and the buyer in a bilateral and reciprocal manner (delivery of the thing and the price, avoidance of eviction, hidden defects, etc.), but the fulfilment of these obligations by the parties does not necessarily imply the transfer of ownership until the delivery of the good. However, the fulfilment of these obligations by the parties does not necessarily imply the transfer of ownership until the delivery of the property. This is the so-called “theory of title and mode”, in which “title” is understood as any formal externalisation of the declaration of will, and “mode” as the way in which the delivery of the property is to be made, normally in our culture and legislation the mode is the “handing over of the keys”.

Likewise, when specifying the effects, it is necessary to distinguish between the perfection of the contract of sale, which is produced with the mere agreement between the parties of the thing that is the object of the contract and the price, being, from this very moment, obligatory for both, and the transfer of ownership, which, although the theory of the transfer of ownership is applicable to the contract of sale, is not the same as the transfer of ownership, although the theory of title and mode is applicable to it, does not always have to imply a material delivery of the property (“traditio material”), the mere delivery of a representative element, such as the keys, (“traditio simbolica”) or of the public deed of sale (“traditio instrumental”) being sufficient.

In the case of immovable property, if the delivery of the property takes place through the “mode”, by means of the different forms of “traditio”, and this is reflected in the contract (“título”), we can say that the full transfer of ownership is consummated. However, this transfer of ownership thus produced will only produce effects between the parties, not against third parties, since for the transfer of ownership of a property to produce effects against third parties, the registration of the title (notarial deed) in the Land Register is necessary and indispensable.

It is also possible to agree on what are known as instalments or payments on account. In this type of contract, the transfer of the property (handover of the keys) is usually not carried out until the last of the payments has been made, unless there is a guarantee. In other words, in the purchase contract it is agreed to pay the full price in several months or years, so that the seller keeps the property in his possession until the last of the payments has been made. This formula avoids having to take out mortgages, for example, or loans from third parties to buy real estate, but failure to make payments can lead to lawsuits, which is why mortgages serve as a guarantee of payment.

The taxes to be paid are also due at the time of making the payments, and it is also important to check any legal aspects of the purchase and sale operations, both the possible urban development charges and the tax charges or problems of the property, which usually appear in the simple note kept by the registry, such as a census or an easement, which are sometimes of the urban development and not of the property in question.

It is common for foreign individuals, resident in European Union countries other than Spain, to use the services of lawyers and tax advisors to make any property purchase, and every day, due to the need to cover and ensure the proper acquisition and sale of their properties, there are more Spaniards who contract the legal advice services of Ruiz Ballesteros for this type of operation, also ensuring that they pay the right taxes and therefore reducing the taxation on these operations, so important for both buyer and seller.

Remember that if you want to know more you can always turn to Ruiz Ballesteros Abogados y Asesores Fiscales.

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