Buying a property out of bank repossession in Spain is more complex than a regular transaction. Although the purchase price is often attractive, you will have to deal with three parties (instead of two), specific tax rules around 'new' properties and strict controls on market value. A thorough Due Diligence is crucial to avoid unexpected costs.
Many clients experience the purchase of real estate through bank repossession as a strange process. This is because the legal and tax reality often differs from what they are used to in Belgium or the Netherlands. Below, we analyse the specific risks and procedures.
Read more about the pitfalls in bank repossessions.
Who are the parties involved in a bank repossession?
In a purchase from bank repossessions, you do not simply negotiate with one seller. Three parties are involved, which drastically limits the room for negotiation and complicates administration.
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The Legal Owner (The Project Developer): It often involves a property developer that has gone bankrupt (e.g. during the 2008-2012 crisis). The receiver or administrator manages the portfolio, but often has little up-to-date knowledge of the condition of the property.
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The Bank: The developer took out a mortgage at the time to finance the construction. The bank is required to cancel (remove) this mortgage at the time of sale.
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SAREB (The 'Bad Bank'): This is the Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria. SAREB is a Spanish government vehicle, founded in 2012, that took over 'toxic' loans and real estate assets from banks.
Expert Insight: "In practice, you will often see a SAREB representative appear at the notary's office to receive payment. You should pay this party via a guaranteed Spanish bank cheque. Make sure that the costs of clearing the existing mortgage are not passed on to you; these are legally for the selling party (the bankruptcy estate)."
Read more about the possible costs of a Spanish bank cheque.
Fiscal Qualification: Why an old house is still 'New Construction'
A common mistake is the assumption that a 10-year-old house is considered 'existing construction' for tax purposes. If the bank repossession stems from a bankrupt property developer and the property has never been lived in before, the tax authorities qualify it as new construction.
This distinction has major financial implications for you as a buyer:
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VAT (IVA) instead of Transfer Tax: You do not pay transfer tax (ITP, typically 7-10%), but 10% VAT (IVA).
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Stamp duty (AJD): On top of VAT, there is the stamp duty (Actos Jurídicos Documentados), which varies by region (often around 1.5%).
Read more about additional taxes and costs when buying a property in Spain.
Technical condition and utilities
With bank repossessions, you often buy the property 'as is'. Because the properties have sometimes stood empty for years, there are specific technical hurdles to overcome.
1. Certificate of conformity and permits
The routine examinations are identical to those of new construction. It is essential to check whether the physical property matches the building plans submitted at the time. If the developer went bankrupt before final completion, the Licencia de Primera Ocupación (LPO). Without this document, the sale cannot be finalised correctly and you cannot rent out the property.
2. Connection to water and electricity
Due to long-term vacancy, meters have often been removed or closed.
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Re-inspection is mandatory: The electrical installation should be re-inspected (Certificado de Instalación Eléctrica or 'Boletín').
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Waiting times: You can only put the utilities in your name after execution of the notarial deed. Allow for a processing time of several weeks before you effectively have power and water.
The Fiscal Risk: 'Buying Too Cheap'
A low purchase price is attractive, but the Spanish tax authorities are watching. Since 2022, the Spanish tax authorities have used the 'Valor de Referencia' as a benchmark.
If you buy a property for €150,000, while the taxman (based on cadastral data and recent sales) estimates the value at €200,000, you will be taxed on that €200,000.
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The tax authorities will issue a complementary tax assessment send for the unpaid taxes on the difference.
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On top of that, fines and interest be charged.
This mechanism is similar to the 'deficit estimation' in Belgium, but is increasingly automated in Spain through the Valor de Referencia.
Read more about control estimation in Spain.
Conclusion
Buying via bank repossession in Spain offers opportunities but requires a specialised legal approach. It is not a standard property transaction. The combination of SAREB involvement, unexpected VAT obligations and the risk of tax revaluation necessitates guidance from a specialist.
Frequently asked questions about Bank repossession in Spain (FAQ)
What is SAREB and what role do they play in my purchase? SAREB is the Spanish 'bad bank' that took over real estate assets and loans from distressed banks. In a bank repossession, SAREB is often the party that collects the mortgage debt. You pay them directly, usually through a bank cheque at the notary.
Why do I have to pay VAT on a 10-year-old property? In Spain, a property is considered 'new' as long as it has never been lived in and is bought directly from the developer (or his trustee). The age of the bricks is irrelevant to the tax authorities; what matters is the 'first occupation'. As a result, 10% owes VAT instead of transfer tax.
Can I negotiate the price in a bank repossession in Spain? The room for negotiation is usually very limited to non-existent. Because multiple parties (trustee, bank, SAREB) must agree and procedures are standardised, bids below the asking price are rarely accepted unless the property has been for sale for a very long time.
What is the risk of the 'Valor de Referencia'? If you buy a bank attachment at a price lower than the reference value (Valor de Referencia) established by the land registry, the tax authorities will tax you on this higher reference value. You will then pay tax on a notional value, not on what you actually paid.
About the author: Glenn Janssens is a lawyer specialising in Spanish real estate transactions and tax regulations. Since 2017, he has been helping Belgian and Dutch individuals and entrepreneurs to safely purchase and structure real estate in Spain. He guides files from A to Z: from due diligence, ownership and tax control to estate planning and optimisation for residents and non-residents. Thanks to his years of experience, hundreds of handled files and focus on transparent communication, Glenn makes complex Spanish legislation understandable and practically applicable for every property buyer.
