What are the options if you want to buy Spanish property with friends? In this article, we will discuss the two most commonly used options.
Option 1: buying in undivided ownership
The most direct way to become joint owners is to buy in undivided ownership, called 'proindiviso' in Spanish. This is regulated by the Spanish Civil Code (Código Civil).
Each buyer owns a percentage of the whole rather than a specific, physical part of the property. It is a relatively simple structure with lower upfront costs. Specifically, party A can buy 40 per cent of full ownership. Party B then buys 60 per cent of full ownership.
Yet there is a considerable risk. Spanish law states that no co-owner can be obliged to remain in undivided ownership. Anyone can demand the partition and therefore the sale of the property at any time. If your friends suddenly need money or change their minds, they can force a sale, through the courts if necessary.
How do you make good agreements? A notarised co-ownership agreement is indispensable. In it, you can record important agreements:
- Exclusive right of use: Agree who gets to use which part of the house or land.
- Cost sharing: Define how maintenance and other costs will be shared.
- Right of pre-emption ('Derecho de tanteo y retracto'): If an owner wants to sell his share, the others must first be given the chance to buy it.
- Pact of indivisibility: You an in Spain agree to co-ownership for a period of maximum 10 years to be retained. This term is renewable, but thus offers only temporary security.
Conclusion: Co-ownership is easy, but the risk of someone being able to force the sale makes it less suitable for long-term projects between friends.
Option 2: Buy through a Spanish or Belgian company
A much more robust method is to set up a Spanish limited company, a Sociedad Limitada (S.L.) or Belgian company. The company buys the property, and the friends are the shareholders. Although this involves more cost and administration, it offers significant advantages.
How can you buy property in the Netherlands with a Belgian company?
The benefits of a partnership:
- Long-term stability: You can include in the articles of association a prohibition on the transfer of shares for a much longer period, e.g. 20 to 30 years. This neutralises the biggest risk of co-ownership.
- Centralised governance: You can agree that decisions should be taken jointly or by a qualified majority of the directors. This prevents one person from taking unilateral actions.
- Clear rules of the game: Articles of association and a shareholders' agreement provide a detailed framework for all possible scenarios, such as sale, inheritance or conflicts.
- Exploitation opportunities: Agreements on the operation of the property can also be laid down. Consider, for example, the rental period and the distribution of rental income and costs. A larger shareholder may wish to spend less time in the rental activity, while a smaller shareholder will put more work into managing rentals. Agreements can be made on how to divide the income from this.
- Liability: Shareholders' liability is limited to their contribution to the company.
Conclusion: An S.L. is the way to go if you are looking for maximum control, security and a stable long-term investment with friends in Spain.
Read more about buying property in Spain with a company.
Buying a house in Spain with friends: which option is most opportune?
This depends on a number of factors .
- Define the goal: Is it purely for personal use or also for rental? What is the long-term vision? The more businesslike the arrangements and objectives, the better it is to work with a company.
- Choose the right structure: Weigh the simplicity of co-ownership against the security of a partnership. If you are buying with several parties together, a partnership will offer more flexibility to make arrangements between them.
- Have your agreements recorded: Whether you choose co-ownership or a partnership, formalise your arrangements.
Here you can read about the 7 steps to set up a Spanish company.
Buying a house in Spain with friends can be a fantastic experience. With the right legal structure and clear agreements, you will ensure that the friendship is as sustainable as the investment.
Do you have questions about buying a property in Spain? If so, please feel free to contact with us.
