Can we buy a property with encumbrances, what are the risks of buying under these circumstances, what is the procedure when investing with certain encumbrances? These are some of the questions we should ask ourselves when making a property investment; it is very important to know the state of the property we are going to buy in order to avoid possible complications after the sale.
Currently, we find a property stock loaded with encumbrances: mortgages pending financial settlement; foreclosures in execution; community charges… all of which characterise the market opportunity and the way in which we can access it.
The most common is to find the acquisition of a property with a mortgage that must first be paid off financially and registered. The parties have two options: to liquidate the selling party and buy free of encumbrances; or to acquire the purchasing party, in the event that financing is required, by means of the corresponding subrogation in the mortgage loan granted to the selling party at the time.
Another very common circumstance is the existence of tenants; for this, the best option is to opt for agreeing the termination of the corresponding contract with them; however, in the event that such an agreement is not reached, the purchaser must respect the existing contract, prior to the sale and purchase, respecting the conditions and clauses of the same.
However, we do not only find this type of encumbrances; we can also find encumbrances derived from non-payments, debts with public administrations, seizures of judicial claims… among others. In these cases, it is necessary to proceed, firstly, by knowing the type of encumbrance in question, and to go to the land registry for this purpose. Secondly, the corresponding communications with the creditors must be established, depending on the origin of the charge, in order to proceed to its cancellation and thus protect the future owner in the real estate context. Broadly speaking, the most common creditors are public administrations, which have little negotiating capacity, or private creditors, with the difficulty of establishing the exact amount of the debt that gives rise to the corresponding encumbrance.
With all this in mind, bearing in mind the need to take precautions against this type of risk, the possibility of investing in the real estate sector and acquiring a property should not be overlooked; therefore, if you are thinking of acquiring a property, do not hesitate to consult us about its status and risks, so that we can accompany you throughout the whole procedure, making your investment safe, legal and reliable.