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How do Unpaid Bills and Taxes on a Property
affect the New Owner |
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How do Unpaid Bills and Taxes on a Property
affect the New Owner |
| Given the number of enquiries Bargain Homes Abroad are receiving
regarding the legal implications of unpaid previous bills,
invoices or mortgage installments on the home, Bargain Homes Abroad have
done a short report showing how the new buyer would be affected
in this scenario. Although Bargain Homes Abroad may sound repetitive, and
certainly biased, take no chances and hire a lawyer: a home
purchase is possibly one of the most important decisions
in life. |
Unpaid Taxes
Unpaid IBI (Council rate): This debt
is construed as a preferential charge on the home,
and it is known in Spanish as a ´tacit legal mortgage´.
An administrative procedure follows a couple of unpaid
bills (depending on the municipality) and if no action
is taken the home is sold at auction. The new buyer
is prevented from paying this tax if previous years have
not been paid.
Unpaid ´Plusvalía´ (Tax on
the increase of the value of land over the years):
No effect unless the vendor is non-resident in which case
the home will remain liable for payment, with the
same effects as on the IBI (council rate) non-payment.
The Town Hall will initiate a legal procedure against
the vendor, obliged to make payment, and once he is declared
unable to make payment (either by being declared bankrupt
or not answering the administrative claim), they will
proceed against the buyer, and ultimately against his
assets, namely the home.
Unpaid seller’s capital gains tax:
No effect on the new buyer.
Unpaid 5% retention of the purchase price to the
tax office when the seller is non-resident: The
buyer is himself liable to retain the mentioned percentage
from the purchase price and lodge it with the Taxman.
The home remains liable for non-payment of the tax
retention. In fact, the non-payment of these monies could
even be construed as criminal misappropriation, although
the taxman will simply wait until the time limits expire
and will set in motion the administrative procedure to
eventually sale at auction. Although may lawyers do not
check that this tax has been paid in previous sales of
the home, it is highly advisable as your home
could have been purchased and sold between non-residents
more than once, and therefore there is the possibility
that tax is owed.
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Unpaid Mortgage Installments
The bank will insist on payment and if it does not take
place they will instruct their lawyers to proceed with foreclosure
of mortgage and sale of the home at public auction.
Unpaid Community of Owners Charge
The community administration decides to proceed against
the new owner and if no action to pay up the outstanding
debt is taken, the new owner will face the sale of his home
at public auction following a court procedure. In addition
to this, the new Horizontal Property Act has given increased
powers to community administrators to pursue debtors, and
the new Civil Procedural Act has new precepts which allow
a quicker execution of debts and therefore, increased facilities
for bidders in a judicial public auction scenario.
Unpaid
Service Bills
Not paying these bills has no effect on the home. They
are debts which go with the person who signed the contract,
and therefore the seller will be liable. However, the following
can happen if they have not been paid for:
•
Electricity: Supply will be cut off.
(A fee may be charged to re-connect)
• Water: Supply will be cut off.
(A fee may be charged to re-connect)
• Telephone: Line will be interrupted.
In principle, the buyer can sign with the supply company
a fresh new contract and remain unaffected by the debts.
However, in practice the companies will put forward obstacles
to this, and at times, it works out cheaper to pay the bills
and ensure supply than litigating with the company, who
will no doubt ensure no supply is available meanwhile.
Of course, the lawyer should have the checks done on this.
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This page has been reproduced
with the permission of Antonio Flores Vila of Marbella
lawyers.
Disclaimer:
Bargain homes abroad does not accept any liability
for the accuracy of the above legal articles and are intended
as general guidance, it does not constitute legal advice,
nor should it be relied upon, you should always consult
a lawyer to discuss your own personal situation. |
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