Gazundering and gazumping, legal in Spain?

Raymundo LarraĆ­n Nesbitt, February, 1. 2021

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By Raymundo Larraín Nesbitt
Lawyer - abogado
1st of February 2021

We frequently get asked by our foreign clients if gazundering and gazumping are both allowed in Spain. In this short blog post we’ll address both.

Gazundering

This is typically a strategy to lower the sales price moments before completing on a property before a notary. Unlike in other countries, such as the United Kingdom, gazundering is not legally possible in Spain.

This is because on buying property, whether off-plan or resale, you sign a contract with a seller which ‘locks you’ into a preagreed sales price. No changes are allowed in pricing following its signing. Should the buyer decide to pull this off at a notary, the seller can back out of the sale and pocket the buyer’s holding deposit. This is done to attain legal security for both parties.

Gazumping

This takes place when a second buyer offers a higher amount for a property after a seller accepted an offer from a first buyer. Admittedly yes, indeed it is possible. The problem is that most sales contracts in Spain are worded with penalty clauses (arras) which means the seller has a high price to pay if he attempts to pull out of the deal and sell the property to a third party. Typically, they would have to pay as penalty 10% of the property price. Naturally, this is only worthwhile pursuing for a seller if the second offer far outstrips the 10% penalty levied by the first buyer. A seller also needs to have cash available to pay the hefty 'freedom' ticket.

In today’s market, a buyer’s market, it is difficult to see this happening. However, during a property boom, it is not uncommon, particularly for high-end property located in prime locations. Bailing out of a sales contract, and paying a penalty, makes perfect sense when you are receiving one, or more, higher-priced offers.

 

At LNA we can assist you buying, selling or renting out your property in Spain. We have 17 years’ experience in conveyance & tax. We are also specialized in Immigration & Residency permits.

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Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

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