Legalising Unregistered Property Extensions

Raymundo Larraín Nesbitt, August, 8. 2017

Lawyer Raymond Nesbitt briefly explains how to go about legalising unregistered property extensions and the consequences of not doing so.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
8^th of August 2017

Photo courtesy: Kingspan Insulation Ltd

Introduction

Often, with a view to sell, property owners decide to make improvements or extensions to their Spanish properties to make them more attractive to prospective buyers. Adding an outbuilding in the garden next to the pool, adding a few additional guestrooms, adding a toilet, building a cellar with home cinema or an in-door heated swimming pool all sound harmless and like a great idea on paper. Surely these improvements add value to the property, making the prospect of selling them far easier, yes?

The fact of life is that if these improvements are not carried out following the correct legal procedure they may become a perfectly good waste of money or even be counter-productive to selling your home.

In this article, I explain what are the legal consequences of unregistered extensions and how to go about legalising them.

Legal consequences of unregistered property improvements

There are several risks associated, with varying degrees of importance, of not following the statutory legal procedure; I will list them as bullet points.

You can be fined. Should your town hall catch you undertaking non-sanctioned improvements on your home you can be heavily fined and even be required to pull down the improvements at your own expense.
You may be criminally prosecuted. You may even face the daunting prospect of a State prosecutor instigating criminal proceedings against you dependent on the illegality committed. This is particularly true of rural property. Please read my article on the matter: How to Buy Rural Property in Spain.
You may be forced to pull down the improvements at your own expense.
Unregistered extensions are uninsured. Should they collapse, you have no legal recourse against them. Legal extensions will be covered by insurance.
You can´t borrow money against the improvements on the property (or not enough money). Should you require to raise capital to face medical treatment, for example, a lender is going to offer you significantly less money if you have not registered the extensions or improvements made to your property.
Unregistered extensions at the Land Registry do not exist legally. This has very important practical consequences, particularly on selling a property. In other words, only accurate property descriptions matching reality at a Land Registry are deemed legal. This translates in practice into significantly reducing the pool of buyers for your property, something nobody wants; more so on a challenging sales environment. Most buyers require finance to acquire a property (i.e. mortgage loan). Lenders will offer borrowers considerably less money to acquire a property with non-registered extensions as these are non-existent for all intents and purposes.

Making it easier on us, let us examine it with a practical example. If a rural property is being sold with a modern two-storey villa of 450 m² in a plot of 10,000 square metres (€1.5mn) albeit on paper (Land Registry description) it is actually a vintage cortijo of 80 m² (€120k), a lender will only be able to finance a fraction of the asking price. Meaning a buyer will be facing a huge shortfall in the money required to close the gap. Consequently, the deal will likely fall through because of lack of finance. What we can glean from this example, is that what is not lodged at the Land Registry simply does not exist legally to lenders and no money can be borrowed against it.

Some extensions require a Licence of First Occupancy (LFO, for short) without which a property cannot be lived in or rented out. So, for example you cannot receive income letting it out as a holiday home.
You may not be able to apply for utilities. As a result of not having attained a LFO, the property may not qualify to apply for utilities.

Profile on the legal procedure to register extensions and improvements

Contact an architect to draft a building plan.
Hire a lawyer.
File and pay for a town hall’s building licence (major or minor works).
Attain a certificate of end of works.
Register the extension/improvement in a deed at a Notary Public.
Register the updated deed at the Land Registry.

Conclusion

Registering extensions and improvements is in a property’s owners’ best interests as these will be made legal and will allow him to fetch a more attractive sales price for his property.

Bottom line, for your own good, your Title Deed must reflect and match exactly your property’s description. If this is not the case, you must hire a lawyer to amend your Title Deed and adapt it to reality to legally sell your property or to apply for a loan against it.

Larraín Nesbitt Lawyers, small on fees, big on service.

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.

Article originally published at Spanish Property Insight: Legalising Unregistered Property Extensions

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Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.