Clearance of encumbrances prior to the purchase of a property is a fundamental process that every buyer should consider when purchasing a property. Clearance of encumbrances refers to the payment of outstanding debts that exist on the property prior to the transfer of the property, or the legal removal of such encumbrances and liens.
When buying a property, it is important to ensure that there are no liens, charges or debts on the property. These charges can be mortgages, liens, outstanding loans or other financial debts that affect the ownership and free disposal of the property.
1.- The importance of the cancellation of charges
The cancellation of prior charges is important for both the buyer and the seller. For the buyer, it ensures that the property is free from any financial obligations, giving him the security of being able to enjoy the property to the full without any future worries. It also allows the buyer to obtain full and legal title to the property, which is essential for future transactions such as selling or obtaining finance.
On the other hand, for the seller, the release of prior charges prior to the sale allows them to be free of the financial obligations associated with the property and to obtain the economic benefits of the sale without legal problems. It also facilitates the transaction process as it is more attractive for buyers to have a property with no outstanding debts.
It is important to note that the process of cancelling previous charges involves a number of legal procedures and formalities that must be carried out in accordance with local laws and regulations. It is therefore advisable to seek the assistance of a property lawyer who can advise you on the whole process and ensure that it is carried out correctly and effectively.
2.-The most common charges
The most common charges on a property are:
Mortgage
A mortgage is a guarantee given to a third party that the property will be used to repay a loan or debt.
A distinction is made between:- Mortgage in favour of the previous owner
In this case, it is necessary to check whether the debt has been economically cancelled or whether there is still an outstanding debt to be paid. - Mortgage in favour of the developer
The developer may have formalised the mortgage:
* On each individual apartment
* on the entire building, with each apartment being responsible for a part of the mortgage according to its share coefficient.
- Mortgage in favour of the previous owner
Usufruct or right of use
All parties must waive these rights.
With regard to usufruct and bare ownership, it is important to bear in mind what we have commented in our article on this subject.
In the event of the death of the usufructuary, the ownership is consolidated in the figure of the bare owner, as explained in our articles on bare ownership and usufruct.
This bare owner must sign the request for cancellation of the entry in the Property Register in favour of the usufructuary.
Retention of title
The seller financed the buyer and bills of exchange with successive maturities were issued to guarantee the payments. If the buyer defaulted, the seller regained ownership of the property.
Easements
As explained in our article on easements, a property may have easements in favour of other buildings.
Easements can be extinguished if they are not used within 20 years.
Marginal notes
The Land Registrar can make marginal notes stating that the property is subject to certain taxes.
Embargos
Due to various economic crises, it is common for some properties to be embargoed because of debts owed by their owners.
In order to lift the embargo, it is necessary to check whether the seller can lift the embargo before the sale or use the money from the deposit or the sale to pay the debt.
Depending on one or the other option, it will be necessary to make the deposit, earnest money and sale contracts conditional on this circumstance.
Options, pre-emptive rights and right of withdrawal
In accordance with the provisions of article 25 of the Law on Urban Leases and article 1518 of the Civil Code:
1. In the event of the sale of the rented accommodation, the tenant shall have the right of first refusal on the conditions set out in the following paragraphs.
2. The lessee may exercise a pre-emptive right to purchase the rented accommodation within thirty calendar days of the day following the day on which he is reliably informed of the decision to sell the rented accommodation, the price and the other essential conditions of the transfer.
The effects of the notification referred to in the previous paragraph shall expire one hundred and eighty calendar days after such notification.
3. In the case referred to in the previous paragraph, the lessee may exercise the right of rescission, subject to the provisions of Article 1.518 of the Civil Code, if the required notice has not been given or if one of the necessary requirements has not been met, as well as if the actual sale price is lower or the remaining essential conditions are less onerous. The right of withdrawal shall expire thirty calendar days from the day after the purchaser has notified the lessee in a reliable manner of the essential conditions under which the sale was made, by delivering a copy of the deed or document in which it was formalised.
4. The right of pre-emption of the tenant takes precedence over any other similar right, with the exception of the right of withdrawal recognised to the co-owner of the property or the conventional right registered in the Land Registry at the time of the signing of the lease.
5. In order to register the deeds of sale of rented dwellings in the Property Register, it is necessary to provide proof that the notifications provided for in the previous sections have been made in accordance with the requirements established therein. If the property sold is not rented, in order for the purchase to be registered, the seller must declare this in the title deed, under penalty of forgery of a public document.
These rights of option, right of first refusal and right of pre-emption are usually old encumbrances that cannot be claimed because they have expired.
They can be cancelled within 5 years from the end of the period in which they should have been exercised.
Censuses
The census is a historical figure that subjects the estate to a series of rights corresponding to the
holder of the census.
They are cancelled 60 years after the last registration.
In conclusion, the cancellation of encumbrances prior to the purchase of a property is a fundamental step in ensuring a clean and safe transaction. By removing any outstanding liens or debts on the property, the buyer is assured that he or she is purchasing a property free from any additional financial responsibilities. In addition, the removal of prior encumbrances gives the new owner the freedom to use and modify the property as he or she sees fit. It is therefore essential that both buyers and sellers take the necessary steps to complete this process and protect their interests.
At Quikprokuo, as solicitors specialising in property sales, we can help you to remove all encumbrances from the property before it is sold and make the transaction as secure as possible for both parties.
