Avoiding the Pitfalls When You Are Buying a Property Abroad!

At this time of year there is more of a tendency for many British investors and private buyers to invest in properties abroad. The reasons behind this are numerous but two of the main incentives are capital growth and rental returns, not to mention the weather! When investing abroad one has to dedicate considerable time to researching the market and deciding on the location. Usually established markets like Italy, Spain or France are more stable and secure therefore the predicted returns are smaller than the immerging markets like Bulgaria or Turkey where the risk is larger.

What factors should I consider when buying abroad?

The location of the proposed building or land and whether it is residential or commercial, whilst comparing the economic indicators for the last six years. It is worth looking at the current and predicated rate of return on investments. One must also consider the current economic environment, whether there are liberal foreign investment laws and most important are there risks concerning currency

Never assume anything is what it seems!

There are different procedures in every country and a different system of law. The lack of familiarity with the language can cause many problems as it is often what is left out of a contract as opposed to what is contained in it which can cause the most problems. Relying on a translation can also be uncertain. Ideally you should seek independent lawyers experienced and competent in legal matter and the language of your chosen jurisdiction, and whose interest is to protect you.

What will a specialist lawyer do for you?

Your expert should advise you on how to purchase your property and in what capacity, the need to prepare a Will after the purchase has been completed and ensuring that the property is registered at the Land Registry in the correct manner.

You should also take advice on residency and the type of property ownership similar to the UK’s joint tenancy and tenancy in common.

Your expert will raise general and specific enquiries in relation to the property and should deal with aspects such as how much should be declared in the Deed of Sale and whether you should be proceeding by way of reservation/option contract, or a full preliminary contract.

Unfamiliarity with the language complicates matters. So your independent expert will translate and interpret all documentation and lead you through the maze of intricacies from the initial contact with the Estate Agents to the placing of the deposit, understanding the contract and amending it if necessary to safeguard the client’s interest, drawing up a Power of Attorney if you are unable to be there at the final signing ceremony with the Notary, and the checking over of searches as well as the final conveyance document transferring ownership of your property to you. They will also give due consideration of the budgetary/ financial matters including the most suitable mortgages.

Additional matters to consider

What the most suitable form of ownership would be for you,

Are there any tax liabilities or any other charges, fees or taxes which you may incur?

It is advisable to get advice on declared values, tax estimates and pointing out further enquiries and checks that have to be made. Of course one must look at any risks associated with the investment.

The buying process in brief

In most international transactions the process of buying usually passes through the following stages: Reservation/holding deposit, preliminary sale agreement and the final contract, which in most countries is in the form of a Notarial Deed.

General Advice

Beware of developer lawyers and question everything at every stage. You must consider the investment risks and do not cut corners! As with out appropriate, independent legal advice your property purchase could turn into a costly exercise. The most important tip is to have a well-informed independent legal advisor, and one who has experience and knowledge of the language and legal system of the UK and of the Country in which you are purchasing.

Conclusions

Finding a reputable law firm abroad can be a minefield, a specialist international property Lawyer, based in England, will take the stress out of the legal aspects of your property purchase. The extra fee incurred on a specialist international property Lawyer, will help you to avoid greater expense and heartache in the future. Books may solve a few of the problems, however, there is nothing like personal and expert advice.

Stefano Lucatello
Joint Senior Partner & Head of The International Property Law Centre LLP

Hull Office: Suffolk House, 21 Silver Street, Hull, HU1 1JG
Tel: 0844 578 5005
Fax: 0844 578 5001
Mobile: 07802 921339

London Office: 25 Floral Street, Covent Garden, London WC2E 9DS
Tel: 0844 578 4006
Fax: 0844 578 4001
Mobile: 07802 921339

Email: stefanol@iplc.co.uk
Web: www.internationalpropertylaw.com