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Types of Charges in BOE Auctions

· 5 min read

#BOE auctions

Types of charges in BOE auctions

Auctions published in the Boletín Oficial del Estado (BOE, Spain's Official State Gazette) offer attractive opportunities to acquire property at competitive prices. However, it is crucial to understand the charges (cargas) that may come with these properties. This guide will help you understand the most common types of charges and how they can affect your investment.

What are charges in an auction?

Charges are financial or legal obligations attached to a property. When you take part in an auction, some of these charges could become your responsibility if the property is awarded to you. That is why it is essential to know about them before you bid.

Main types of charges

1. Mortgages

  • What it is: A loan secured on the property.
  • How it affects you: If the mortgage predates the debt that led to the auction, you may have to take over its repayment.
  • What you should know: Check the outstanding amount and the loan terms. Sometimes you can negotiate better terms with the bank.

2. Seizures

  • What it is: A legal attachment (embargo) on the property for unpaid debts.
  • How it affects you: Seizures that predate the debt that led to the auction may remain in force.
  • What you should know: Look into how old the seizures are and how much they amount to. More recent ones are usually cancelled by the auction.

3. Debts to the community of owners

  • What it is: Unpaid service charges owed to the community of owners (comunidad de propietarios).
  • How it affects you: You will be liable for the debts for the current year and the previous three.
  • What you should know: Ask the community for a certificate of outstanding debts. These charges have priority and you will have to pay them even if they do not appear in the Land Registry.

4. Property Tax (Impuesto sobre Bienes Inmuebles, IBI)

  • What it is: An annual property tax paid to the local council.
  • How it affects you: You will have to pay the IBI for the year of purchase and possibly the year before.
  • What you should know: Check with the council whether any debts are outstanding. IBI is a preferential charge that you will have to cover.

5. Usufructs and easements

  • What it is: Rights of use or access that others hold over the property.
  • How it affects you: They may limit your use or enjoyment of the property.
  • What you should know: These charges usually survive the auction. Assess their impact on the value and use of the property.

6. Tax liens (afecciones fiscales)

  • What it is: Liability for taxes relating to previous transfers of the property.
  • How it affects you: You could be secondarily liable for these taxes for a period of time.
  • What you should know: They usually expire after 4-5 years. Check the Land Registry for any tax lien notes still in force.

7. Leases

  • What it is: Rental agreements in force on the property.
  • How it affects you: You may have to honour existing tenancy agreements.
  • What you should know: Find out whether the property is occupied. Leases may not appear in the Land Registry.

How to protect yourself when taking part in BOE auctions

  1. Research thoroughly:

    • Request a land registry extract (nota simple) from the Registro de la Propiedad (Land Registry).
    • Ask the community of owners for a certificate of outstanding debts.
    • Check with the local council about any IBI arrears.

  2. Consult the experts:

    • A specialist lawyer can help you interpret the charges.
    • A property adviser can assess the impact of the charges on the market price.

  3. Work out the real cost:

    • Add up the auction price and all possible charges.
    • Include a margin for unforeseen costs.

  4. Be prepared for surprises:

    • Bear in mind that some charges may not be officially registered.
    • Consider taking out title insurance.

  5. Visit the property if possible:

    • This will give you a clearer idea of the condition of the property and any potential problems.

Taking part in BOE auctions can be an excellent investment opportunity, but it requires careful research and an understanding of the charges involved. With the right information and a measure of caution, you will be able to make informed decisions and minimise risk.

Remember that every auction and every property is unique. If you have specific questions, it is always advisable to seek professional advice.