Legal Aspects of Buying a Luxury Home
in the Balearic Islands
The Balearic Islands, known for their natural beauty and Mediterranean climate, have become a highly desirable destination for those seeking luxury residential properties. The high-end residential market in these islands has experienced a significant boom in recent years, the exclusivity of the location, the panoramic sea views and the privacy offered by the luxury villas and mansions have attracted those seeking a second or permanent residence on these islands. All of this helped to cement the Balearics’ reputation as a luxury residential destination.
However, navigating the legal aspects of buying such properties can be complicated and stressful, as the high demand for this type of properties often requires the buyer to act quickly and decisively in order not to miss out on the opportunity. It is therefore important to receive good advice that gives the buyer peace of mind and comfort throughout the process.
Main legal issues in real estate transactions in the luxury residential market
Prior to the acquisition of the property, a legal, urban and tax check must be carried out to verify, among other things:
- The ownership
- The state of debts
- The urban status
- The tax compliance of the property
Notwithstanding the above, in this type of transaction, where a high-end real estate property is acquired, it is essential to carry out a technical inspection to check the correct execution of the construction works, the structure of the property, the quality of the materials used, as well as the correct functioning of the installations.
The resulting technical report will be of great use in negotiating the conditions of the purchase and will give the client a better understanding of the property to be acquired.
Therefore, it is highly advisable to properly structure the form of acquisition of the property, in coordination with the buyer’s advisors in their country of residence and in Spain (to consider the application and formalities of the different regulations). The choice of the purchase structure is crucial to the transaction itself, but also plays a strategic role in the long-term profitability of the investment and the impact on a future sale of the property. For that purpose, it is necessary to carry out a specific analysis from a legal and tax point of view in order to inform the buyer of the most appropriate structures for the acquisition of the property, depending on the particular circumstances of each specific case.
In this sense, a correct structure of the purchase of the property will allow, among others:
- To optimise the costs, income and benefits of the investment, especially in the case of acquisitions that involve the promotion of the construction of the property by the buyer himself.
- To make the process of selling the property more flexible with structures that facilitate the process of acquiring the property by a third party, thus maximizing sales opportunities.
- To protect the property against legal or financial risks, depending on whether the buyer wishes to carry out any type of activity on the property.
If the buyer is interested in financing the purchase, it is also essential to have a proactive strategy to secure the most favourable conditions taking into account the nature of the investment. With the help of the best financial advisors, negotiating and structuring optimal agreements with the banks, the quality of the investment made and its future profitability will be strengthened. Our experience with Lionsgate Capital is exceptional, as their knowledge, quality of advice and professionalism provide an additional guarantee of excellence throughout this process.
The importance of finding the right local advice
All things considered, acquiring a luxury property in the Balearic Islands is a tempting and very exciting prospect for buyers who wish to have their second home on one of our islands, however, they must be aware of the legal complexities involved in the whole acquisition process. Obtaining the right legal and tax advice is crucial to the successful acquisition of the property.
At Deloitte Legal we provide comprehensive (legal and tax) and multinational advice to the client at all stages of the transaction. Deloitte Legal has a presence in more than 150 countries around the world, with high national and international recognition and with expert teams in Corporate M&A, Tax and Real Estate that enable us to provide global advice. Our approach is to provide a complete service, accompanying the client throughout the acquisition process and always meeting their expectations.
Article by Lluca Compte
Senior Associate of Deloitte Legal’s Corporate M&A Department
Lluca Compte forms with Fernando Martínez Comas, partner, the team of lawyers specializing in commercial and real estate law based in the Palma de Mallorca office of the prestigious firm Deloitte.
