REAL ESTATE PURCHASE AND SALE – PAYMENTS TO THE NOTARY ACCOUNT vs OPENING A BANK ACCOUNT IN SPAIN

For years and even decades, the following form of payment has been very common in Spain:

• Partial payments or on account of the final price : This type of payment is made through bank transfers , either to the account of the agent or representative of the seller, or to the account of the seller directly.
• The final payment of the rest of the agreed price: By delivering a bank check to the seller from a Spanish bank account.

In other words, it has been a very common practice in Spain for partial payments on account of the final price to be paid to the seller to be made by bank transfer , but the seller has always required that the final payment , normally the most important, be made through a bank check (banker’s draaft), which gives full guarantee of payment effectiveness.

The simultaneity of the payment

As we can see, it has not been common practice for the final payment of the price to be made by bank transfer . The reason for this lies in the lack of understanding regarding the “time” for carrying out said transfer. The seller will always require that said payment be made “before” the signing of the notarial deeds of sale, to guarantee that the money is effectively in his bank account, and the buyer, for his part, will require that said transfer be made “after” the seller has signed the deeds of sale, thus guaranteeing that the payment is made once the seller has fulfilled his delivery obligation.

The choice of the bank check as a payment system allows the parties to make the payment simultaneously with the signing of the notarial acts. In such a way that the buyer keeps the check in his possession until the seller signs the acts in the presence of the notary.

With which the coincidence of the moment of payment and the delivery of the property is perfect.

In addition, the formula of payment by bank check provides an additional guarantee to the seller since, by its very nature, it is not the buyer who actually pays or is obliged to pay by bank check, but it is the same bank that issued the check that who is obligated to make such payment. Which gives a secure and accurate payment guarantee to the seller.

Check from a Spanish bank

In addition, the seller, in order to guarantee your payment, has requested that this bank check be issued by a Spanish bank . The reason for this is, first, the mistrust that accepting checks from foreign banks can generate for the seller due to the difficulty of recognizing their existence and validity, and, second, due to the extra expenses and costs involved in clearing a check from funds found abroad .

All of the above has been very important and has greatly conditioned sales in coastal areas and with a high percentage of foreign buyers. This is due to the fact that international citizens have been led to open bank accounts in Spain with the sole effect of making the final payment of the price to the seller effective by means of a bank check issued from the account opened in the name of the buyer in a Spanish bank. and to which, before the completion of the sale process, the buyer has transferred sufficient funds to cover the final amount of the price.

Therefore, it has been a very common practice in Spain to recommend foreign buyers and investors to open bank accounts in Spanish banks in order to proceed with this form of payment at the end of the process.

Supply companies and Town Halls

This requirement has also been reinforced by the usual practice of water and electricity supply companies, local councils, etc. which have felt much more comfortable when domiciling the payments of the invoices corresponding to the consumption of the property in bank accounts domiciled in Spanish banks , avoiding direct debit in foreign bank accounts.

With which, by way of summary, it has been a common practice to recommend foreign customers to open a bank account in Spain once the purchase intention has been formalized.

Notarial payment system in other European countries

This requirement to open a bank account in a Spanish bank has always been a point of conflict between the Spanish and foreign systems.

This is so because, in many countries, especially in continental Europe, all payments related to the sale transaction are made directly on the account of the acting NOTARY , who is the one who receives all amounts from the buyer and is entrusts payment to the Seller, once all legal requirements according to regulations have been met.

That is why, for many years, investors from continental Europe have seen it as a strange case to force the opening of bank accounts in Spain, diverting the function of the notary in this regard.

In addition, regarding the direct debit of payments for consumer invoices, foreign customers or buyers did not understand why bank accounts already opened in their names in their countries of origin, with a valid European IBAN, could not be accepted by part of the supplying companies to domicile the consumption derived from their services.

In addition, especially in some nationalities, such as France or Belgium, they have especially forced this situation, since many of the purchase operations have been financed through mortgage loans granted in their countries of origin .

The lending banks of these countries, when executing the payment of said loans, usually do so directly on the notary’s account . With which, in the cases in which the purchase and sale of Spanish real estate by these citizens was subject to the granting of a bank loan, the same borrowing banks originating from these countries established as an obligation to release the loan funds that these were directed to the account of a notary, and not to the account of the seller, or to the account of the buyer.

Notary service offer

For this reason, in recent years the number of Spanish notaries who have adapted to this new need demanded by foreign clients has increased, and have made available to them a service for receiving and depositing money on account of legal operations and transactions. real estate

That is why , above all, in the coastal areas and with a high volume of international real estate transactions and a high influx of foreigners , the notarial practice of receiving payments on account and final purchase and sale transactions in the accounts has been developed. notary banks.

It is voluntary

It must be said that this activity is completely voluntary on the part of notaries. In other words, there is no obligation for said notaries to offer this type of service to their clients , with which, in practice, we find certain notaries who refuse to offer this type of service, and, on the other hand, other types of notaries more open and prepared in this regard.

The procedure

The procedure normally used in practice for sending said amounts to the Notary’s account is normally the following:

• The real estate agent or the buyer’s lawyer informs the notary of the need to instrumentalize the payment through his account.
• The notary proceeds to identify the buyer , to study the conditions of the transaction, and to the information procedure and monitoring of money laundering regulations.
• Once this process is completed, the notary delivers your bank account details to said Agent or lawyer to transmit it to the buyer.
• The buyer, upon receipt of the bank details of the NOTARY, makes the transfer to said instrumental account.
• Upon completion of the sale, the notary public, by notarizing the deed of sale, issues checks or transfers to the selling party, agents and intermediaries against your bank account , for payment of taxes, and other expenses and fees , as well as those of the real estate agency or the legal representatives of the buyer, following the instructions of the buyer.

 Greater comfort and guarantee to the buyer

 This system obviously supposes a greater guarantee in the control of the funds with respect to the buyer, since in the case of the purchase transaction not being carried out for any reason, the notary can always reimburse the parties for the amounts deposited so that they can decide what to do with it

Normally, if the deposit has been made unilaterally by the buyer , in the case of not accepting the sale, proceed to immediately return the funds to the buyer.

However, if said deposit has been previously agreed between the parties, and there is a prior notarial deed of deposit , which establishes the conditions under which said deposit must be managed, the notary, if the sale is not executed, will examine the content of the deposit document agreed between the parties and will always act accordingly with their prior agreement . In the event that the parties do not agree on the form of reimbursement of said amounts, the notary will be forced to deposit said amount before the judicial authority, and the Spanish courts so that they are the ones in which the destination of the money is decided. said funds through the judicial processes to be initiated by the parties.

Need to trace the payment

Obviously, all these transfers and payments must be correctly documented, either in a notarial deed of deposit , or in the deed of sale itself .

Conclusion: It is not necessary to open a bank account in Spain to buy a house or a property

It can be said that there is no longer an obligation to open a bank account in Spain, especially in some regions or areas in which the notary makes his instrumental bank account available to the parties.

Another thing will be, depending on the place, the requirements to be fulfilled with respect to direct debit orders for the consumption of services connected to the home, such as alarm, security, Wi-Fi, Internet, electricity, gas , etc. .

Therefore, for the procedure of buying a home in Spain, from our law firm we no longer consider the opening of a bank account in Spain for our clients as an obligation . We offer this as an option, provided that in the area where the purchase is made there is a notary predisposed to have your bank account to implement the payment.

But what happens after the purchase with the supplies?  

After the purchase process, once this is completed, depending on the area where the property is located, it will be necessary to confirm with the supplying service companies, Town Halls, etc. , to determine if they accept direct debits of payments in foreign bank accounts, and, Otherwise, recommend to our clients , this time yes , and once the sale is finished, to open an instrumental bank account in Spain for these purposes.

TLACORP 2023