An insight when buying or selling property in Spain during coronavirus times

What are the legal aspects to keep in mind in a conveyancing transaction in Spain during the pandemic?

T he outbreaks caused by the coronavirus pandemic has changed our lives in a drastically way limiting our daily course of action. This affects our present and future expectations and has a strong impact particularly when buying or selling a property in Spain.

COVID measures introduce restrictions to our mobility reducing the possibilities of moving freely within countries and territories and, for obvious reasons, these restrictions might affect the undertakings assumed while buying or selling property in a conveyancing transaction.

The pandemic restrictions might stick around for a while thus making highly advisable including a COVID clause in all the conveyancing contracts signed in Spain during the next few months.

COVID clause when buying or selling a property in Spain

Including a COVID clause when you are buying or selling a property in Spain is almost mandatory given that Spanish regulations do not contain specific provisions to the case that an agreement cannot be completed due to a COVID emergency. This clause should offer the possibility of, in case of a COVID event, not incur in a breach of the terms and conditions agreed between the parties in a document (most likely a Contrato de Arras).

This clause should be used as a safeguard for example to differ the closing date of the transaction.

Examples of a COVID event when buying or selling property in Spain

• Any of the parties being in a quarantine
• Falling sick with the virus
• Mobility restrictions imposed by any government affecting execution the agreement (e.g. inability to fly to Spain)
• Restrictions imposed by an administration are causing a slow down in the process (e.g. obtaining the needed paperwork to close the deal)
• Any delay coming by a third party affecting the transaction (e.g. bank transactions, mortgage…)

Consequences of the COVID event in a conveyancing transaction

The examples above are likely to cause a situation where the transaction cannot be completed due to external causes. Having a pandemic clause in the contrato de arras governing the relationship between the parties should suspend the execution of the agreement given the parties some extra time to get over the COVID situation. Note however that, unless agreed by the parties, this should never be used to modify the conditions undertaken by the parties nor to terminate the deal.

Things to keep in mind when including a COVID clause in a presale contract or contrato de arras:

• Concretization

Being specific is a key element here, meaning that the range of COVID events must be explicitly included or excluded from the COVID clause.  Some of the events have been mentioned previously although for maximum clarity it is recommended that the catalog of COVID events is drafted taking into account the conditions of the deal (e.g. pandemic situation in Spain, where the parties are based, likeliness of a further COVID wave, etc.).

• Notice requirement

Notice of the COVID event must be given when invoking the clause, in a timely manner and using the necessary means to guarantee that the counterparty is fully aware of the situation.

The party claiming the COVID event should likewise report periodically to the counterparty and where possible provide information on the estimated duration of the situation.

• If things go wrong

COVID clauses are always used as a safeguard in those situations where there is no way around to conclude the deal. Such clauses, however, must never be invoked to modify the conditions previously agreed by the parties or to allow the seller or the purchaser to withdraw from the agreement.

In the case that any of the parties could use the clause in a way that could harm the interests of the counterparty dispute resolution remedies must apply. In this sense, having the intervention of a third party (arbitration) could be a satisfactory way of settling a dispute.

If you are thinking of purchasing or selling a property in Spain do not hesitate to contact us for a free consultation, our team of expert English speaking conveyancing solicitors and tax advisors will be glad to hear from you.