Conducting Due Diligence for Real Estate Purchases

After the recent global financial crisis, housing market became one of the key parts of the global economy and has been greatly supported by many Governments. Due to rapid increases in house prices across the global economies, the housing market creates perfect investment opportunities for foreign and local investors. Over the time the economical and political stability decreased risk perception of investors and created a safe market. Therefore, international buyers seek countries for investing and, but also buying a property in holiday-friendly countries for their families to use and a potential investment opportunity.

I hope these timely and carefully written article will contribute much to current and future considerations when buying property in anywhere, but mostly in the European Countries.

√ As always, the first thing you need to consider is to know the construction company, real estate and the people you are dealing with. Do not buy a property from a friendly man that you just met saying his friend is selling a property at a very low price. This is most likely to be a scam and you would lose your deposit or at the worst your entire savings. Do your research; check the background of the company, verify company information from places like Chamber of Commerce.

√ If you chose a property and thinking buying it, do your comparison, look at similar properties from other estate agents in the same area and check them out. At this point, you might want to visit the place, inspect the property, look at the materials that used in the property, identify material defects if there are any.

√ Always negotiate on price and terms of purchase.

√ You also need to be aware of that most likely there will be some other costs, beyond the purchase price, such as levies and taxes (title deed duties, VAT might be levied subject to certain circumstances, etc), premiums for insurances (some insurances might be compulsory), the monthly paid maintenance fee for the property (if any) and real estate tax.

√ In most jurisdictions, the ownership of property is transferred after an official deed and registry which is signed at the Land Registry Directorates. All other transfer instruments, contracts and covenants in relation to a property ownership must be prepared accordingly. Most of the jurisdictions, legal ownership to the property do transfer with certain type of agreements. Hence, you need to be extra cautious for people who try to convince you to make payment without a valid agreement signed and/or title deed organized on your name. It is advised to make payment after checking the validity conditions at the Land Registry Directorate.

Furthermore, there are certain must check outs.

√ Before making any payments, check the title deed of the property. Ownership of property is recorded at the relevant title deed registries. Title deed registry records are open to public. The rightful owner, limitations on the property such as mortgages or any obstacle which prevents the sale of the property, encumbrances and other liabilities attached on the property may also be reviewed from such records. In most jurisdictions, title deed registry records are final and, all bona fide purchasers hence are protected by Law.

√ However, there might also be some security mesurements in places that are closeby historical or military or similar security zones. Foreigners purchasing property might need to get certain permits and/or military clearances. Therefore you need to make sure, the property you interested in is not within the historical, military or security zone.

√ Another point that needs to be checked is that occupancy permits. It might be a small chance but still there might be some newly constructed buildings that have not been issued occupancy permits or some illegal constructions attached to the building. These properties may not have valid occupancy permit or at the worst, a demolition order for the property might have been given by a court. The relevant municipal records needs to be checked for such orders.

√ Last but not least the sale agreement shall be drafted carefully and all conditions of the sale shall be clearly stated.

√ Make sure that the estate agent you are dealing with is in your side. As estate agents only get commission if you buy the property, they may tell you what you wanted to hear to buy the property. As always, before making any payment consult with lawyers. 

By providing a simple Power of Attorney you can ask your attorney to

⇒ make all necessary checks on the property on your behalf;

⇒ ensure that the title is clean, habitation permit has been taken, no demolition order has been given for the property;

⇒ confirm that he property is not within the historical, military or security zone;

⇒ negotiate contract terms on your behalf;

⇒ draft and finalize purchase contract;

⇒ convert the title to your name, finalize all the procedures for the property purchase at the Land Registry Directorate.

Please be aware that, foreign commercial corporations which are established according to the relevant laws of their countries of origin are not subject to this article. Special regulations shall be considered for these purchases.

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The contents of this website are intended to be used as general free information only and do not constitute legal advice. Legal advice can only be provided by a suitably qualified professional following a detailed consideration of your personal circumstances.

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