by Catherine Usher and Michael Logan
Each of the member states of the EC has its own system and procedures for property transactions although some, of course, are similar. The following is a brief introduction to some aspects of property transactions in member states.
Belgium
There is no system of registration of titles, but there is a register of transfers (including mortgages) which is open to the public. The existence of this register does not guarantee title, but is evidence that a transaction has taken place. This evidence can be rebutted only in limited circumstances.
An agreement will usually stipulate that the property will not be transferred until payment of the purchase price or the signing of a notarial deed. If the parties want the limited comfort of registration then both must sign a notarial deed in front of a notary public.
The purchaser usually selects a single notary for both parties. His duties may include investigating the title, drafting the agreement and the notarial deed, arranging transcription of the deed, assisting a mortgagee and arranging payment of taxes and other expenses.
The most common form of lease in Belgium is a short-term lease which both landlord and tenant have the right to break at the end of the third or sixth year. For some commercial properties the tenant is given security of tenure, with the rent being subject to review every nine years. Alternative long-term leases are emphyteose (nine to 99 years) which are usually used for existing buildings and superficie (maximum 50 years) under which the lessee has the right to have a building which it erected purchased by the landlord at the end of the term.
So far as planning is concerned, a restrictive zoning plan is strictly applied. Information is available from municipal authorities who will issue a planning certificate indicating whether any general or special plans affect an area. All building projects require a building permit.
Belgian banks will consider taking one of two main types of charge as security for a loan — a formal legal charge in notarial deed form (usually used on residential property) or, more commonly for commercial property, an agreement by the owner not to deal with the property without consent, the bank retaining authority to register the charge.
When the notarial deed is copied on to the register, registration tax of 12.5% is payable, a percentage of which can be reclaimed if the property is sold within five years. A “property merchant” pays 5%. Notarial fees are usually 4% and payable by the purchaser. VAT at 17% is chargeable on the sale of a property less than two years old. Occupied property is subject to a local property tax based on deemed annual rental value.
Denmark
The Danish Land Registry is called the Tingbog. The information contained in it is split into three — ownership, matters affecting the property and mortgages. A purchaser or mortgagee obtains protection from the date on which a transfer or mortgage is filed. The Tingbog also shows a public valuation figure for the property.
The Danish equivalent of a contract for sale and purchase is known as a Slutseddel. Upon signature the purchaser usually pays a deposit of 10% to 15% of the purchase price, one-third of which is placed with the estate agent. The Slutseddel will be conditional on matters such as a satisfactory survey and finance being obtained, and, if signed without legal advice, a lawyer’s consent. At least two weeks prior to the date of transfer the balance of the purchase price is deposited by the purchaser. On the contract conditions being satisfied, a purchase deed will be completed, filed with the local municipality for tax purposes and subsequently recorded in the Tingbog. A three- to six-week period is usual for registration, following completion of which the purchase moneys will be released.
In Denmark leases are granted for “time and eternity”. There is an initial fixed period in which neither landlord nor tenant can terminate the lease. After this period the tenant can do so by giving suitable notice, but a landlord must demonstrate that it wishes to occupy the property or (with very strict limitations) that it wants to use it for redevelopment. Leases will usually contain provision for rent review and for indexation, with the rent rising annually.
Planning law is dealt with at regional, municipal and local levels. Local plans are entered in the Tingbog.
Mortgages on Danish property are secured by the issue of bonds with maturity periods of 30 years for a new building and 20 years for an existing building. Finance provided in this way is limited to 80% of the property’s public valuation figure.
Stamp duty of 1.2% is payable. There is a land tax based on land value, with rates varying from 0.6% to 2.4%. There is also an official sliding scale for lawyers’ fees based on value.
France
France has had since Napoleonic times a comprehensive system of land registration in that all land appears on the Cadastral Register and all land transactions are recorded at the Bureau des Hypotheques. The system was, however, orginally designed for taxation purposes and not as a means of guaranteeing title. The Cadastral Register is maintained at local level and forms the basis for valuation of land for ownership tax purposes. The Bureau des Hypotheques is closer to a register of title, and mortgages, for example, will appear on it. A search of the register does not, however, give priority to a purchaser.
The majority of contracts in France take the form of a compromis de vente, which is a bilateral contract. There is also the promesse de vente, which is a unilateral offer of sale by a seller which imposes no immediate obligation on a buyer who has a limited time in which to accept the offer. Property may also be bought “on plan” (the purchase of land which is to be built on, with the purchaser paying the contract price on completion of the building) or en viager (where part of the purchase price is paid on completion and the balance on instalments during the existence of a named life). It is usual for a payment of 10% of the purchase price to be made on account. The transfer itself to be validly effected must be by an acte de vente, which is a notarial document signed before the notary.
The notary in France is a public officer who also acts as a tax collector — prior to completion of any transaction he must obtain sufficient funds to cover duties and taxes. As a recorder of documents the notary is frequently acting for more than one party and is not the exclusive agent of one of the parties to the transaction.
Leases are common for both residential and commercial property. Numerous terms are implied by the Civil Code.
No equivalent to the English building society exists in France. Most banks provide loans for the same purpose, but obtaining the loan can often take longer and it rarely represents more than 70% to 80% of the purchase price. Frequently there is no separate document, the mortgagee being a party to the acte de vente.
As well as the set notional rate for stamp duties there are additional local and regional taxes which mean that the rate of duty may be between 9% and 18%. Stamp duty is also payable on mortgages. Land registry fees are payable at the rate of 0.1% of the purchase price and at a lower rate for registration of mortgages. Most building land and certain buildings are subject to VAT. Where VAT is applicable stamp duties are reduced. A local tax based on notional letting value is payable by the occupier. There is also a tax on the ownership of land, levied by the local commune and payable annually.
Germany
The acquisition of property in the former German Democratic Republic remains affected by transitional provisions which are not considered here, but otherwise the former GDR is now subject to the same land law as the Federal Republic of Germany. There are two systems of land registration. The Kataster is organised by city governments and contains information regarding dimensions and plans of properties. This confers no rights on an owner, mortgagee or purchaser. The more important system is the real estate title register in each area which contains the Katastral specifications, details of present and past owners, encumbrances and mortgages. Entries in the land register are used as evidence of title and the interest of a purchaser can be secured by a priority notice.
Contracts for the sale of land must be completed in the presence of a notary and the agreement on the transfer of title and the application for registration of the change of ownership require notarial form. Although each are distinct transactions, they are usually included in one instrument to reduce notarial fees. As the entry of the transfer of title into the land register must take place before ownership can pass to the purchaser the parties usually agree that payment of the purchase price will be made on the entry of a priority notice in the land register, confirmation that the community waives any pre-emptive rights, obtaining purchase permission from the community if applicable and the cancellation of all charges by the vendor unless the purchaser is to take them over. The notary will file the application for registration of the change of ownership once payment of the purchase price has been made.
The notary in Germany represents both parties, but is a neutral and is required to include in the transfer deed a statement that both parties have been properly advised as to the risks contained in the contract.
The longest permissible term for a lease is 30 years. Business leases are generally for terms of five, 10 or 20 years, with renewal and option clauses often inserted in short-term leases. There is no security of tenure in Germany for commercial tenants — at the end of the term the landlord is entitled to possession without having to compensate the tenant.
The most important zoning provisions are federal laws. Building regulations are state laws complemented by various federal provisions. Urban planning is governed by the community, which sets up a development plan. A building permit is required for development, substantial alterations or change of use. It is common for developers to have to buy off neighbouring owners in order to obtain a planning consent.
German law allows two forms of right which perform more or less the same function as the mortgage in English law. Such rights allow the owner of them to repayment of the secured sum by application to the local court for foreclosure or compulsory administration of the mortgaged land.
A vendor and purchaser are jointly liable for real estate acquisition tax of 2% of the purchase price, but it is usual practice for the purchaser to pay all of this. Land Registry fees of 0.5% of the purchase price are payable on registration. Agents’ fees are borne by the purchaser and are generally between 3% and 5% of the purchase price. An annual land tax based on the value of the property and varying between 0.7% and 2% is payable on land and buildings in addition to a local tax of between 0.5% and 0.6% of the value of the property.
Greece
Land registration in Greece operates on a district basis with properties registered under the names of estate owners. To ensure sufficient protection for a purchaser, a search of the last 20 years of title is required. The search is usually undertaken by personal attendance.
Greek contracts must be in writing and are prepared by a simvoleographos, who is a civil servant. He will require a vendor to produce evidence of his title, a plan of the property prepared by a civil engineer and a certificate showing that any income from the property during the previous five years has been declared. The parties must appear personally or by a proxy to sign the contract. In certain circumstances a member of the Athens Law Association has to be present.
Leases are usually granted for three to five years, with a minimum of one year. It is more common for tenants to surrender their interest than for there to be an assignment, since a landlord may seek a premium for his consent to an assignment. Office and shop owners favour the sale of their properties as rent reviews referred to court tend to result in assessments lower than the true market value.
Planning control is largely by “plot ratio”, minimum dimensions of plots suitable for building being laid down. Restrictions differ depending on the category of land in which the plot falls. Stringent requirements apply where an antiquity is discovered during the development of a site.
Financial assistance in the purchase of property in Greece is relatively new. More usual is a personal loan for a period of five to 10 years which is not directly made in respect of a property. A number of state-controlled investment banks are now established to provide long-term funding for particular projects, either through straight lending or equity participation.
All property transactions (except those subject to VAT) are subject to stamp tax. The rates vary and there are many exemptions. Registration fees also vary between different district registries. New buildings transferred for value are subject to VAT. In all other instances a transfer tax of 11% or 13% is payable on the market value of the property. An annual property tax calculated on market value is also imposed.
Netherlands
Registration in the Public Registers is an indispensable requirement for an effective transfer of land. Registration does not automatically guarantee title and, unless agreed to the contrary, the vendor warrants ownership of the property.
There are no formal requirements as to the contents of contracts, but a notarial instrument is required for the transfer deed which is recorded in the public and district registers.
Distinction is made between long and short leases. There are no detailed rules on long leases and the terms are therefore to a large extent negotiable. Short leases are subject to fairly strict statutory provisions intended to protect the lessee’s position. It is possible to hold land under a perpetual leasehold.
Legislation prevents building in certain areas without permission and may limit the use of land.
A notarial instrument is required for mortgages which must be recorded in the public registers.
A transfer tax of 6% is levied on the acquisition of property and fixed land registry fees are payable on transfers and mortgages. Unless agreed to the contrary, the costs related to a sale are usually paid by a purchaser.
Republic of Ireland
Registration in the Republic of Ireland is so far compulsory in only three of the counties, though voluntary registration in all areas is possible. In compulsory areas application for registration of a freehold sale or grant of a lease or assignment of a term of at least 21 years must be lodged. For unregistered land it is possible to register deeds which affords priority to the deed first registered, but registration itself is not compulsory.
Contracts in Ireland are made by auction, tender or after private negotiation. There is usually a post-contractual period during which the purchaser investigates the vendor’s title and at the end of this period the sale is completed by the vendor executing a document transferring ownership against receipt of the price.
Modern business leases will usually be for a term of 35 years or less at a full market rent without a premium, but with five-yearly rent reviews. A business tenant of three years’ standing has the right to renew on termination of his lease or, failing that, the right to compensation for improvements that he has made. A new tenancy can be refused if the landlord has obtained planning permission to demolish and reconstruct the premises or needs vacant possession to develop the property. Licence agreements conferring only personal contractual rights are commonplace, mainly on agricultural land.
Land Commission consent may be required for the acquisition of non-urban land by non-Irish nationals.
Security over land can be by mortgage or deposit of documents of title with the lender. The latter informal method is frequently adopted in practice. Charges created by companies require to be registered in the Companies Registry.
Stamp duty is levied, with a top rate of 6% being payable. VAT at 10% is levied on a limited number of property transactions.
Italy
Italy has no comprehensive land registration system — registration is of deeds and not titles and by reference to an index of vendors and purchasers, not properties. The function of registration is to place third parties on notice as to the present status of ownership.
The standard procedure is for the vendor’s estate agent to prepare the contract, but a notary should be instructed. A normal deposit is 10% of the purchase price — a purchaser who fails to complete loses his deposit, but if a vendor fails to complete Italian law provides for the return of the deposit plus a like amount, ie twice the original deposit paid. Completion dates are usually on an “on-or-before” basis. All conveyances are typed on Revenue-stamped paper called carta bollata. On completion all parties to a notarial document or their attorneys must be present. The notary will not complete unless he has the amount required and notarial fees, stamp duties and disbursements.
The notary is a non-salaried public official appointed by the state but remunerated by his clients. He is responsible for the correct registration of transfers of land and also for collecting stamp duties. He will be acting for both parties in a transaction. If a purchaser is not taking separate legal advice, a notary will not automatically carry out the necessary searches and will require extra payment to do so.
A search at the local comune reveals details of planning permissions and detailed plans are available by reference to which property is transferred. Land in Italy is ostensibly zoned as farming land, olive groves, seashore, forest or building land. Limits as to what may be built and density regulations are laid down by each comune and planning applications are made to the local planning authority of the comune.
Italian notaries are forbidden to arrange mortgages and it is common to employ a Commercialista to advise on financial and taxation matters.
Stamp duty on houses and flats is 10% and 17% on land. Payment of estate agents’ commission is shared by vendor and purchaser. Notaries’ fees are fixed by law. There is a local property tax calculated on the notional letting value of property and property owner’s income.
Luxemburg
Having its origin in the Napoleonic code, property law in Luxemburg and the conveyancing process is very similar to that of France. It is based on a comprehensive double land registration system. All dealings in land effected by a notarial deed are registered in the Registration Administration. The Cadastral Register provides details as to ownership of land within local areas. Registration does not, however, mean that title is guaranteed but gives official confirmation to the existence of the transfer.
While the terms of a transaction may be incorporated in an agreement binding on the contracting parties, to be valid against third parties and for registration purposes there must be a notarial deed signed before a notary. This will be transcripted and registered at the two registers by the notary.
The notary is not state employed as in France. There is a distinction between so-called long-term leases and normal leases. Long-term leases can be between 27 and 99 years (leasehold) and up to 50 years (ground lease). Normal leases are in practice for terms of between nine and 12 years. For leases of more than nine years a notarial deed is required and the lease is registered. In commercial leases the responsibility for repair, insurance and property owner’s tax falls to the landlord. Rent may be indexed or geared to a fixed rate of interest usually agreed at between 2% and 5%.
Planning is the responsibility of the municipality and the comune. Land use is specified in broad terms by each comune’s plan d’ amenagement. All material development (including change of use) requires planning permission. Planning controls are particularly strict in Luxemburg city.
Mortgages must be in the form of a notarial deed and properly registered. A mortgage is generally secured by registration for a period of 10 years.
Property taxes include 6% registration tax, a 1% transcription tax and, in the city of Luxemburg, a municipal tax of 3%. There is also a yearly tax imposed by the municipality on land and buildings based on the official value determined by the tax authorities, which is normally far lower than the market value. Rates vary according to the type of property and the municipality in which it is situated. A wealth tax of 0.5% is also payable on total assets including real estate.
Portugal
Portugal is moving towards a comprehensive system of land registration. Although registration is not yet compulsory throughout Portugal, in practice proof of registration must be produced before a transfer may be effected. The register contains details of ownership, title, description of the property, mortgages, charges and third-party interests.
On contracts being signed, a deposit, which may vary from 10% to as high as 50%, will be payable. Under general law, in the event of the purchaser failing to complete, he loses his deposit. If the vendor does so, he has to repay to the purchaser twice the amount of the original deposit. The deed of transfer itself must be executed by both parties before a notary, who will require evidence that tax laws have been complied with. He will also require a habitation certificate for any property built after 1950 as proof that it complied with planning and building regulations.
The notary in Portugal is not required to be a qualified lawyer.
The ability of non-nationals to purchase land depends on the type of residence permit held. Non-resident companies must apply for permission to buy land.
Tenure can be either freehold or leasehold, but the vast majority is freehold.
Portuguese planning law distinguishes between individual buildings and larger-scale developments. A planning licence from the relevant city council is required for new individual buildings and for work involving substantial alterations to existing buildings. Large-scale developments require an allotment permit which will frequently place an obligation on the land-owner to provide infrastructure and general facilities for the public.
Mortgages must be created by deed before a notary and must be registered to be valid. The concept of a mortgage by deposit of title deeds is not recognised in Portugal.
Real estate transfer tax is payable by purchasers on the higher of the purchase price and the net value of the property. The rate payable on urban property and land for building is 10% and on rural property 8%. Notarial and registration fees amount to between 1.5% and 2% of the purchase price. There is also a real estate tax which is a municipal tax, the basis of assessment of which depends on whether the property is classified as urban or rural.
Scotland
In Scotland the highest level of ownership is known as “the superiority interest”. Most land is held on an original grant from the superior, who does not retain any right of possession. The right of possession is enjoyed by the “heritable proprietor” and it is his interest which equates to what is generally understood as “ownership”.
Scotland has a land register (the Land Register for Scotland) and a deeds register (the Register of Sasines). The Register of Sasines is a method of recording deeds. The Land Register for Scotland will eventually replace it. Title which is registered at the Land Register for Scotland is guaranteed by the state, but the recording of a title in the Register of Sasines has no such effect. It is a public record of deeds evidencing title and a purchaser must carry out an investigation going back at least 10 years from the date of recording of a vendor’s title.
A contract for the purchase of land must be formally executed and in writing. The most common form of contract is by way of exchange of offer and acceptance together known as “the missives”, exchange of which need not be simultaneous. A system of competitive bidding operates and a closing date may be fixed prior to which offers must be submitted. The missives can often therefore contain conditions. Completion will be on the date provided for in the missives, giving time for conveyancing formalities to be completed. On completion the purchaser receives in exchange for the purchase price the document of transfer, the disposition, which is subsequently stamped and registered or recorded as appropriate.
In Scotland there is no statutory provision for continuation of the term of a lease of commercial property beyond the period provided for in the lease (as in England and Wales) other than limited security of tenure for the tenants of retail premises. Nor does an original tenant have any responsibility to a landlord after assignment of his interest in a Scottish lease as he would have under a lease in England and Wales.
Planning is dealt with at local level by local authorities, and planning information about a property is provided by a local authority search.
The only form of fixed security that may be created over a property is a standard security, which must be recorded in the Register of Sasines or registered in the Land Register. A number of standard conditions are imposed on the grantor of the security by statute. A creditor under a standard security does not have power to appoint a receiver, and lenders over commercial properties usually require a company debtor to enter into a floating charge.
Stamp duty of 1% is payable where a purchase price exceeds £30,000.
Spain
All land is registered at the Spanish Land Registry, with virtually all charges and encumbrances registered. There are, however, no protection provisions giving priority to a purchaser who has made a search.
On the sale of a property in Spain a local tax, the plusvalia, is charged by the municipality on the increased value of the property since it was last sold. It is payable by the vendor, but this aspect should be addressed by a purchaser prior to the sale as liability attaches to the property. An assessment can be requested from the municipality and remains binding on the authority for one year. As it may not be until some time after the sale that the tax is demanded, the purchaser should make a retention from the purchase price to cover the plusvalia payable.
In Spain the transfer document, the escritura, is executed in front of a notary. The notary is an impartial official who is not acting for either party and nor is he responsible for collecting transfer tax — the escritura is sent to the tax office for stamping by the purchaser’s lawyer or through a gestoria (a general agent employed by the purchaser for the purpose). Title is completed when the escritura has been registered.
Virtually all Spanish land is freehold. The checking of compliance with planning regulations is done at the municipality. Recent legislation relating to coastal properties provides that all foreshore is the property of the Spanish government and that no further building by individuals or companies will be permitted in an area stretching 100m inland from the high watermark.
Mortgages in Spain provide for repayment after some 12 years on average and are often offered by builders to secure payment of the purchase price by instalments. The loan agreement must be executed in front of a notary and be registered.
Transfer tax is payable at 6%, or 6.5% when the property is a new property being sold by a developer. A tax of 0.5% is payable on the value secured by a mortgage. The rate of the plusvalia referred to above varies according to the length of ownership of the vendor and the area in which the property is situated.
