Registered Encumbrances: Key Considerations When Buying Property in Mallorca

Acquiring a property, whether it's a home or land, is one of the most significant decisions a person can make in their lifetime. However, this process can be fraught with complications if certain fundamental legal aspects are not taken into account. One of the critical points that every buyer should consider is the verification of any registered encumbrances that may exist on the property.

"Notas simples" can provide a wealth of information, but it is essential to know how to properly interpret that information.

What Are Registered Encumbrances?

Registered encumbrances are liens or restrictions recorded in the Land Registry that affect a property. These can include mortgages, easements, preventive annotations for seizure, among others. The existence of these encumbrances can significantly impact the value of the property and the conditions under which it can be disposed of.

Common Types of Encumbrances

Mortgage

A mortgage is a real guarantee placed on a property to secure the fulfillment of an obligation, usually a loan.

If you purchase a property without canceling the mortgage, your property continues to secure the seller's debt.

It is crucial to check whether the property is mortgaged, as failure to repay the loan could lead to foreclosure.

Easements

These are rights established over a property for the benefit of another, which may restrict its use. Common examples include rights of way, easements for pipelines, etc., although they can be configured according to the needs of the asset.

For example, in a development built on a golf course, the constructions were burdened with a "negative easement for golf ball passage," obligating property owners to tolerate golf balls flying over or landing on their property. This prevented them from requesting changes to the golf course in the future.

Marginal Notes

Marginal notes are annotations (which do not constitute a registry entry) in the Land Registry that provide additional information about the legal situation of the property without altering its ownership. These notes, which are made next to a registry entry (in the margin of the folio), can indicate limitations, encumbrances, or specific situations that should be considered by the buyer:

• Marginal Note of Fiscal Encumbrance:

These are recorded to ensure compliance with tax obligations associated with the transfer of the property, such as transfer taxes. These notes usually expire in five years and cannot be canceled in advance unless a tax audit has already been conducted by the administration.

Fiscal encumbrances are only canceled due to expiration and generally do not pose a major problem for the transaction, except in specific cases.

They become particularly relevant when the owner has benefited from some tax relief (reduced rate, exemptions, etc.), as this could affect the new owner.

• Marginal Note of Ten-Year Insurance:

When a developer undertakes a new residential construction, they are required to obtain ten-year insurance to guarantee against possible structural damage for ten years after construction. However, this requirement can be waived if the builder is an individual self-builder.

If it is noted that the ten-year insurance was not obtained because the builder was a self-builder, the seller must prove that the property was used for their own use so that the buyer can exempt them from obtaining the insurance.

Marginal notes will provide us with information on whether this mandatory insurance has been obtained, offering legal security to the buyer.

• Marginal Note of Urban Encumbrance:

These notes indicate that the property is subject to an urban development project or the obligation to contribute to urbanization costs.

They can also indicate that the property is affected by urban plans that limit its use or impose specific obligations on the owner. These notes are typical of areas of recent urban development.

• Marginal Note of Indivisibility of the Property:

These notes indicate that a property cannot be divided or segregated. This is common in properties linked to a specific building, such as rural properties in Mallorca, where, during the process of processing a license on rural land, it is required to register this marginal note of indivisibility as a prerequisite for the license to be granted.

Consequently, it is common to find this mention in simple notes for rural properties built in recent years.

• Marginal Note of Communication of New Construction by Antiquity:

One of the ways a building can access the Land Registry is through the declaration of new construction by antiquity, provided that the statute of limitations for any potential urban infraction has expired.

The registration of a property in the Land Registry does not certify the legality of a property from a town planning law perspective.

When a declaration of new construction by antiquity is made, the Land Registry is required to notify the City Council so that it can determine the urban legality or illegality. However, it is rare for City Councils to respond to the registry's notification.

• Marginal Note of Urban Illegality:

These are added when a construction or license is declared illegal by the administrative authorities.

This may involve the obligation to demolish or legalize the construction, significantly affecting the value of the property.

• Marginal Notes Prohibiting Tourist Rentals:

In some regions, notes may be established that prohibit the use of the property for tourist rentals, reflecting restrictions imposed by local legislation.

In Mallorca, for example, rural properties that take advantage of the extraordinary legalization mechanism of 2024 must register this prohibition in the Land Registry as a requirement for their legalization.

Preventive Annotations

Preventive annotations are temporary entries in the Land Registry that aim to guarantee or secure a right while a judicial or administrative process is being resolved. Among the most common are:

• Preventive Annotation of Seizure:

This ensures the collection of a debt by attaching the property to an execution process. They can be administrative (debts for taxes, social security, etc.) or judicial (seizures requested by the owner's creditors).

Their existence implies that the property is linked to the payment of the corresponding amounts, so it is necessary to cancel them before the sale.

• Preventive Annotation of Prohibition of Disposal:

This is a precautionary measure that prevents the sale of a property while the judicial or administrative procedure that imposed it is ongoing. This annotation blocks new entries related to the disposal of the property.

Retention of Title Agreement

This agreement is established when the seller of a property reserves ownership of the property until the buyer has paid the full price. Until this condition is met, the property is not fully transferred, and the agreement must be canceled before any new transaction.

Resolutory Condition

These imply that previous transactions can be undone under certain circumstances (the most common being non-payment), potentially compromising the seller's rights.

Purchase Option

This is a contract that grants the beneficiary the right to acquire a property within a specified period and under agreed conditions. If registered in the Land Registry, any potential buyer must ensure that the option period has expired or that the option has been canceled before proceeding with the purchase.

How Can I Cancel Registered Encumbrances?

Each type of registered encumbrance has its own cancellation mechanism, and it is crucial to follow the correct procedure to ensure that the property is free of encumbrances. Some, such as fiscal encumbrances, expire after the legally established terms (5 years for fiscal, 7 years for urban planning), while others require the debtor's presence for cancellation (mortgages) or a letter of payment (seizure annotations in favor of the administration) or a court order (judicial seizures).

It is essential that any buyer, before acquiring a property, ensures that all encumbrances they do not wish to assume are correctly canceled to avoid future complications.

Can There Be Unregistered Encumbrances?

Yes, there can be unregistered encumbrances that, although not appearing in the Land Registry, can affect the property and its use. These encumbrances, despite not being registered, are legally valid and can have significant consequences for the owner. Among these are:

Legal Easements

These are rights that allow one property to benefit from the use of another (servient property) in favor of a third party. These easements can be established by law and do not require registration in the Land Registry to be valid. A common example is the easement for the installation of electrical lines in favor of utility companies, or easements in favor of landlocked properties.

Some Easements

Continuous and apparent easements (such as those for drainage or views) may be enforceable against third parties even if they are not registered, provided their existence is evident and constant over time. These easements may be established through prolonged possession (prescription) or through visible and permanent use.

Tacit Legal Mortgages

Although most mortgages require registration to be enforceable against third parties, there are tacit legal mortgages that, by law, affect certain properties without needing to be registered. An example is a tacit mortgage that guarantees the payment of certain tax debts to the Tax Authority. Although not registered, these mortgages can affect the property.

Legal Encumbrances

These refer to situations where a property is subject to the payment of certain amounts, such as the obligation to pay community debts in properties belonging to a condominium regime.

In short, verifying registered encumbrances is a crucial step that should not be overlooked in the process of acquiring a property. Consulting with a lawyer specializing in real estate law can ensure that the purchase is made without unpleasant surprises, safeguarding the investment and providing the peace of mind needed to enjoy your new property in Mallorca.

At desalvador abogados, we specialize in providing comprehensive and personalized advice to ensure that each real estate transaction is carried out with the utmost legal security. If you have any questions about registered encumbrances or any other legal aspects related to property acquisition, do not hesitate to contact us.