What happens to utility debts when buying a property in Spain?

When buying a property, one acquires much more than the ownership of the property itself: along with the property, a bundle of rights and obligations are transferred that go with the property. Thus, the new owner may acquire contractual obligations (rents), community obligations, town planning obligations, etc., which is why it is essential to have a lawyer carry out a legal review of the property before purchasing a property.

When you buy a property, you acquire much more than mere ownership: along with the property comes a whole series of rights and obligations that you need to be aware of before buying the property.

Among the obligations that are in some way related to a property, we can distinguish two main types:

Obligations in rem or propter rem: 

These are those obligations linked to a real right that the debtor assumes as a consequence of the ownership of said real right over the thing. For example: by the mere fact of being the owner of a property, the community fees must be paid.

In some cases, and in order to prevent the previous owner from disclaiming his debts on the grounds that he no longer has anything to do with the property, the law can create a "real affectation", i.e. a linking of the property to the payment of the debts regardless of the fact that the original debtor is no longer the owner. In this way, it is possible for an owner to lose his or her home because of debts owed by the previous owner.

Personal obligations: 

These are all obligations that the owner acquires not because of his or her status as owner, but because he or she has chosen to contract them. These obligations are therefore not linked to the thing, but are independent.

Sometimes these obligations may be related to a property (supply contract, gardening contract, etc.), but the new owner is not, in principle, bound by the previous debts.

But why do we start with theories about obligations if we were going to talk about supply contracts? Because it is necessary to know the essential differences between the two types of obligations in order to understand which situation we are dealing with and what we can do in each case.

Debts arising from supply contracts

As we have pointed out, supply contracts are personal obligations, even if they are related to real estate. In addition, there is no law that provides for the property to be assigned to the payment of these debts. This means that the new owner is not obliged to pay the supply debts of the previous owner. However, sometimes we see that the supply companies may oblige us to settle the debt of the previous owner in order to be able to put the supplies in our name.

What is happening? 

Users usually request a change of ownership of the contract, which means, in legal terms, a subrogation in the position of the contract, including in the debts generated. Therefore, it is necessary to distinguish between the two possibilities that exist.

Change of ownership

If, when calling the supply company, we are requesting a mere "change of ownership", what we are actually doing is asking that, where the previous owner's name appeared, our name now appears. In this case, we will be accepting the personal subrogation in the legal position of the seller in the supply contract, substituting him for all effects and purposes.

In these cases, the supply company may tell us that there is an outstanding debt and that we have to assume it in order to change the ownership of the contract.

If a change of ownership is made, the new owner assumes the full legal position of the previous owner in the supply contract, including the debt.

Cancellation of the contract and new registration.

If instead of requesting a change of ownership of the contract, what we do is to request the cancellation of the contract and the processing of a new registration, instead of accepting the seller's position in the contract, what we do is to "kill" the previous contract and create a completely new legal relationship.

Theoretically, the correct thing to do would be to terminate the old contract and enter into a new one, but this may involve additional costs and time.

However, such an operation can have different problems:

• In order to process a new registration, the supply company has to demand certain documentation by legal imperative (current certificate of occupancy, certificate of electrical installation, title deed or rental contract) and, once the documentation has been received, it has to make the appropriate checks, so obtaining the supply can be delayed (around one month).

• In addition, the processing of the different documents, if they have not been requested at the time, entails additional time and money.

On the other hand, as far as the cancellation of the contract is concerned, it is common that the supply companies do not allow the cancellation of a contract that has outstanding debts. In our opinion, this is an erroneous action on the part of the companies, which we must oppose, insisting that it is a debt owed by the previous owner and that only the previous owner is responsible for its payment.

The problem is that any additional claim to the supply company will only delay the processing of the change of ownership or the new registration that is to be carried out, exclusively harming the purchaser of the property.

Prevention is better than cure

But all is not lost for the buyer who has to pay a debt: normally, after having paid the amounts owed, he will be able to "repeat payment" against the seller. This means claiming from the seller the payment of the debt that we have assumed on his behalf. The main problem is that, in the event of a refusal, there will be no choice but to initiate a legal claim, so again more time and money will have to be spent.

As we have seen, the only legally valid way of avoiding the assumption of the previous owner's debt, and even with reservations about the actions of the supply companies, would be to request a cancellation and the processing of a new supply, but this also implies the possibility of spending a period without supplies while the cancellation and new supply are being processed, as well as the need to present certain documentation, which is not always available (certificate of occupancy, electrical installation report, etc.).

As a consequence, our advice can only be to be extremely cautious with this matter in the negotiation of the purchase contract, carrying out an exhaustive review of the situation of the property (including the supply contracts) and articulating in the purchase contract the necessary mechanisms to ensure that all the bills are duly paid before acquiring the property.

Only in this way, the buyer can be sure of acquiring exactly what he/she wants: a property "without surprises".