Guide to buying property abroad

The Spanish region of Valencia in 1994 revamped a national law on development and passed it through the local legislature. The Valencian ‘Ley Reguladora de la actividad Urbanistica’ was intended to speed up urban development and ensure that new developments included sound infrastructures including good sanitation and roads. Also the law included the right for local developers, in certain circumstances, to issue repossession orders or demand payments for infrastructure improvements.
Or in Portugal, few know that over 200,000 residences have no ‘licença de habitabilidade’ and hence according to 1999 legislation these properties cannot be sold since the licence is necessary in order to obtain the ‘escritura’ (completion document).

In Italy, if your dream villa has agricultural land attached, the right of pre-emption could be exercised by your farming neighbours, whereby they could buy back the land for less than its purchase price. Patrick Dring, director of international property at Knight Frank estate agents warns that this is a complicated area of Italian tax and law.

Or outside the EU in nearby Croatia, is the recent case of an EU couple who bought a substantial parcel of land but shortly after the deal was signed and sealed they were informed that they could not build on the land because it had just been re-zoned as a nature reserve.

Further afield in Australia, you will find that foreigners are restricted about the type of property they can buy or in the United States, once you buy your dream holiday home in Arizona, say – and as a non-US citizen – year round access may be limited by your immigration status.

At some destinations the act of buying property may help secure residency. Hong Kong, for instance, recently implemented legislation that takes foreign ownership of property as a positive step toward gaining a visa. Elsewhere the opposite is true. For example, immigration authorities in New Zealand stress that owning property confers no advantage toward a residency permit.

A significant number of countries require proof of income or net worth. In Switzerland, the foreign purchase of property differs dramatically across the 26 cantons, not only in proving that you have the money to afford life in the canton, but some areas that prohibit the foreign ownership of property altogether. Switzerland is also one of the those countries across the world where it is compulsory to take out private medical insurance if you take up residency.

You might want a foreign property for investment purposes, such as tapping into high season rental. But some places such as parts of Florida may restrict the number of days you are allowed to let the property or you may be prohibited from your renting out the property altogether. Or indeed in somewhere like Croatia you could be hit with an unexpected tax of 25 per cent rental income.

Where in World
No matter where in the four corners of the globe you are considering a claim on your piece of paradise, it is of paramount importance to do your research. The purchase of property abroad involves myriad areas of the law – ranging from tax regulations and immigration rules to zoning restrictions and inheritance planning. Don’t trust luck and throw caution to the wind. Seek expert advice and above all, do you homework. As with the purchase of all overseas property, un-prepared matters will never sort themselves out, and it will never be ‘alright on the night’.

Check List
Consider the following (non-exhaustive) list as a spot check to help you on your way:

• Have you contacted the appropriate embassy/consul for immigration/residency rules?
• How much income or net worth is legally required by a foreign national for the acquisition of property?
• What about wills (UK and host country)?
• Does the property have a clear title?
• Is your legal representative fluent in both English and the local language?
• Unfortunately?
• Is your estate agency regulated?
• Have you scrutinised local zoning laws?
• If you change your mind prior to the exchange of contracts, will your deposit be refunded?
• Is there a cooling off period?
• Have you taken professional financial and tax advice?
• Are there any restrictions on renting out the property in your absence?
• What tax is payable on rental income?
• Does the host country have a double tax treaty with your country of domicile?
• Are you clear about what you will pay for local property taxes?
• What is the position of capital gains tax?
• If you are buying off-plan, does the development have bank guarantees/bonded insurance if the project goes bust?
• Are restrictions imposed on foreign nationals opening a bank account?
• In the case of retirement, is entitlement to a pension in say the UK, transferable to the new country?

Postscript
Make sure you have spent enough time in the country to familiarise yourself with the different seasons – sunshine is one matter but monsoons are another. Do not shy away from talking to as many expatriates as possible who have already taken the plunge, and locals too. Their knowledge could prove invaluable in pointing out the pitfalls that fall outside of the legal intricacies of the buying procedure. Take the case of an upmarket Paris apartment in a neighbourhood that turned out to be plagued by drug dealers at night – a potential expatriate buyer learned this through informal discussions with the locals. Finally, keep a healthy contingency fund for the unexpected.