Buying Overseas – Legal Q&A

Q. Buying overseas remains popular for UK investors, but differences in the property purchase process across continental Europe and beyond can lead to problems. Is there a way that the risks associated with buying abroad can be mitigated?

For years there has been a steady flow of ex-pats making the move to sunnier climes, along with a growing number of those looking to buy a holiday home. Approximately 300,000 British households now own a foreign property, with many more still hoping to make their dream purchase overseas. However, while the weather may be more reliable abroad than in the UK, the advice you receive when purchasing a property overseas may not be so dependable.

Buying property abroad can be a complex process, fraught with difficulty. Therefore, for brokers and their clients, the combination of independent, expert legal advice and specialist insurance is imperative to stop that dream turning into a nightmare. Here are some specific tips that Goldsmith Williams Overseas Ltd (GWOL) recommends:

Expert advice
Clients should seek advice from reputable independent solicitors, architects and surveyors with a good knowledge of the property market, laws and processes in the country in question.

Legal backing
A lawyer will confirm that the property has title, planning, legal registration, etc. Just as prospective buyers should never buy ‘blind’ in the UK, potential overseas homeowners must not allow themselves to get carried away with the romantic aspect of owning the holiday home of their dreams.

Title insurance, which provides financial assistance in the event of ownership wrangles, is becoming increasingly popular for residential transactions abroad, as it offers the peace of mind that investors need when they venture into unfamiliar environments. It may also help the investor to secure a mortgage, as lenders may be reluctant to lend if they think there may be ownership or land registry issues.

In the UK, a one-off premium buys a title insurance policy which gives an owner perpetual cover against the known title defect, and/or protects a lender until the loan is repaid. Should an “onerous encumbrance” contained in the title deeds be enforced, the title insurer’s standard policy provides cover for the legal costs, which could include the cost of an out-of-court settlement, as well as compensating loss in the value of the land.

Costs and contracts
Costs should always be checked carefully and buyers should never sign anything that they do not understand. A comprehensive English translation of legal documents should be supplied so that the terms of any contract are clear.

Tax and Will implications
The implications of the laws affecting tax and wills should always be researched as each country’s laws can vary significantly. For example, failure to pay taxes in some countries can lead to court action and possible seizure of property.

Buying off-plan
Eastern European countries are proving very popular choices at the moment and buying off-plan is common in this region. It is important to look closely at the terms and conditions of any contract for a new build property and, if necessary, negotiate on them.

Whilst buying abroad may seem a complicated and risky business, with expert legal advice and insurances, brokers can help deliver for their clients the overseas dream.