How to ensure your foreign property transaction goes smoothly
A cottage retreat deep in the French countryside; a sleek high rise penthouse in
Hong Kong; a spacious new build complete with swimming pool in the Melbourne suburbs.
The choice for those seeking a permanent base, holiday home or investment opportunity
overseas has never been greater.
But with every mouth-watering destination comes a complex set of laws and processes
governing property transactions. Grappling with the legal matrix needn’t detract
from the thrill of securing the property of your dreams but any prudent buyer should
consider the legal implications of purchasing property overseas. Here we examine
some of the key issues.
Property law varies enormously between countries. Something as simple as “ownership”
of a property may not mean the same thing as at home. Many jurisdictions do not
allow foreigners to hold real estate while others, like the UAE, restrict foreign
buyers to specific areas. In some locations it is common for foreigners to register
a company and use this to purchase property. There may be significant legal and
practical differences between this and owning the property in your own name.
Many popular destinations have building standards and regulations that are equal
or superior to those in the UK. However, in certain countries you will need to check
things you would take for granted when buying a property at home, like whether the
property has a safe and reliable electricity and water supply. You may wish to have
a registered surveyor examine the property. The Royal Institute of Chartered Surveyors
has around 100,000 members across the globe.
It’s also advisable to find out about the rules on planning permissions. Even if
you don’t intend to do any extensions or major building works, minor modifications
like knocking down a garden wall might require permission.
The purchase of foreign property brings with it a wide range of tax considerations
in the UK and overseas countries. The UK has treaties in place with many countries
to prevent British residents and property owners abroad having to pay the same tax
in both countries, but not all taxes are covered by this. For example, inheritance
tax isn’t included in the treaty between the UK and Spain. With good tax planning,
purchasing a property overseas can be a great financial investment, and you should
consult a qualified tax adviser.
Having decided to go ahead with the purchase, those not fortunate enough to have
the spare cash to buy outright will need to look at financing options. There are
two main possibilities: take out a mortgage in the country where you are buying
the property; or remortgage your home in the UK and use the cash to finance the
overseas purchase. Both options have relative legal and financial advantages and
you should take independent financial advice to decide which best suits you.
Finally, get legal advice at all stages in the process from a specialist in the
country where you are looking to buy. Some jurisdictions require property transactions
to be conducted by a public notary. The notary is a neutral figure appointed to
ensure that the transaction follows the legal process, not to advise the parties
concerned. You should get an independent advisor to protect your interests.
These are just a few of the legal matters that you are likely to encounter when
buying property abroad. The good news is that with common sense, proper research
and, above all, appropriate professional advice, anyone can enter into a foreign
property transaction with the same security they would have at home.
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