Three documents decide most secured transactions in Spain long before anyone discusses price: the registry extract, the valuation, and the list of what is already charged against the asset. A borrower who understands what a lender reads in each of them can anticipate the objections. A borrower who does not will spend weeks answering questions that the documents had already raised.
The nota simple, and what it is not
The nota simple is an informative extract from the Land Registry. It states who owns the property, how it is described, and what charges and limitations are recorded against it. It is worth being precise about its limits: it is informative, not certifying. Where a transaction needs a document with full legal effect, the certified extract is the one that carries it.
The distinction is written into the Mortgage Law. Article 222(5) of the Mortgage Law gives the nota simple purely informative value and states that it does not attest the content of the registry entries, and Article 225 provides that the freedom from charges or the burden on a property can be proved against third parties only by a certificate from the Registry. The same Article 222(5) sets what the extract must show at least: the identification of the property, the identity of the holders of registered rights, and the extent, nature and limitations of those rights, together with any prohibitions or restrictions affecting the holders or the rights.
Two practical points follow. The extract must be current. One obtained six months ago tells a lender what was true six months ago, and charges are registered continuously. And the extract must cover every registered unit involved. A building divided horizontally has an entry per unit, and a file that produces one extract for a property with fourteen registered units has produced almost nothing.
Reading the charges section
The charges section is where transactions are made or lost. Several categories appear, and they do not carry the same weight.
Mortgages are the obvious one, and what matters is not only the outstanding balance but the registered maximum, which can be considerably higher than the debt actually owed. A lender assessing available equity looks at the registered figure until it is shown a certificate of the real balance. What is registered is set by Article 12 of the Mortgage Law: the entry states the principal of the debt and, where applicable, the agreed interest, or the maximum amount of mortgage liability, identifying the obligations secured.
Embargoes are court or administrative attachments, typically for unpaid tax, social security or a judgment. They are not fatal, but they change the sequence: an embargo has to be quantified, negotiated and lifted, and that takes time no one has usually budgeted. On the extract they appear as preventive annotations, which Article 42 of the Mortgage Law makes available, among others, to whoever obtains an attachment order enforced against the debtor’s real estate.
Charges that follow the asset
Tax affections are a category foreign borrowers routinely miss. When a transfer has been self-assessed for transfer tax, the property itself remains answerable for any shortfall for a period, whoever owns it. It is a charge attached to the asset rather than to the person, and it survives a change of owner.
The rule is Article 5(1) of the consolidated Transfer Tax and Stamp Duty Law. The property transferred remains subject to payment of the taxes on that transfer whoever holds it, subject to the exceptions in the same provision, of which the one that concerns real estate is a holder protected by the public faith of the Registry. A holder is not so protected where the Registry expressly records the affection. Article 79 of the General Tax Law supplies the mechanism: an acquirer of an asset charged by law with a tax debt answers with that asset, subsidiarily and by derivation of the tax claim, if the debt is not paid.
Then there are the charges that do not appear on the extract at all and still attach to the property: unpaid local property tax within the periods the law allows, and unpaid community of owners contributions for the current year and the preceding three, which under horizontal property law follow the flat as well as the owner who owed them. A lender will ask for certificates on both. A borrower who has not obtained them has left a hole where a number should be.
For local property tax, Article 64(1) of the consolidated Local Finance Law charges the property with the full tax due whenever title to the rights on which the tax is levied changes, for whatever reason, as a subsidiary liability under the General Tax Law, and requires the notary to request information on pending amounts and to warn the parties about them in the deed, among other matters. For the community, Article 9(1)(e) of the Horizontal Property Law makes the acquirer of a flat or premises answer with it, even with a registered title, for general expenses owed by previous owners up to the amounts attributable to the elapsed part of the year of acquisition and the three preceding calendar years. The seller must declare in the deed that contributions are paid or state what is owed and provide a certificate from the community matching that declaration; without it the notary cannot authorise the deed, unless the buyer expressly releases the seller from that obligation.
A charge that nobody mentioned is worse than a charge that was disclosed and priced. The first costs credibility, the second only costs money.
The valuation, and why the lender wants its own
A valuation prepared by a valuation company registered with the Bank of Spain, following the regulated methodology, is the reference document in Spanish secured lending. It gives market value, and where relevant the value for mortgage purposes, which is deliberately more conservative because it ignores speculative elements.
Borrowers frequently arrive with a valuation commissioned for another purpose, or one prepared some time ago, and are surprised that the lender wants a fresh one at the borrower’s cost. The reason is not distrust of the number. It is that the lender needs a valuation addressed to it, current, and prepared on the basis it will have to defend if the asset ever has to be sold. Where the borrower’s own valuation and the lender’s differ materially, the gap itself is informative: it usually reflects an assumption about planning, absorption or condition that deserves to be examined.
For assets whose value depends on operation rather than bricks, such as hotels or serviced buildings, the valuation exercise is different again and the business plan carries part of the weight. Our note on core, core-plus and value-add strategies sets out how that shifts the risk profile.
The rules behind the valuation
The rules frame the request for a fresh valuation. A valuation issued under Order ECO/805/2003 expires six months after the date of its report, under Article 62(4), and the Order defines the value for mortgage purposes in Article 4 as a prudent assessment of the future possibility of trading the property, from which speculative elements are excluded. And where the lender is a credit institution, Article 20 of Royal Decree-law 24/2021 obliges it to accept any valuation the client provides, provided it is prepared by an approved valuer and has not expired; the institution may carry out whatever checks it considers appropriate, but may not pass their cost to the client.
The valuation also does procedural work. Article 682 of the Civil Procedure Law sets the conditions for using the special enforcement procedure against a mortgaged property, and one of them is that the mortgage deed state the price at which the parties value the property for the auction. Where a valuation has been carried out under the provision to which that article refers, the price can in no case be lower than 75 per cent of it. A low valuation of that kind therefore lowers the floor for the auction price the parties can set in the deed.
Ownership, powers and the chain above the asset
Where the registered owner is a company, the lender needs to see the chain above it. Who owns the company, who is entitled to bind it, and whether the person signing holds sufficient powers, granted before a notary and registered where required. Where the owner is foreign, powers granted abroad generally require legalization or an apostille and a sworn translation, and this is a step that reliably adds days when it is discovered late rather than planned.
Inheritance is the other frequent complication. A property that has passed on death but where the inheritance has not been formalized and registered cannot be pledged by the heirs as though it were theirs, and resolving it is measured in months. It is better found in the first week than the fifth.
The registry rule behind this is Article 20 of the Mortgage Law. To register a deed that declares, transfers, charges, modifies or extinguishes a right over property, the right of the person granting it, or in whose name it is granted, must already be registered or annotated, and where the Registry shows the right in someone else’s name the registrar refuses registration. The same article lists the cases in which documents granted by heirs can be registered without that prior step, and a mortgage granted by heirs over property still registered in the deceased’s name is not among them.
Costs the documents imply
Formalizing a mortgage in Spain carries notary fees, registry fees and, on the mortgage deed itself, stamp duty. Since the 2018 reform, the lender rather than the borrower is the taxpayer for stamp duty on mortgage loan deeds, which does not make it free: it is priced into the facility. What matters for the borrower is the total cost of the money over the period it will actually be outstanding, which is the calculation we set out in our note on private debt secured on Spanish real estate.
The 2018 reform is the second paragraph of Article 29 of the consolidated Transfer Tax and Stamp Duty Law, inserted by Royal Decree-law 17/2018 for taxable events accruing from its entry into force: where the deed is of a loan secured by a mortgage, the lender is the taxpayer. The same decree-law added letter (m) to Article 15 of the Corporate Income Tax Law, so that for a lender subject to that tax the stamp duty due in those cases is not deductible.
The practical sequence
Obtain current registry extracts for every unit. Obtain certificates for outstanding balances on any registered mortgage, for local property tax, and from the community of owners. Commission a valuation from a registered valuer, addressed to the lender. Document the ownership chain and the signing powers, apostilled and translated where the owner is foreign. Only then approach the market.
Done in that order, the file answers the lender’s first three questions before they are asked. Done in the reverse order, which is the common case, each answer arrives a week after the question, and a transaction that could have closed in six weeks takes four months or does not close at all.
Montclare structures and arranges financing secured on European assets, and prepares the corporate and tax structure that sits behind it. Our services are set out on our services page.
This article is informational and does not constitute tax, legal or financial advice. Lending and credit intermediation are regulated activities and the treatment of any transaction depends on its facts. Each engagement is subject to scope and applicable regulation.