Purchasing a property in a foreign country can seem like a minefield as you try to understand the differences between the process you know and a new one you entrust a professional to advise you about. One of the questions that often arises is, who is responsible for payment of council rates? First of all, lets define what council rates are.
All properties are registered on the local Town Hall’s (Ayuntamiento) system and each property is given a unique reference number known as the “Referencia Catastral” that consists of a series of 20 letters and digits. This reference contains a complete description of the property to include type, building size, plot size, tax value of the land as well as the tax value of the building. This information may be subject for review so the tax value may increase or decrease once an inspection has been carried out. Each time ownership of a property changes, the Town Hall should be informed so the necessary changes can be made on their system and the council rates bills can be issued to the correct person each year. Council rates may vary depending on the Ayuntamiento; all charge Property Tax (known as Impuesto sobre Bienes Inmuebles “IBI”) but variations may apply when it comes to payment of Domestic Refuse Collection and Drainage as some may not charge one or the other or in the case of the Ayuntamiento de La Oliva, drainage is included in the water bill.
These rates are calculated based on the tax value not the market value of the land and the building itself or water consumption in the case of those areas where drainage is included in the water bill. The voluntary payment period also varies from Ayuntamiento to Ayuntamiento, so it is important to ensure you are properly informed about this.
Now that you know what council rates are, we can continue with the matter at hand and determine who is responsible for payment of these rates when a property is sold. Well, up until now, the rule has always been that the person who holds ownership of the property on the 1st January of the year is responsible for payment in full of council rates, regardless of the month in which ownership of the property is transferred. Even though some parties up until now may have come to a private agreement about payment and split the bill between them, this may now become the norm according to a recent Spanish Supreme Court ruling on the 15th June of this year.
Said ruling stipulates the possibility of the vendor deferring partial payment of council rates to the purchaser for the time they would take ownership of the property in the year the sale takes place. The ruling also establishes that in the event a specific agreement is not reached about payment, the vendor would be responsible for it, even though he may defer payment to the purchaser in due proportion.
The only way to prevent this situation would be to establish an agreement to the contrary in the sale and purchase contract, i.e., it would have to expressly state the vendor is responsible for the annual bill in its entirety.
This ruling is based on the following legislation:
- Art. 1445 and onwards of the Spanish Civil Code, “Código Civil”
- Arts. 61, 63 and 75 of Local Tax Collection Law, “Ley de Haciendas Locales”