Contract case studies for overseas property purchases

1st February 2017

The Author: Olivia Williams
Olivia works as a Customer Relationship Manager in Palma for United Advisers Marine. Olivia enjoys being the first point of contact for all her clients helping with any queries or questions they may have.

“Learn from the mistakes of others. You can’t live long enough to make them all yourself.”

These are wise words from Eleanor Roosevelt and particularly relevant for those thinking of purchasing an overseas property.

Simon Conn is an overseas property and finance expert who has been in the business for more than 35 years. Simon has been on hand to rectify mistakes made by potential purchasers on numerous occasions. We speak to him about two key case studies, so that you don’t fall foul of the same mistakes.

The subtleties of language

We have written at length about the importance of getting your legal contracts correctly translated before signing. The following case study highlights just how important this is, and why Google translate isn’t a definitive resource.

Simon tested various translation options available to demonstrate how much the meaning of a document could differ. To ensure a fair test, both human and automated services translated a Spanish legal document provided by an expert property lawyer.

Unsurprisingly the automated translations were hard to read, the phraseology awkward, and many words lost all meaning. There were also several technical terms that remained untranslated.

Simon tested two levels of human translation; a Spanish tutor, and a professional translation service. There was a significant improvement in the document produced by the Spanish tutor. However, there were still errors, with keywords and phrases missing.

Simon adds:

“People might think it is safe to use a foreign language tutor because they can understand both languages, realistically they will not have access to the experience or knowledge that a larger professional company would. Of course, some might, but the majority will probably know very little about Spanish law or the formalities of purchasing a property.”

Our sample document included the Spanish word “censos”; this usually means a survey (census), however, in this context, it referred to a leasehold; two very different things. This type of misunderstanding can create costly problems further down the line. The correct context of the word “censos” was only picked up by the professional translation service.

Just as you would hire your own lawyer, rather than using one recommended by the seller, you should use an independent translation service. The professionals you hire to help with the purchase of your overseas property should always have your interests as their priority. This is less likely to be the case if they also represent the seller.

Simon adds that:

“Legal contracts can feature very technical words and phrases that are alien to people purchasing a property. Therefore, when they receive the translated documents back, they may just assume they are okay and sign them. Using an independent lawyer who understands the law in their home country and in the country where they are purchasing will ensure that you are protected when purchasing your overseas property. They can check any legal documents thoroughly and advise how it could affect buyers personally on both a legal and possibly tax basis.”

Great expectations

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.”

Donald Rumsfeld

Once your contract is correctly translated, it is time for another key contract challenge; what is missing. Even the most commercially minded foreign property buyer cannot be expected to know exactly what a foreign contract should and should not include.

Simon highlights the case study of Mr B:

“He and his wife had set their hearts on a lovely property at the upper end of the market in Spain and contacted me after their viewing trip. By that time, they had already agreed a good price with the estate agent, and the agent had gone to the trouble of preparing a contract in both languages.

But the agent was putting what Mr B felt was undue pressure on them to pay a deposit. He was a successful businessman and his instincts were telling him he should really call on some professional help. His usual solicitor did not have the expertise to advise them so referred Mr & Mrs B to us.

The translation was accurate, but a few issues immediately leapt off the page. The deposit was way too high and Mr & Mrs B were being asked to pay the deposit over before the team had had a chance to carry out further legal checks. The agent’s contract was also worded in such a way that Mr & Mrs B would not have been legally entitled to back out, even if the results of their legal checks did not stack up.

This demonstrates the difference between having legal support that can give the right advice. Because of the insight, a four rather than five, figure deposit was needed to reserve the property. Furthermore, the agent’s contract was re-drafted to make sure Mr B could get his money back if it were not given the green light following title and planning checks. Having the right support in place made it easy for Mr B to check out his gut reaction to the unnecessary pressure the agent was putting on them to secure the deposit.

Although we wouldn’t recommend it, you can go it alone when purchasing a property. If you decide to follow this path, check you are up to date with the current legislations and the obligatory elements in local property contracts. The more you can reduce the ‘unknown unknowns’ the more secure your property purchase will be. The best way to do this is to employ the skills of an expert who knows and understands the market.

Simon Conn United Advisers Partner Profile










This article was adapted from an original blog post on Simon’s website: Do you know what you are signing when purchasing an overseas property.

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