Buying and Owning Property in the EU

Buying and Owning Property in the EU

08.08.2019 11:49

Buying property in the EU 

One of the most important things to keep in mind when buying property in the EU is Lex Rei Sitae or “the land where the property is situated”. It is a legal document of property law and international law stating that different sets of land/real estate depends on the EU member state upon which it is situated. 

What does this mean? It means that purchasing real estate in the EU does not constitute a single-structured method, but rather, common elements found amongst the different legal systems of EU member states. 

Influences of legal systems 

In both land and immovable property laws, there are a number of channels between the legal systems throughout EU member states. For example, France, Belgium and Luxembourg incorporate the system of the Code Napoleon. Portugal, Spain and Lithuania use the Civil Law System based on the Roman Law Model. Malta and Cyprus incorporate both Common Law and Civil Law. Different legal systems correspond to different formalities with regards to land and immovable property laws.

Most of the EU member states incorporate the Civil Law System; however with each having derivatives from specific codes and law models, (this especially applies to EU member states of the Eastern European region). 

In the European Union, everyone has the right to own and use their lawfully acquired possessions. However, the land/property laws of EU member states of the European Union are not harmonized. This means that, if you wish to buy property in a specific EU member state, the land law of that EU member state applies.  

Difference in Land/Real Estate Regulations

Here are some examples of differences between land/property regulatory distinctions of EU member states: 

  1. Differences in contractual requirements (what to include/exclude, languages) 
  2. Transfer of property ownership by notary public vs. transfer of property ownership by Land Registry
  3. Permit to purchase property or land vs. no permit requirement 
  4. Legal obligations of the preliminary contract 
  5. Property deeds vs. application of ownership to Land Registry 
  6. Registration tax 
  7. The length of time for the registration of property ownership

The transaction process for the registration of real estate/land ownership is a product of an EU member state’s legal system. For example, the purchasing contract in France comes in two different forms, Promesse de Vente or the Compromis de Vente, the main difference being that the Promesse de Vente requires the presence of the notary public, while the latter, not necessary. In the Netherlands, the public notary is the one responsible for drawing up the sale contract and registering it. While in Hungary, before considering a contract, Non-EU citizens require the permit to allow for the purchase of real estate/land.

The reason why the rules for purchasing property are treated differently in each EU member state is because the property is immovable. It serves as an actual part of the land of the state and affects the environment the region. 

Similarly, the property rights enforced in a particular EU member state are related to the way its citizens view and practice law as part of their culture and history. 

Problems Encountered When Buying Property in the EU

The following lists common situations concerning the foreign purchasing of land/immovable property in the EU.  
Properties off plan: buying property in the EU that is off plan has previously set some problematic situations. Some examples include: 

  • Incompletion of the development project by developers for various reasons
  • Failure to meet deadlines of completion of the development project
  • Constructing development projects outside the green zone 
  • Constructing development projects in very isolated areas (i.e. lack of infrastructure)
  • Properties with missing structural elements 

Property buyers would have paid beforehand and face complicated legal battles in recovering their payment back. 

Administrative confusion: This often occurs when foreign buyers do not have enough information about the administrative process of a certain EU member state. For example, not knowing where to collect various documents, or where to submit them, miscommunication between foreigners and administrative officials, not knowing the timing for the payment of various bills or taxes etc. Administrative processes can be quite complicated for foreign applicants.  

Local transactions: This situation is similar to a culture shock when entering a country having a very different set of views and cultural expectations – but in the perspective of transactions. For instance, the promised deadline of certain documents taking longer than usual, unexpected utility bills, differently structured utilities, certain structural irregularities of a property, cases were the remodeling of a property requires some sort of permit etc. Many surprises arise because foreigners are not accustomed to the manner in which transactions are carried out. 

Legal uncertainty: Cases when the legal forces of certain EU member states created uncertainty in the property transaction. For example, properties that were built in a green zone were deemed illegally built because the legal entity enforced a law demolishing that green zone. Other situations involve legal entities that appeared to offer services in favor of the buyer, however were really after the interests of the developer.

Cross-border Transactions When Buying Property in the EU

The European Union’s function, in this case, is to provide a fair common market across Europe. It regulates cross-border transactions ensuring the fair and just treatment of both domestic and foreign buyers and sellers. This includes: 

  • Regulating the accurate marketing of property 
  • Cross-border contracting
  • Regulating the payment across national borders
  • Consumer cross-border transactions

The EU however does not direct its rules towards the substantive law of land/immovable property of EU member states. The Land/Immovable Property Law is regulated independently by each EU member state. 

Real Estate/Land Ownership in the EU 

Depending on the EU member state, foreigners may receive ownership of either: 

  1. Real Estate with land 
  2. Real Estate without land 

In this case, the ownership of real estate/land is rather straightforward, with the clear end product being full ownership of real estate or land or both. Full ownership corresponds with acquiring property rights, such as the right to rent out the property, or the right to sell the property. With the exception of Greece, which currently requires the nature of ownership over property/land to be predetermined before purchase (full ownership vs. bare ownership vs. usufruct ownership).  

Restrictions on the purchasing of land by non-EU citizens are often resolved in alternative methods. For example, a popular method involves the formation of a limited liability company in an EU member state. The company acts as a legal national allowing for the purchasing of land. 

In addition, some EU member states impose their own restrictions on the type of real estate permitted for ownership by foreigners, as well as the area in which real estate/land is located. 

Best Place to Buy Property in Europe 2019 

According to the report Emerging Trends in Real Estate®: Europe 2019 written by PwC and the Urban Land Institute, the top countries for buying property in the EU 2019 are (ranked accordingly):

  1. Lisbon
  2. Dublin
  3. Madrid
  4. Frankfurt
  5. Amsterdam
  6. Hamburg
  7. Helsinki
  8. Vienna
  9. Munich 

The report states that Lisbon has risen significantly from previous years due to Portugal’s growing economy and quality of life. The destination is currently a hub for international companies, investors and tourists.