What Property Tax Debts Can Be Claimed from the Buyer?

3 June, 2024
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Real Estate
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Neus Vallara


When transferring a property, it is crucial to verify that the property has no outstanding debts in terms of Property Tax (Impuesto sobre Bienes Inmuebles, IBI). The reason is that any possible debts have a real attachment to the property, either in the form of direct liability (tacit legal mortgage) or under subsidiary liability, so the new buyer may end up being responsible for them.

In this article, we explain what the tacit legal mortgage and subsidiary liability regarding Property Tax debts entail. Additionally, we debunk some common misconceptions about the claim of IBI debts.

What is the Tacit Legal Mortgage Regarding Property Tax Debts?

The tacit legal mortgage is regulated in Article 78 of the General Tax Law, which states that “In taxes that periodically levy on assets or rights registrable in a public registry or their direct, certain, or presumed products, the State, the autonomous communities, and local entities will have preference over any other creditor or buyer, even if these have registered their rights, for the collection of accrued and unpaid debts corresponding to the natural year in which payment is required and the immediately preceding year.” This is known as the tacit legal mortgage. Since the IBI is a periodic tax levied on the ownership of certain rights regarding real estate, the debt of the current year and the immediately preceding year will be guaranteed by the tacit legal mortgage and will take precedence over the claims of other creditors, such as a creditor who constituted a mortgage as security.

It is important to note that the liability extends to the entire existing debt, i.e., the quota plus the accrued interest, surcharges, and costs.

What is Subsidiary Liability Regarding Property Tax Debts?

Subsidiary liability is regulated in Article 64 of Royal Legislative Decree 2/2004, of March 5, which approves the revised text of the Law Regulating Local Treasuries. This article states that, in the case of property transfer, the property will be liable for the payment of the total tax quota under subsidiary liability. Subsidiary liability requires that the principal debtor be declared insolvent and that the administration issues a declaration of liability, which must be notified to the subsidiary liable party.

In this case, the liability extends only to the tax quota, without including debts for interest, surcharges, or costs. In other words, it is as if the administration re-issues the bill to the new owner.

How Can I Avoid Property Tax Debts If I Am Going to Buy a Property?

Firstly, if the parties have negotiated that the properties are transferred up to date with the payment of Property Tax, it is recommended that this express agreement be recorded in the earnest money contract, giving it the status of an essential condition, which will allow, in case of breach by the seller, not to formalize the purchase without attributing the breach to the buyer.

It is also advisable, at the time of formalizing the earnest money, that the seller provides a certificate issued by the Administration stating that there are no debts related to the cadastral reference of the property. If there is a debt, it is recommended to condition the transfer to the debt being settled at the time of the signing of the purchase deed.

At the time of formalizing the purchase deed, it will also be convenient for the seller to prove that the property is up to date with the payment of IBI. Although Notaries usually check the debt status of the cadastral reference corresponding to the property, not all municipalities are attached to the consultation system, so it is advisable to request that the seller provides an administrative certificate, in addition to what the Notary might request.

Common Misconceptions About the Liability of Property Tax Debts

Both the tacit legal mortgage and subsidiary liability have generated several confusions or erroneous beliefs.

Firstly, there is a widespread confusion regarding the number of years for which the Administration can claim from the new owner in the case of subsidiary liability. Although the General Tax Law establishes that the Administration’s right to demand payment of assessed and self-assessed tax debts expires after four years, it should not be forgotten that this prescription can be interrupted, which restarts the period to claim the debt. Therefore, although we have often heard otherwise, it is not true that the Administration can only claim the debt of the last four years through subsidiary liability. In case of transfer, the property is liable for the tax quota that is not time-barred, which can be from the last four, six, or twelve years. Hence, we should not make the mistake of thinking that debts older than four years are not claimable from the new buyer.

Another misconception is believing that if the seller has no debts with the Administration at the time of transfer, the property does not either. This is also FALSE. The debts may correspond to previous owners of the current seller. Therefore, be very cautious with certificates indicating that the owner has no debts with the administration, as the information they provide is partial. The most advisable thing is for the seller to provide a certificate indicating that there are no debts related to the specific cadastral reference of the property. This can prevent unpleasant surprises later on.

Finally, another misconception is that the claim through the tacit legal mortgage is not compatible with the claim through subsidiary liability. This statement is FALSE, as these two routes are not mutually exclusive. This means that the Administration can directly claim from the new owner the debt of the current year and the immediately preceding year and, additionally, claim the remaining annual amounts through subsidiary liability.

If you have any doubts or need more information, you can contact the real estate law department of MES Advocats at this link.

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