“I don't understand why I can't sell the apartment,” David asked me, perhaps for the 10th time during our meeting. David, a former security establishment man, had bought the apartment a few years earlier with his retirement severance pay.
“Remember, when you bought the apartment I explained to you that the land attached to the apartment could not be registered in your name because you are not a local citizen. After consulting with the agent you agreed that the land would be registered in her name.
I warned you then that this might create problems in the future and that perhaps you should look for another solution, and that at the very least you needed to take an irrevocable power of attorney from her. You said you trusted her and that everything would be fine. It's not that you can't sell the apartment,” I replied.
The agent, who was registered as the owner of the proportionate share of the land attached to the apartment, demands that David pay her several thousand euros for the sale of the land, even though David paid the entire consideration for the purchase.
At the end of the meeting with David I called the local partner and asked him to hold a conversation with the agent. After an unsuccessful conversation with her, it was my turn to have a conversation with her, which was apparently much less pleasant than the conversation with the local partner, to the point that the next morning she called back and announced that she would sign a power of attorney for the sale of the land provided that her expenses, in the amount of a few tens of euros, were paid. I agreed immediately, without obtaining David's consent, in order to speed up the process of selling the apartment before the buyer “cooled off.”
How could David have avoided the frustration and unpleasantness he found himself in, which could have amounted to a loss of thousands of euros and perhaps the loss of the entire sale?
Well, since in some countries a foreign citizen cannot own land but only the house/apartment built on it, there is a need to find solutions for registering ownership of the land. But... it must not be forgotten to protect your rights as an owner, or as someone who paid the full consideration, so that in the future you can sell the house/apartment without being subject to the extortion of whoever is actually registered as the owner of the land.
The simple solution is to register the land in the name of the agent or a local friend, but in such a case you must obtain some security, such as an irrevocable power of attorney from the person registered as the owner of the land, which will allow selling the land without needing the owner's signature and without paying any consideration to the person registered as owner. If possible, you can draw up an agreement with the person registered as owner that grants you the right to sell without needing his signature/consent and without your being required to pay him when the land is sold, and register this agreement in the local land registry.
There is also an option popular with real estate marketers to recommend setting up a local company in the country where the property is purchased that will be the owner of the property and the land. In such a case you must take into account the costs involved in opening the company and managing it on an ongoing basis (bookkeeping, filing reports with the local tax authorities, accountant's fees, fees and so on), which eat into the return. If you intend to buy only one apartment (no matter in which country), I think this is a less good/recommended solution.
I recommend that my clients protect themselves also when the development/construction company proposes that the proportionate share of the land remain in the company's name, not out of fear that it will demand payment in the future for signing the sale documents, but mainly out of fear that the company will be dissolved/disappear by the time the buyer wishes to sell the apartment, and then legal proceedings will be required that will take a long time and cost the buyer money in order to carry out the sale.
Don't fall into the same trap David fell into! Before you buy a property abroad, it is important that you know the rules of the game and consult a lawyer who works in international real estate.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית