Due Diligence When Buying Property in Mallorca

Objective of Due Diligence

The review should confirm that the seller can effectively sell, the property matches the described object, all essential permits are in place, there are no unexpected encumbrances, and the tax structure is correctly calculated. Especially with premium properties in Mallorca, risks often arise not from obvious ownership issues but from extensions, pools, guest houses, rustic plots, coastal protection, community rules or tourist use.

Legal Review

The starting point is a current Nota Simple or, for higher risk, a register certificate from the Registro de la Propiedad. Items to check include owner, co-ownership shares, usufruct, mortgages, embargoes, easements, pre-emption rights, resolutory conditions, pending proceedings and references to urban planning or tax burdens. When companies are sellers, this includes authority to represent, commercial register extract, beneficial owners and anti-money laundering checks.

The register data must be reconciled with the Escritura, the Catastro and the actual property. Catastro is important for location, areas, use, reference value and cartography, but does not replace proof of ownership. Discrepancies in plot size, built area, pool, outbuildings or use should be clarified before signing, as they affect financing, tax base, permits and future marketability.

Permits and Use

The buyer should have the construction and use history documented: building permits, project documents, certificate of final works, declaration of new construction or renovation works, registration in the land register, first occupation license or relevant declarations, and the valid cédula de habitabilidad. In Mallorca, the cédula de habitabilidad is particularly important for sale and rental, and often also relevant for final connection to electricity, water and other services.

For fincas and plots in suelo rústico, additional caution is needed. The Consell de Mallorca points out that for new residential buildings in rural areas, a minimum area of 14,000 m² is generally required and only one dwelling per plot is possible, subject to further territorial and municipal rules. Therefore, check subdivision, legality of all buildings, possible proceedings by the Agencia de Defensa del Territorio, water supply, wells, wastewater, access and protected zones.

For properties near the sea, a comparison with the Coastal Law is necessary. Servidumbres de tránsito and protección can restrict renovations, fences, terraces, pools or extensions. For apartments and complexes in community ownership, check the declaration of division, statutes, minutes, approved special assessments, outstanding community debts and restrictions on tourist rentals.

Technical Review

A technical due diligence should be carried out by an independent architect, aparejador or engineer. Check building fabric, roof, facades, moisture, hillside location, retaining walls, foundation, building services, air conditioning, electrical installation, pool technology, wastewater, energy efficiency, fire protection and maintenance condition. For renovated luxury properties, it is crucial whether the executed quality matches the permits, invoices, guarantees and manufacturer documentation.

The energy certificate must be available and registered at the time of sale; however, it does not replace a structural technical inspection. For new builds or newer properties, also relevant are developer guarantees, decennial insurance, handover protocols and defect lists. For older properties, the buyer should conservatively estimate costs for roof, moisture, windows, insulation, electrical and plumbing modernization.

Tax Review

For buyers, it is first crucial whether it is an existing property or a new build from a developer. When buying an existing property, ITP generally applies in the Balearic Islands. This property transfer tax is calculated progressively: 8% up to €400,000, 9% for the next bracket up to €600,000, 10% up to €1,000,000, 12% up to €2,000,000 and 13% above that. When buying a new build from a developer, VAT (IVA) generally applies, usually 10% for residential properties, plus AJD. In the Balearic Islands, AJD is generally 1.5%, for properties over €1,000,000 it is 2%, and in certain cases of VAT exemption waiver, 2.5%.

The tax base is not only the purchase price. Since 2022, the cadastral reference value may be decisive for ITP/AJD and inheritance or gift tax if it is higher than the declared price. Therefore, querying the valor de referencia is part of every tax due diligence. If the seller is not resident in Spain, the buyer must generally withhold 3% of the purchase price as a payment on account of the seller's tax and remit it via Modelo 211.

The budget also includes notary, register, gestoría, possibly financing costs, ongoing IBI, waste fees, community costs, and for international buyers, possible obligations from IRNR, rental, wealth tax or solidarity tax on large fortunes.

Risks Before Signing the Contract

Before reservation, arras or private contract, at least the following conditions should be secured in writing: unencumbered transfer or clear cancellation mechanism, current register information, complete permit file, valid cédula, energy certificate, community debt certificate, technical inspection, tax calculation, financing conditions and verifiable payment channels. Deposits should not be made without clear withdrawal rights if essential documents are missing.

• Red flag: The seller cannot clearly prove ownership, authority or family status.
• Red flag: Catastro, land register and reality show different areas or buildings.
• Red flag: Pool, guest house, basement, pergola or extension is not permitted or not registered.
• Red flag: There are outstanding mortgages, embargoes, community debts, IBI arrears or unresolved special assessments.
• Red flag: The property is advertised with tourist rental potential, but license, zoning, capacity and community consent are not proven.
• Red flag: Cash payment, unusual payment channels or offshore structures are proposed.

Practical Recommendation

For high-quality properties in Mallorca, due diligence should be conducted as a coordinated process: lawyer, notary, tax advisor and technical expert review different risks. Only when legal, technical and tax results align should a binding contract be signed. A thorough review takes time but protects against the most expensive mistakes: non-legalized building parts, overestimated usability, unexpected taxes and encumbrances that complicate resale.