In many countries the final payment for the purchase of a property will be done via a Bankers Draft. Having typically paid a reservation fee or initial deposit to secure the property and having hopefully instructed an independent lawyer to conduct all of the required legal work to ensure the purchase and the client is safe to proceed with the sale, the buyer would transfer the balance of the purchase price to their account in, say, Spain and then would arrange for their bank to issue a Bankers Draft. That Bankers Draft is physically handed over to the seller at the time of signing the Title Deed at the Notary.

So what is a Bankers Draft?

Quite simply it is a cheque that the Bank issue from your account. The Bank will immediately ring-fence the money to honour that cheque and therefore the person receiving it knows that the Bankers Draft won’t bounce, which is a possibility if they accept a “normal” cheque.
 
In Spain however, the seller has to declare in the title deed that they have received the money for the sale. They won’t do this without having received the money. The buyer doesn’t want to transfer the money to the seller before signing the title deed. Effectively neither party trusts the other and therefore they use a Bankers Draft as it is effectively as good as handing over cash at the time of completion.
  
So why use a Bankers Draft when buying a property abroad?

The reason for this is a combination of the fact that the title deed is signed at the Notary Public and the fact that that they don’t have “undertakings” for example in Spain. An “undertaking” is a professional promise between Solicitors in the UK. On the sale of a property in UK for example the purchase price will typically be transferred to the Client Account of the seller’s solicitor and the buyer’s solicitor will, in return, receive an undertaking to the effect that this money will not be released to the seller until completion takes place and that it will be returned if completion does not happen.
In Spain however, the seller has to declare in the title deed that they have received the money for the sale. They won’t do this without having received the money. The buyer doesn’t want to transfer the money to the seller before signing the title deed. Effectively neither party trusts the other and therefore they use a Bankers Draft as it is effectively as good as handing over cash at the time of completion.

How much does a Bankers Draft cost?

If you have just opened an account with the bank (as most people have done when buying a property in Spain) then you would normally expect the bank not to charge for a Bankers Draft. If, on the other hand, you have had the account open for a while then the Bank is likely to charge. The bank can charge 0.5% of the amount of the value of the bankers draft. Whilst this may seem expensive it is possible to negotiate this with the bank. In any event, this cost is relatively small compared to the potential risk of losing the money by transferring the money to the seller in advance.

Clearing a Bankers Draft into a UK account – time / several weeks if not months

If for example you are selling a property in Spain and wish to pay the Bankers Draft into your UK account you should be aware that;
 

1. It can take several weeks (sometimes a couple of months) for a Spanish Bankers Draft to clear through a British Bank account. It is therefore normally quicker to pay this into your Spanish Bank Account and then transfer this to your British account when it has cleared.
2. The exchange rate that you will receive from a high street bank in the UK may not be as favourable. 

If you would like to know more about how Bankers Drafts can assist you in a foreign property purchase then you can contact our international legal team

Disclaimer – International legal issues are a complex area of law and this information is no substitute for independent legal advice on an individual basis taking into consideration your personal circumstances and legal requirements. This information is provided to provide general information only and was correct at the time of publishing. The legal position in relation to international transactions can change frequently and this page may not have been updated following any changes in the law. You should therefore not rely on this information and should seek legal advice in relation to your personal circumstances.

It may come as somewhat of a surprise (or not) to learn that there are individuals operating on-line who are pretending to be solicitors and lawyers – both in the UK and abroad - in order trick and scam innocent victims out of money. The scammers often use the names of legitimate, reputable law firms and on first glance will appear to work for those law firms as part of the deception. Even going as far as setting up a website that mirrors the website of a genuine law firm with a very similar domain name.
  Notable scams include the following subjects;
 

• The fake inheritance scam
   
  You would receive a telephone call or an email from the fake lawyer abroad who informs you that some long lost relative has died and you are entitled to their inheritance. You of course have never heard of the relative because they never existed. You are then asked to provide your bank account details and some ID documents so that they – the scammers - can make a transfer of the funds to you directly. After supplying the ID documents, you are then asked to make a series of payments for various taxes, government administration fees, Notary fees and all manner of additional expenses to allow the transfer to be made to you. All designed to continue to extract funds under the promise of the inheritance being transferred to you. By the time you realise what has happened you may well have provided enough information for a complete identity theft and, if the scam is long enough, all of your savings. Of course there is no inheritance and the scammers disappear.
   
• The fake timeshare cancellation scam
   
  You would receive a telephone call or an email from the fake overseas lawyer in which you are informed that they have been made aware that you have a timeshare, and the good news is they can not only cancel your ownership but can also get all of your money back plus compensation. You may well have been looking for a way out of your timeshare for some time so this indeed seems like great news. You may even be informed there are no legal fees to be paid upfront and therefore you do not suspect that it is a scam. All that is required at that stage is for you to pay the relevant court fees to register your interest, some taxes, Notary fees and land registry fees. As with the fake inheritance scam, there is no cancellation and the scammers disappear after you have made the numerous transfers to their accounts.
   
  There are unfortunately quite a few timeshare cancellation scams around.

 

• The fake class action scam
   
  You would receive a telephone call or email from a fake foreign lawyer informing you that they are aware that you have money tied up in a failed property investment abroad. You are informed that they already have a class action against the developer and have already won a court case. There is a pot of money which has now been set aside to pay all of the victims of the failed development and that you are entitled to join the class action in order to recover your share of that compensation. You are told that this is a one-time offer and that you need to act quickly. All that is required is for you to pay the fees to register your claim, and some additional court taxes. Once all payments are made to the accounts they provide they will send you your cheque. Of course there is no court judgement, and the scammers disappear. 
   

As you can see all the scams work in a similar way – they offer you something and then gradually extract money from you. They are collectively known as “advanced fee scams” as there is always some reason why you need to pay something up front before the promised money is sent to you.
 
Of course the vast majority of companies who claim to be solicitors are genuine and only a small percentage of lawyers are fake but if you are contacted out of the blue you should be sceptical and do some research. There are various things that can indicate that the lawyer who contacted you is a scammer and several things that can help you avoid being scammed by a fake lawyer;  
 

• They contacted you out of the blue rather than you contacting them.
   
  If you are cold called by a lawyer or solicitor it is likely to be a scam. The Solicitors Regulation Authority Code of Conduct prohibits solicitors from making unsolicited approaches – i.e. it must not cold call. Similar regulations apply in other countries. In Spain, for example, the Codigo Deontologico de Abogacia Española (the Code of Conduct for Spanish lawyers) also prohibits cold calling. 
   

• They promise you something that sounds too good to be true; 

• If you haven’t bought a lottery ticket it is impossible for you to win the lottery.

• Why would a court make an order of compensation in favour of somebody who was not part of the litigation that resulted in that compensation being awarded?

• Does what they are telling you seem logical and make sense?
   

• They tell you that you mustn’t tell anybody about what is happening.
   
  The reason that fake lawyers will tell you this is to avoid you speaking to anybody else or taking legal advice on the matter and the scam being discovered.
   

• Are they registered with the relevant Law Society or Bar Association 

Most Law Societies and Bar Associations these days have a website where you can look up details of law firms and lawyers. Are they registered? If they are do the details match exactly? Contact the lawyer at the details on the Law Society or Bar Association website and see if it goes through to the same person. 

• How permanent do they look? 

 

• Have you carried out a Google Search?

   

• What does their website look like?

 

With British people being one of the main groups of foreign owners of properties in Spain it is hardly surprising that occasionally a British person sells his or her Spanish property to another British person. Typically, we see the buyer initially converting their Sterling to Euros, paying the seller the purchase price of the property in Euros and the seller then converting the Euros back into Sterling.
   
In the case set out above where, for example, a British client buys a property in Spain from a British seller. The contract of sale can be drafted in such a way as the purchase price can be set in Sterling rather than Euros and can also be paid in the UK rather than Spain.
There are several things that would need to be taken into consideration however;
 

1. The Notary in Spain will need proof that the purchase price has been paid. In past years it was enough for the seller to confirm that they had received this but recently for Anti-Money Laundering purposes Notaries in Spain have started asking for copies of proof of payment.
    
2. The transfer tax that is payable on the sale (the Spanish equivalent of Stamp duty – Impuesto de Transmisiones Patrimoniales) still has to be paid in Euros. Therefore in the purchase contract and title deed it will be necessary to have a Euro equivalent so that the taxes can be based on that.
    
3. If the seller is non-resident in Spain then part of the price has to be paid in Spain in Euros.
    

If you would like to know more about buying property abroad in Sterling then you can contact our international property legal team.
 
Disclaimer – International legal issues are a complex area of law and this information is no substitute for independent legal advice on an individual basis taking into consideration your personal circumstances and legal requirements. This information is provided to provide general information only and was correct at the time of publishing. The legal position in relation to international transactions can change frequently and this page may not have been updated following any changes in the law. You should therefore not rely on this information and should seek legal advice in relation to your personal circumstances.