03-04-2008 : Government tightend measures
The Government of the Balearic Islands has tightend it's measures to capture individuals or Companies that under declare the value of properties in sale transactions.With immediate effect they have asked that Notaries (via whom all property sale and property mortgage transactions must pass) must provide a copy of all official valuations associated with new mortgages.
Where sales transactions are under declared on deeds, in order to pay less taxes or utilise previously undeclared income for part of the purchase, and a mortgage valuation suggests a higher figure should have applied, then authorities may well investigate. Up till now the authorities have relied upon random searches where very obvious anomalies arise between the value of a particular transaction and those taking place in the same area for similar properties (not always easy where they also be under declaring!)
An interesting consequence of the new measures could also be to penalise buyers who seek "over" valuations from the banks valuer in order to obtain a larger mortgage. In these situations although the sale price may be correct the authorities may insist that the transfer taxes (generally 7% of price) be levied on the higher mortgage valuation figure rather than the actual agreed sale price.
It is recommended than anyone purchasing a property consult with their agent or lawyer should they have any concerns over the new rules.