When buying property overseas, it’s important to be aware that property laws in other countries can be very different to those in the UK and there are often issues to consider that you wouldn’t normally have to worry about when purchasing a property at home.
Far too many people fall into the trap of investing in a property abroad, only to be hit by unexpected problems that can end up leaving them seriously out of pocket. You therefore need to take the right steps to protect you against unforeseen risks when buying an overseas property to ensure your dream home in the sun doesn’t turn into a nightmare.
Taking out title insurance
Unless you have bought property in the USA, you may not have heard of title insurance. In effect, it is an indemnity insurance policy which protects against financial loss as a result of defects in the title of a property. While it is commonly used for property transactions in the United States, title insurance can also often be used in other countries as well.
A common example of a ‘defective’ title is if the wording of the title documents makes it unclear who the true owner of a property is. This means you might buy a property in good faith, only for a third party to claim ownership.
Title insurance can protect you from such issues, meaning you should not lose out financially even if an issue is uncovered with the title of an overseas property you have brought when the sale has already gone through.
Getting specific risk insurance
Specific risk insurance is something slightly different and is, as it sounds, designed to protect you against a specific risk associated with a property. This type of insurance is generally used where a problem is uncovered during the checks and searches involved in buying a property and the issue cannot be resolved.
For example, if it turns out that an extension to a property did not have the proper planning permission in place, there could be a risk of the local authorities later finding out about this and insisting the extension be demolished. While these kinds of issues can normally be resolved (e.g. by applying for retrospective planning consent), in those rare cases where a solution cannot be found, specific risk insurance can be vital.
Specific risk insurance can allow you to go ahead with the purchase knowing that, even if the issue identified does later end up costing you money, the insurance will cover the loss, meaning you do not end up out of pocket.
To find out more about this type of cover, please take a look at our article on 'Do I need specific risk insurance when buying property abroad?'
Using a property lawyer with professional indemnity insurance
When buying any property, you rely on your lawyer to handle the purchase in a way that protects your interests, both during the deal and for the future. If your lawyer makes a mistake, however, it can leave you with a property that ends up being a serious headache with the potential to lose you a lot of money.
If your property lawyer has professional indemnity insurance, this can help cover you in the event that they do turn out to have made a negligent error during the process of buying your overseas property. However, lawyers in other countries do not always have professional indemnity insurance (unlike in the UK, where it is a requirement), meaning if you use an overseas property lawyer, you may not be covered.
For this reason, it is strongly recommended to use a UK-based property lawyer if possible, ensuring you are covered by their professional indemnity insurance if a mistake is made during the conveyancing process.
If you are buying a property abroad it is always recommended to use an independent lawyer with specific experience in these matters to ensure you are not caught out by unexpected problems. To talk to one of our UK-based overseas property solicitors about your potential purchase, please get in touch.
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.