What is real estate law and how does it affect real estate ownership?

All of us, at some point in our lives, have to deal with buying, selling or renting a property, whether as investors, landlords or tenants, or simply with the purpose of finding a home in which to live with our family. For this reason, it never hurts to have a basic understanding of Real Estate Law and how it affects the ownership of real estate. Here we are going to explain everything you need to know about it, so pay attention.

What is Real Estate Law?

Real Estate Law is, fundamentally, the set of rules, norms and laws whose purpose is the objects considered as real estate by civil legislation. It is therefore intended to regulate and govern the creation, transfer, modification, acquisition and extinction of property rights and their dismemberment, as well as the encumbrances and taxes that must be borne.

The basis on which Real Estate Law in Spain is founded is called the Real Estate Registry Law. The purpose of its publication in the Official State Gazette and its implementation was to streamline all the processes mentioned above, which, until then, had been extremely difficult to carry out. In fact, it does its bit to decentralise the system, allowing more than a single public administration to undertake them. It also focuses on the use of new technologies and faster access to justice.

However, there are other legal texts that also have a direct influence on real estate law. This is the case, for example, of the Spanish Constitution, which establishes the legal framework on which the right of everyone to decent housing is based. Likewise, although to a lesser extent, there are other laws and decrees that are also related, such as the Mortgage Law.

For its part, the state body in the field of real estate law is the Land Registry. In fact, it is in charge of making effective any change of ownership of a property, as well as certifying its rental status or any other matter. Therefore, although it is not always compulsory, it is essential for most of these procedures.

What is real estate?

We have all heard of real estate. However, despite the simplicity of the concept and its definition, not everyone knows exactly what it is. Specifically, they are properties that, due to their physical characteristics, cannot move or be moved from the place where they are located. 

To be more precise, the laws establish a series of criteria according to which immovable property can be classified. In this respect, a distinction must be made between:

1. immovable property by incorporation. Constructions of residential buildings, single-family houses, etc.
2. Real estate by nature. This refers to plots of land, both on the ground and in the subsoil.
3. Real estate by analogy. This is the case of mortgage concessions.
4. Real estate by representation. This point refers to the documentation that accredits the registry ownership of the property, such as deeds.
5. Real estate by accession. This is the most complex point as it refers to access points of the real estate, such as doors and windows. When they are uninstalled, they are considered movable property, whereas when they are part of the construction, they are immovable property.

Real estate is therefore all the real estate we are used to. Knowing this will allow you to better understand that there is a very close relationship between real estate and real estate law, since, fundamentally, they represent the bulk of the subject matter of the discipline.

Relationship between Real Estate Law and Real Property

Real Estate Law, as we have already mentioned, regulates everything related to real estate. In addition to establishing the rules that regulate the use of real estate in the cases detailed at the beginning of this article, it also establishes the taxation of real estate. As you will be aware, being the owner of a home, business premises or any other type of property entails various tax obligations. These are the most important ones:

1. IBI (Property Tax). This is a direct tax that is established according to the tax value assigned to the property or its cadastral value. It is applied by the municipalities themselves and is paid once a year.
2. Wealth Tax. This is a tax whose purpose is to force individuals to pay taxes based on their net worth. 
3. Tax on the Increase in Value of Urban Land. This is another municipal tax, the purpose of which is to tax the increase in value of land that can be developed when it is transferred. Its amount varies according to many factors, the most important being the number of years since the last change of ownership, its cadastral value and its location.
4. Personal Income Tax (IRPF). Its objective, among many others, is to tax the ownership of all real estate that does not produce income and, moreover, is not used by its owner. It could be said, in this sense, that it is established according to the yield of the real estate capital, reaching the amount of 2% of the cadastral value. It should also be borne in mind, in this respect, that the capital gain obtained after a sale is also taxed.

In short, there is a close relationship between Real Estate Law and Real Estate since this discipline is in charge of establishing all the rules related to properties of this type. In addition, although not directly, it also establishes parameters regarding taxation. We hope we have been of help and that, from now on, everything will be much clearer for you.

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