Exchanging a house is very similar to the situation where you simultaneously sell something to the same person and also buy something from him again. If both properties do not have the same value, there is often some additional payment to be made, unless the difference is donated.
If one or both houses are mortgaged, they will have to be cancelled at the land registry. If the debt for which the mortgage was established has not yet been paid, new mortgages will often have to be established.
All the issues involved in selling and buying a house also apply when exchanging two houses. There are also a number of things that are slightly different from a regular purchase.
Instead of two separate purchase agreements, it is important to draw up an exchange agreement. This sets out the agreements between the two owners. After all, you don't want the other party to suddenly become uncommitted to taking your house while you have to take the house from him, which was not the intention of the exchange.
When exchanging your house, you owe transfer tax on the value of the property you acquire. If you acquire a house, 2% transfer tax is due. If you acquire a commercial property, separate garage or piece of land then you owe 6% transfer tax. In principle, each party to the exchange pays the transfer tax on the value of what it acquires, not just on any additional amount to be paid.
If the exchange involves entrepreneurs for sales tax purposes, sales tax may also be due.
The exchange itself is realised by registering the notarial deed of exchange. Usually, at the time of passing, the keys are also handed over. The risk also passes so it is important to arrange for buildings insurance.
For more information on the exchange of houses and other real estate, please contact us. We will be happy to help.
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