Buying an occupied flat:
risks and how to act

Buying an occupied flat means acquiring a property whose possession is in the hands of a third party who is not the seller. The buyer receives ownership, but not effective possession: they cannot enter, live in it or rent it out until they recover its use through the legal routes. That is why these assets are sold at a discount that can be very significant compared with an equivalent unoccupied flat.

That discount has a clear logic. The seller passes two burdens to the buyer: the cost of managing the recovery of possession and, above all, the time it will take to achieve it. During that period the property produces no income, generates expenses and carries an uncertainty that the conventional market is not willing to take on. The investor who knows how to analyse the situation turns that uncertainty into a margin of safety.

Why the type of occupancy changes everything

The most common mistake is to talk about an "occupied flat" as if it were a single thing. It is not. The occupant's legal situation completely determines the applicable legal route and the foreseeable timeframes. Before valuing anything, you have to identify what type of occupancy you are facing.

Illegal occupation without title

This is what is popularly known as "squatting" (okupación): people who occupy the property with no contract or authorisation from the owner. Within this scenario it is worth distinguishing two situations that the legal system treats differently. When the property constitutes someone's habitual home and it is entered against the will of its dweller, we are in the territory of unlawful entry into a dwelling (allanamiento de morada). When what is occupied is an empty property, a second home or a flat that is nobody's residence, we speak rather of usurpation. The classification is not an academic detail: it determines which procedure applies and how forcefully the judicial route can act.

A tenant under contract who has stopped paying

Here there is no illegal occupation in the strict sense. A valid lease contract exists, but the tenant has stopped paying the rent. The corresponding route is eviction for non-payment, a tenancy procedure with its own rules, timeframes and safeguards. It is a legally very different situation from squatting, even though in practical terms the result is the same: the owner does not have the use of the property.

Occupants with some dubious title

The most slippery ground. People who invoke a contract of dubious validity, a tenancy at will (precario), a verbal agreement or an authorisation that is no longer in force. These cases require case-by-case legal analysis, because the appropriate route depends on which title is claimed and its real soundness.

What the legal routes to recover possession are

Recovering possession of an occupied property can only be done through the procedures that the law provides for it. Depending on the type of occupancy, the route will be an eviction procedure, when there is a breached tenancy relationship, or a procedure to recover possession, when the occupation has no title. The legal system also provides for specific procedures designed to handle certain scenarios more swiftly, depending on the circumstances of the case and on who is occupying the property.

Determining which of those channels applies, and how to conduct it correctly, is a strictly legal decision. There is no single route or fixed timeframe: they depend on the type of occupancy, the available evidence, the courts' workload and the incidents that arise during the proceedings. That is why the recovery of possession must always be handled by a lawyer, who will assess the most suitable procedure and avoid mistakes that delay or complicate the outcome.

This type of asset frequently appears in the world of real estate debt. Many occupied flats reach the market through portfolios of unpaid loans or foreclosed properties. If you are interested in the context, it is worth understanding what an NPL is and what a REO is, as well as the differences between auctions, auction transfers and NPLs, because they are the routes through which much of this asset base changes hands.

How to value the operation

The right question is not "how much discount does it have", but "does the discount compensate for the cost, the time and the uncertainty I am taking on". An occupied flat is only a good investment when the entry price leaves enough margin to absorb everything that comes afterwards.

The factors that have to be put on the table are:

• The estimated recovery time. It is the variable that weighs most. Every month the property remains occupied is a month without income and with expenses. An attractive discount over a long timeframe can be completely diluted.
• The legal and management costs. Fees, charges, court agents (procuradores) and costs associated with the entire process of recovering possession.
• The uncertainty. Court timeframes are not exact and incidents can arise. A prudent valuation builds in a margin for what cannot be foreseen.
• The condition of the property. Many occupied flats require refurbishment after possession is recovered, a cost that is often underestimated.

Prior due diligence is essential

Before signing anything you have to do your homework. Rigorous due diligence covers, as a minimum, the registry situation of the property (charges, ownership, noted proceedings), the type of occupancy we are facing and, as far as possible, who is occupying it and on what basis. Without that prior analysis you cannot estimate either the timeframe or the real cost, and without those two figures no valuation is possible. Buying an occupied flat blindly is not investing: it is gambling.

Equus Capital: analysis before investing

At Equus Capital, a legal and wealth advisory firm based in Valencia, we analyse each occupied property before our clients take a step. We identify the type of occupancy, study the registry situation, estimate the time and cost of recovering possession through the legal routes and set all of that against the discount to find out whether the operation makes sense. We always work within the law and with legal advice at every stage. The first consultation is free and with no obligation.

Frequently asked questions

Is it legal to buy an occupied flat?

Yes. Buying an occupied property is perfectly legal: ownership is acquired even though effective possession is not available. What is not legal is recovering possession by force or outside the judicial procedures. The purchase must be formalised with the usual safeguards and, given its complexity, with legal advice.

How long does it take to recover possession?

There is no fixed timeframe. It depends on the type of occupancy, the applicable legal route, the available evidence, the workload of the competent court and the incidents that arise during the proceedings. That is why estimating timeframes is a central part of the prior analysis and must be done by a lawyer on the specific case.

What is the difference between squatting and a tenant who does not pay?

In squatting there is no title: the occupant entered without a contract or authorisation, and the route is a procedure to recover possession. In non-payment of rent there is a valid lease contract that the tenant breaches, and the route is eviction for non-payment. They are different legal situations, with their own procedures and timeframes.

Is it worth buying an occupied flat?

It may be worth it if the discount amply compensates for the cost, the estimated recovery time and the associated uncertainty. The key lies in prior due diligence that identifies the type of occupancy, the registry situation and who is occupying it. Without that analysis, the discount can be a trap rather than an opportunity.