Buying an occupied flat means acquiring a property that is in the possession of a third party who is not the seller. You get ownership, but not effective possession: you cannot go in, live there or rent it out until you recover its use through the legal routes. That is why these flats sell at a discount that can be very large compared with an equivalent vacant flat.
The discount has its logic. The seller passes two burdens on to you: the cost of recovering possession and, above all, the time it will take. In the meantime the flat produces no income, runs up expenses and carries an uncertainty the ordinary buyer does not want. Anyone who knows how to analyse the situation turns that uncertainty into a margin of safety.
In this article
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 legal route and the timeframes depend on the occupant's legal situation. Before valuing anything, you need to know what type of occupancy you are dealing with.
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 there are two situations that the law treats differently. When the property is someone's main home and it is entered against the resident's will, that is unlawful entry into a dwelling (allanamiento de morada). When what is occupied is an empty property or a flat that is nobody's residence, it is usurpation instead. Be careful with second homes: if they are used from time to time to live in, they can count as a dwelling even when they are empty that day. The classification is not an academic detail: it determines which procedure applies and how forcefully the courts 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 rely on a contract of doubtful validity, a tenancy at will (precario), a verbal agreement or an authorisation that is no longer in force. These cases have to be analysed one by one, because the right route depends on which title is claimed and how solid it really is.
Possession is always recovered through the courts, never by force or by taking the law into your own hands. Acting on your own can make the owner liable for a criminal offence. Before buying and before acting, take advice from a lawyer who looks at your specific case.
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. Be careful if you buy through a company: the fast-track eviction against occupiers with no title (article 250.1.4 of the Civil Procedure Act) is only open to individuals, non-profit organisations and public social housing bodies. An investment company has to take another route.
Deciding which of those routes applies, and how to run it properly, 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 whatever comes up during the proceedings. That is why recovering possession must always be handled by a lawyer, who will choose the right procedure and avoid mistakes that delay or complicate the outcome.
These assets turn up a lot in the real estate debt market. Many occupied flats come up for sale through portfolios of unpaid loans or foreclosed properties. If you want the context, it helps to understand what an NPL is and what a REO is, as well as the differences between auctions, auction assignment (cesión de remate) and NPLs, because that is how many of these assets change hands.
How to value the operation
The question is not "how big is the discount". It is "does the discount make up 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.
This is what you need to put on the table:
- The estimated recovery time. This weighs most. Every month the flat stays occupied is a month with no income and with expenses. A good discount can come to nothing if the timeframe drags on.
- The legal and management costs. Lawyer, court agent (procurador), court charges and the other costs of the whole 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. Serious due diligence covers, as a minimum, the registry situation of the property (charges, ownership, noted proceedings), the type of occupancy and, as far as possible, who is occupying it and on what basis. Without that you cannot estimate the timeframe or the real cost, and without those two figures no valuation is possible. Buying an occupied flat blind is not investing, it is gambling.
Equus Capital: analysis before investing
At Equus Capital, a legal and wealth firm based in Valencia, we look at each occupied property before the client takes 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 see whether the deal 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: you acquire ownership even though you do not have effective possession. What is not legal is recovering possession by force or outside the court procedures. The purchase must be formalised with the usual safeguards and, given how complex it is, 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 can be worth it if the discount more than makes up for the cost, the estimated recovery time and the uncertainty. It all depends on 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.