What is the ownership reserve of a car and how does it affect the buyer?
28 Feb 2024
When we acquire a vehicle through financing, we encounter terms that can be confusing and unfamiliar. One of them is the "reserve of domain". In this article, we will explain what this concept means and how it can affect the car buyer.
What is the reserve of domain of a car?
The reserve of domain is a contractual clause that is established when we purchase a vehicle through financing, either through the dealer or a banking entity such as BBVA.
This clause allows the financial entity to retain ownership of the vehicle until the buyer has fully paid the agreed amount.
In other words, the reserve of domain means that the entity financing the car purchase (usually a bank or a finance company) retains ownership of the car until the loan requested to buy it is fully paid.
This way, if the buyer does not finish paying for the vehicle according to the established installments, the financial entity can recover it more easily as it continues to be listed as the owner.
The lifting of the reserve of domain is crucial to transfer ownership of the vehicle to the buyer once the loan has been paid.
Does the reserve of domain condition the ownership of the vehicle?
Although the buyer owns and uses the car, technically they are not its owner while a reserve of domain exists. This means that, even though they can use and enjoy it, they cannot sell it or transfer its ownership until the reserve is canceled.
The reserve of domain is recorded in the Vehicle Registry of the General Directorate of Traffic (DGT). This way, it is recorded that the ownership of the vehicle belongs to the financial entity and not to the buyer, until full payment occurs.
This has important implications. For example, the buyer cannot:
Sell or give the car to another person.
De-register the vehicle.
Change important elements of the vehicle such as the engine or bodywork.
Use the car as collateral to request another loan or credit.
Only when the incurred debt is completely extinguished, can the reserve of domain be canceled in the DGT registry, and the buyer will become the absolute owner of the vehicle.
How can I know if a car has a reserve of domain?
There are two main ways to find out if a car has a reserve of domain:
Requesting a detailed report of the vehicle: This procedure can be done online by indicating the car's license plate and paying the corresponding cost (around 10 euros). The report will include information about the legal status of the vehicle, including whether it has any lien or charge registered as a reserve of domain. At agencies like Gestalde it can be requested very easily.
Requesting a simple note from the Registry of Movable Property: This request must be made in the province where the car is registered. The simple note contains registry information about the vehicle, such as owners, charges, and liens. The price is usually about 5 euros.
Both options will provide information on whether there is a reserve of domain on the vehicle. They will also allow you to know which financial entity has the reserve registered in its favor.
In addition to these two options, many financial entities issue a letter of freedom from charges when the loan for purchasing the car is considered terminated. In that letter, they confirm that the vehicle no longer has a reserve of domain.
To lift the Reserve, must the full loan associated with the car be paid?
If you have a car with a reserve of domain and wish to sell or give it away, you must first cancel this clause. This means paying the total outstanding amount to the creditor (the financial entity). Once this payment is made and the entity issues the letter confirming the cancellation of the reserve, you can request that the reserve be lifted in the Registry and thus proceed legally with the sale or transfer of the vehicle.
One must be very careful at this point because selling or transferring a car with a reserve of domain to a third party without having previously canceled that reserve may legally be considered unjust enrichment.
What are the steps to cancel the reserve of domain of a car?
Cancelling the reserve of domain involves following a series of steps, which may vary slightly depending on each case. According to Transferencia24, these are the general steps:
Pay the total outstanding credit to the creditor (financial entity).
Request from the financial entity a document that certifies that the credit has been paid in full. This document is usually referred to as a "letter of freedom from charges".
Request a simple note from the Registry of Movable Property where the car is registered. This note collects the registry information of the vehicle.
Present the letter of freedom from charges from the financial entity at the Registry of Movable Property.
The Registry will proceed to issue a new simple note without the reserve of domain, confirming its cancellation.
Pay the Registry fee for the processing, which usually amounts to around 10 euros.
Once these steps are completed, the reserve of domain will have been effectively cancelled, and the buyer of the vehicle will become the full owner of it.
What is the cost of lifting the reserve of domain?
The process to lift the reserve of domain has an associated cost, which may vary slightly but usually ranges from 20-30 euros between fees and procedures:
Cost of the simple note of the vehicle: approximately 5 euros.
Cost of the management in the Registry to cancel the reserve: approximately 10 euros.
Costs for sending documentation, certificates, etc., charged by financial entities.
Therefore, even though it is necessary to follow some steps and pay some fees, in general, this cost to release a car from a reserve of domain is not very high.
Some companies handle these procedures from start to finish for a fixed amount, around 100 euros.
What is the time frame to receive documentation without reserve of domain?
Once all necessary procedures to lift the reserve of domain in the Registry of Movable Property are completed, you should wait approximately 15 business days to collect all the documentation without charges in the corresponding registry.
This is the estimated time for the Registry to process the cancellation of the reserve and issue a new simple note of the vehicle without that charge.
However, the process can be expedited if managed through specialized companies. In some cases, it can be obtained in just 48 hours.
What are the consequences of selling a car with a valid reserve of domain?
Selling a car with a valid reserve of domain can lead to serious legal problems for both the seller and the buyer:
The seller may be accused of unjust enrichment for disposing of something that legally does not belong to them.
The buyer does not acquire the actual ownership of the vehicle, so they could not sell or modify it. If they end up paying for the car, the original financial entity could claim it.
The financial entity with the reserve in its favor could seize or recover the vehicle at any time, leaving the buyer without the car they had paid for.
Therefore, it is completely inadvisable.
Common cases of reserve of domain in the buying-selling of cars
The reserve of domain is a common procedure in the buying-selling of financed cars. It is very common for buyers to be unaware that they must cancel or lift the reserve to carry out the change of ownership of the vehicle once the payment period with the financial entity has ended.
Some typical cases are:
Sellers who consider the financing ended but do not lift the reserve before selling the car.
Buyers who acquire a second-hand car without verifying whether it has any pending lien or charge.
People who inherit a vehicle and cannot sell or change the ownership due to an existing reserve of domain.
Relatives of the deceased owner who use the car but are unaware of the steps to take regarding the reserve.
To avoid unpleasant surprises, both sellers and buyers must ensure the legal status of the vehicle and cancel any pending reserves before signing any transaction.
Frequently asked questions about the reserve of domain of a car
The following are some of the most frequently asked questions regarding the cancellations of reserve of domain:
Q. How does it affect the sale of the car if the future owner is not the same person who finances it?
A. In this case, the future owner of the vehicle, even without income, must be listed in the financing as a CO-OWNER.
Q. Do financial institutions and banks always apply this clause?
A. They always reserve the right to apply it, but they do not always do so. Generally, it depends on the risk they estimate of the operation. As a general rule, official finance companies of the brands always apply it.
Q. How long does it take to cancel a reserve of domain and what does it cost?
A. The process can take 2-4 weeks. The total cost usually ranges from 20-30 euros including fees and procedures. Some companies offer to manage it faster, in 48 hours, for about 100 euros.
Q. How do I know if my second-hand car has any pending reserve or charge?
A. It can be easily checked by requesting a simple note of the vehicle or an ownership report. This confirms any existing charges on the car.
Q. If I finished paying for my car a while ago, can I sell it directly?
A. No. Even if it has been fully paid, it is necessary to explicitly cancel the reserve of domain before any sale or transfer of the vehicle.
Q. Can I cancel the reserve of domain of a deceased relative?
A. Yes. The legal heirs must prove their relationship with the deceased owner and can manage the cancellation of the reserve without problems.
In conclusion, before buying or selling a car with financing, it is essential to ensure that its legal situation is correct, without any pending charges, to avoid later troubles. Getting well-informed and consulting specialized companies can help in these cases.
