Thousands of properties are bought and sold on the coast every year – and the numbers are increasing. For most people, buying a house is a major investment which is complicated enough in their own country. In Spain, the legalities of property purchase may be particularly daunting if you are a foreign resident and unfamiliar with both the laws and the language.
The first thing a buyer must obtain is their NIE number which is a number which will identify foreigners in Spain for all their transactions. You shall not be able to sign your tittle deeds without this. It can either be obtained personally or through your lawyer. You will also need to open a bank account in Spain.
This is the crucial first step. The second is that he or she speaks your language. A good lawyer can guide you through all the steps of house purchase, from ensuring that the purchase contract is correct through negotiating payment terms, taking care of the title search and ensuring that your house is registered in the property registry. A lawyer is cheap insurance against possible future problems and will only cost you around one to one-and-a-half percent of the purchase price, plus VAT. It is standard practice that a lawyer will ask for a pre-payment, called a “provision de fondos” to cover expenses and fees.
Once you have found your dream house, the most important next step is to secure it by paying a deposit. This is generally €10.000 – €50.000 and will be held in a client account by the agent. A further payment taking the balance to 10% will then be paid to your lawyer within a few weeks of reaching an agreement.
If the property is on an urbanisation or part of a residential complex, then you will automatically become a member of the Community of Property Owners, responsible for general maintenance, gardening, pool cleaning etc. Make sure that all fees are paid up to date and that you are aware of how much your annual community costs will be.
Your lawyer must check at the local Property Registry to ensure there are no outstanding liens or mortgages against the property, or whether it has been embargoed for non-payment of a mortgage or taxes.
You will receive a copy of the entry for the property in the registry books. This “Nota Simple” shows who owns the property and includes a detailed description with boundaries. Some properties are held in the name of an offshore company, which used to be common practice as it avoided Spanish transfer and inheritance taxes. Sometimes you will receive two “Notas Simples”, one at the beginning of negotiations for the purchase and again immediately before you sign the contract.
Property in Spain is subject to an annual municipal tax – IBI – and the seller should provide you with up-to-date receipts, which will state the exact amount of this annual tax, as well as the “Valor Catastral”, which is the official value of the property as assessed for tax purposes and necessary when you prepare your annual tax return. There may be additional rates, such as for rubbish collection or other services.
Like death, taxes cannot be avoided. There are a range of taxes to be paid when purchasing a property in Spain. For resale properties the rate is a flat 7%. For new properties purchased from a developer it is VAT/IVA of 10%. There are also notary and registry fees of about 1% depending on the cost of the property. The local Town Hall also add a tax based upon the rise in value since the property was last sold. And then there are the aforementioned lawyer’s fees. Agents fees are paid by the seller in Spain. In total, closing costs are normally of the order of 10-14%. The rates can, and do, change on a regular basis. Please consult with your agent or lawyer at the time of your purchase.
Approximately a month after you have made your deposit, you can expect the completion of the sale to take place. The contract must be in Spanish, although you can obtain a translation if necessary. A legal property purchase contract in Spanish is called “Escritura de Compraventa” and is signed by both parties in the presence of a Spanish Notary Public who will keep the original copy of the contract in his/her files.
The contract should describe the property and its location in detail, as well as the identity of the purchaser and seller.
If the purchase is financed with a mortgage, the bank representatives are present in order to pay and sign the mortgage.
The final step is to take your copy of the “Escritura” to the Property Registry and have it officially registered, at which time you will obtain your “Escritura Pública”, the title deed.
The property is now legally yours…. congratulations!