| In Spain the purchase of a Spanish property is a regulated process. For anyone buying a property in Spain, the single most important piece of advice is to find a good solicitor who will thoroughly research the spanish property you intend to buy, and ensure it is free of debts and restrictive clauses. Your solicitor will check the property registry, which will show immediately if the vendor owns the property and whether there is an outstanding mortgage (mortgages can be sold on with the property in Spain).
Legal process for buying a Spanish property
- When you find the property you wish to buy, you will be required to pay a deposit payment or reservation fee of around 10% upon signing a private sale contract. The property will then be immediately taken off the market and the price is fixed. If the vendor pulls out of the sale, he is legally required to pay you double the payment in compensation. However, if you pull out of the sale or fail to complete on the date fixed, you will lose your deposit payment.
If you buy off-plan, payments are different and covered as staged payments throughout the development period. Your solicitor will keep you informed as to when these are due. Be sure that the payment is refundable subject to legal checks as to ownership, planning permission, boundaries and legal description of the property.
- Once the legal checks have been undertaken, the sale is performed before a Public Notary who acts as a legal representative of the State. The Notary checks the legal documents and witnesses the signatures.
The final payment is made at the time of sale and this transaction is recorded in the Title Deed (Escritura de Compraventa) signed before the Public Notary. If you are unable to appear in person at the signing you should give a Power of Attorney to your lawyer to act on your behalf. At this time, any existing mortgage should be cancelled. If you are taking a mortgage with another bank the loan amount will be paid directly to the vendor on completion.
Many charges and debts incurred by the previous owner can be registered against the property. If these are left unpaid, it is your lawyer's job to ensure you buy the property free of any debts.
- Title deeds are sent to the Land Registry where the transaction is officially registered in Spain.
Once completion has taken place, certain fees and taxes must be paid.
NIE Number
At the earliest possible time we recommend you apply for an NIE number (a foreigner’s identity number). This number is necessary when carrying out any financial transaction in Spain including buying a property.
The NIE numbers are issued at the National Police Station in the town where you are purchasing the property and you need to apply for these in person. Unfortunately, there are few hard and fast rules with regard to making the application as each town has its own rules. You will need your passport and a photocopy and complete the application form in duplicate using black ink. It is always useful to have several spare photocopies of your passport. You should go to your nearest National Police Station usually between the hours of 9am and 2pm and complete the NIE application form, but be prepared to queue.
Often, your estate agent or lawyer will assist with this formality and they generally know the procedure in the area where they operate and will give you further guidance as to what additional, if any, documents you need to present.
Costs Involved
Re-sale purchase tax: If you are buying a resale property, you are required to pay the ITP (Impuesto de Transferencia de Propiedad or Transfer Tax) which stands at 8% for the balance above 400,000€.
New properties purchase tax: buyers of brand new houses in Spain pay 8% IVA (VAT) if the house is finished or is being built at the time of the purchase, plus 0.5% stamp duty.
However, if you buy land in Spain, commercial premises or parking spaces in garages, then the VAT payable rises to 18%.
Increased patrimony tax (Capital Gains): this is payable to Spanish Treasury must be paid by the vendor. The purchaser withholds 5% of the total purchase price to ensure the seller declares it. It represents the difference between the current (official) sale price and the original purchase price when the seller originally bought the property, plus the value of any reforms and improvements carried out since then.
Notary and Property Registry fees vary but as an approximate guide they range from 0.1% of the declared price of a property (for properties of 400,000 Euros or more) to around 0.4% (for properties of under 100,000 Euros). If you use a mortgage then you will have to pay Notary fees on the mortgage deeds as well.
Therefore you will need to account for around 8% of the purchase price for resale residential property or 8 - 9% if VAT is
paid (for new properties). To this you must add approximately 1% for lawyer's fees. The vendor normally covers agent's fees unless otherwise agreed.
Other Costs
Local rates
Annual local rates (IBI) are payable and are calculated from rateable value of the land. The rateable value takes into account the value of the land plus buildings as well as location, and usage and the tax is calculated at 0.85% of this value
Rubbish collection & water rates
The Town Hall sets this charge according to the property and this must be paid every 6 months. It will never cost more than about €200 per year. Water consumption is paid quarterly and is metred in cubic metres.
Community fees
The purpose of the Community is to own and maintain the common areas within the community or urbanization. Depending on the size of plot, each homeowner must pay a contribution towards upkeep in the community areas and its services.
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