In most cases buying a property in Spain can be quite a straightforward process – if you use a good reputable lawyer – they should follow these steps to make your purchase an easy and trouble free one. One thing you must take into consideration is the fees and taxes payable. On purchases without a Spanish mortgage the total fees and taxes are approximately 11.3% of the purchase price. If a Spanish mortgage is involved, these can rise to around 15% of the purchase price.
Your solicitor will check with the Town planning department of the Town Hall about if any major developments are planned in the property area and if they could affect the property.
If you are buying a new or recently constructed property you must make sure that the construction that has taken place has been authorised and that it was undertaken in accordance with the plans approved. If you are buying a property off plan or in the course of construction the property seller must produce proof of these permissions.
Certificates of completion and First Occupation Licence
This is another important thing that must be checked as if not, you could run into problems registering the property with the result that you could be fined or even receive an order demolition of the building.
By Spanish law any property sold to you off plan or in the course of construction must be accompanied by a bank or insurance guarantee to protect the buyer against the risk of the seller not being able to complete the construction and delivery of the property either because they become insolvent or for any other reason.
It is a written document which includes the sale price and it states that the buyer has to pay a deposit. If the potential buyer does not go ahead they can lose the deposit. If the seller refuses to go ahead the buyer is entitled to claim compensation, usually double the amount of deposit paid.
Also known as a Contrato Privado de Compraventa, this is a full, binding commitment to buy the property and an agreement that commits both parties. The seller must sell a stated property at an agreed price to a stated person as the terms set out in the contract. Remember that under Spanish law by signing and completing this contract you become, in some senses, the owner of the property, though you will need to sign a deed of sale (escritura) and register your ownership to be safe as far as third parties are concerned.
Most contracts will include that:
- – The details of the seller and buyer should be stated fully
- – The property should be fully described, both in an everyday sense and by reference to its land registry details
- – A date for the signing of the deed of sale (escritura) will be fixed or the contract will permit either party to require the signing of the escritura at any point by giving notice to the other
- – A statement will be made as to when possession will take place which is usually on the date of signing the title
- – The property should be sold with vacant possession
- – The property should be sold free of any charges, debts or burdens and all bills should be paid up to date before signing the escritura
- – It will state who is to pay the costs of the purchase
- – It may confirm the details of any agent involved and who is to pay their commission
- – It will state what happens if one or both of the parties break the contract
- – It will establish the law to cover the contract and the address of the parties for legal purposes
Deed of Sale
This is the title document proving who is the owner of the property and containing a detailed description of the property itself. It is, under Spanish law, necessary for the Escritura to be signed before a Spanish Notary Public. The Notary is a public official who put on the public record the fact that the title deed recording the sale/purchase has been signed in his presence and understood by the parties concerned. The function of the Notary is not to advise or to protect either your interests or the interests of the person selling the house. When the Escritura is signed in front of the Notary the purchase price must be, in his presence, handed over to the person selling the property or the seller must confirm that the money has already been handed over. Proof of such payment must be then incorporated into the title deeds of the property.
Do I have to be in Spain to complete the transaction?
The buyer and the seller of the property may attend in person in front of the Notary, but, if this is inconvenient, most lawyers can attend on their behalf if one or both provide a Power of Attorney.
Where must the money be paid?
The price, together with the taxes and fees payable, is usually paid by the buyer to the seller in front of the Notary. This is the best and safest way. You can, in fact, agree to pay in whatever way and wherever you please. In the case of a seller who is not tax resident in Spain the buyer is obliged to retain 5% of the price and pay it to the Spanish Tax Administration (Agencia Tributaria) on account of the seller’s potential tax liabilities.
Fees and Taxes
In Spain when a property transaction takes place, as in any other country, taxes and fees have to be paid at completion. Failure to do so means that registration of the Escritura at the Property Registration cannot take place.
The Notary’s fees for the execution of the Escritura are fixed by a sliding scale established by law.
Land Registry’s fees
For the registration of the Escritura at the Land Registry, again a sliding scale is applicable dependant on the purchase price. In accordance with Spanish law the Land Registry’s fees must be paid by the seller.
Transfer Tax or VAT
If the seller is a private individual and not a property developer, the sale is subject to a transfer tax at the rate of 7% levied on the purchase price. If the seller is a company or developer, the sale is subject to a VAT at the rate of 7% which will be levied on the purchase price plus a stamp tax at the rate of 0.5% or 1%.However, if you buy land in Spain, commercial premises or parking spaces in garages, then the VAT payable rises to 16%.
The Plusvalia, literally means ‘more value’, and is a municipal tax levied on the sale of a home. It is calculated on the basis of the cadastral value (Valor Catastral) of the property and is also based on the number of years the property has been in your possession. The Plusvalia is based on the assessed increase in the official value of the property from the date of the previous sale to the date of the current sale. The amount payable varies widely since it is based upon the assessed increase in the land’s value and the lapse of time since the prior transaction. The amount payable also depends on the location of the property and the applicable scale. In accordance with Spanish law the Plusvalia Tax must be paid by the seller.
Capital Gains Tax
Capital Gains Tax must not be confused with the above-mentioned Plusvalia Tax. Capital Gains Tax is not based on the official value of the property like the Plusvalia Tax, but on the real value. The Capital Gains Tax is based on the increase in the purchase price and the sales price. In order to guarantee that non-resident sellers pay this tax, Spanish law now provides that in the case of a non-resident seller transferring a property located in Spain, the purchaser is obliged to withhold 5% of the purchase price on account of the sellers potential tax liability and deposit this retention in the tax office. Restitution by the tax authorities of the whole or part of the 5% will take place after the seller has declared and paid the tax. Clearly, the Capital Gains Tax falls on the seller. However, if the buyer fails to retain and deposit the 5% of the purchase price and the seller does not pay the amount due, the tax authorities can levy this sum on the property. It is essential that any buyer always deduct 5% of the purchase price when buying.
Once you have completed the above, you will be the owner of your Perfect Spanish Property!
Registration in the Land Registry
Your property must be registered in the Land Registry. This must be done immediately after its execution.
The payment of community expenses such as pool, gardens, security, rubbish collection etc. must be up to date and the seller will be asked to provide receipts to ensure all is paid up to date prior to purchase. Water, electricity, telephone and gas- Again the seller must be up to date with payments as supplies can be cut off if not and you will be obliged to pay any outstanding fees.
Real estate tax
Levied on the official assessed value of the land and construction. The new buyer will be responsible from the purchase date, but if there are any sums outstanding from the seller (up to 4 years) the buyer will be responsible for payment.
The Property Register
This protects the interests of the owner and third parties. The complete history of any property can be found in the Property Register and any title or right or charge which may exist against a certain property can be inspected. It is not recommend to buy from someone who is not registered as the owner at the Property Register because only the owner registered at the Property Register can prove that he is the legal owner of the property and only he can guarantee to transfer the property to you as the legal owner. If this is not the case you can ask the Property Register for a certificate “Certificación Registral” or an extract “Nota Simple”, that shows all previous transactions and indicates who is the legal registered owner of a property and whether the property has any charges against it.