|
We strongly
recommend you employ a solicitor with experience of purchasing Spanish
property or an English speaking Spanish solicitor (Abogado). He
will carry out the necessary searches to ensure the land belongs
to the vendor, is free of charges, has the necessary planning and
building permission and the Contract is fair and legal. During
your familiarisation visit we will be happy to introduce you to
an Abogado who will be pleased to act on your behalf and answer
any legal queries you have.For
newly built properties a deposit and various stage payments are
normally requested during the construction progress with payment
of any outstanding balance upon completion/signature of title deeds.
Resale properties usually require a deposit and outstanding balance
upon completion/signature of title deeds. For your added security
and peace of mind we always use bonded accounts to handle any deposits
or payments made by our clients.
Below
we have highlighted various sectors of the purchasing process. This
is a handy list for your guidance only and we strongly recommend
you seek professional legal advice prior to buying any property.
Please scroll down the page or use the drop down menu to select
a specific topic.
General
Information about:
Buying
property in Spain
|
Purchasing
to let?
Once you have purchased your Spanish property,
you may consider it suitable for letting when you are not
in residence.
Did you know
We offer a comprehensive letting and management service,
can arrange promotion of your property in the UK and service
it for holiday letting through our Alicante office.
|
|
| Costs |
|
| Apart
from the actual cost of a property, it is advisable to allow approximately
10% of the purchase price to cover the fees and costs of acquiring
the property. This 10% should cover the solicitor's fees, translator's
fees, land registry cost, notary's charges, stamp duty and VAT. In
accordance with Spanish law, the buyer is responsible for: Transfer
Tax or IVA + stamp duty when buying from a developer Property Registration
fees Notary charges Please note all professional fees including the
notary's and land registry's charges are subject to VAT at the prevailing
rate. |
| Lawyers |
return
to top of page |
| It
is highly advisable to seek professional legal advice, and to employ
a solicitor (Abogado). Most lawyers will tell you in advance what
their fees will be. As a general guide the standard Spanish lawyer's
fee for the purchase of a property is 1% of the purchase price plus
VAT. This is a relatively small price to pay for peace of mind as
using a lawyer in your home country could double or treble the bill.
The Spanish legal system is very different from other European countries
it is therefore essential to seek expert professional advice from
the very beginning to avoid any misunderstandings and disappointments,
|
| The
Process |
return
to top of page |
Information
provided by the seller of a re-sale home.
- Title deeds
- Property plans
- Occupancy permit, document providing that a property is habitable
- The last paid Property Goods tax bill
- The latest paid community tax bill
- Receipt showing compliance with the increase in land tax value (subsequent
to authority transfer) Information provided by the seller of a new
home.
- Deed of declaration of New Construction
- Occupancy permit
- Certificate of rateable value of the property |
| The
Contract |
return
to top of page |
|
Once you have
found your ideal property, a contract will have to be drafted and
you need to make provisions for the deposit. The standard deposit
is 10% of the purchase price. The deposit becomes payable upon signing
the contract (Contrato de Compraventa), which will include a completion
date and the transaction conditions which usually contains an assurance
by the sellers that the property is sold free of charges, tenants
and mortgages. It is imperative to review all important legal details
prior to signing and before you have paid your initial deposit on
the property.
After
you have signed and paid your deposit, if you are buying a resale
property, check the receipt for the paid IBI, the Impuestos sobre
Bienes Inmuebles, this is the annual real estate tax. This receipt
gives the all-important Valor Catastral the official assessed value
of the property, on which your property owner's income taxes will
be based. Check with the local town hall that the last local Property
tax (I.B.I.) bill has been paid, if not, please be aware you will
be liable for any outstanding balance.
You should then ensure the following paperwork is in order:
- All payments to the Proprietors Community are up to date
- Authority
and Liabilities Certificate show no problems brought about by non-payment
of local Property Tax
- Copy of the Statutes which govern the Proprietors Community.
- Ensure your deposit is held in Escrow (a special bank account
normally held by a law firm) and that your purchase contract indicates
not only the selling price of the property but any additional charges
payable by you.
- Make sure the vendor of the property has indicated what is to
remain in the property at the time of the sale. It may sound obvious
but many properties are sold furnished but you must be made aware
of what you are buying with the property and whether the property
includes details such as a garage, all of the this must be mentioned
in your deposit contract.
Once the contract
has been signed by both parties and the deposit has been paid, you
have secured the property. This is a binding contract for both sides
with penalties for breaking it or for failing to honour the terms
of the contract.
Before buying
any Spanish property you must obtain a current Nota Simple. This
is an extract from the title from the Registro de la Propiedad which
shows the latest recorded details of any charges. There are many
forms of charges - In Spain debts, charges or court orders are registered
against the property rather than the person: these include hipotecas
(mortgages), censos (ground rent or leasehold payments), usufructos
(interests in the property), limitaciones (restrictions on use),
multas (fines), cláusulas resolutorias (determinations, i.e. decisions
about the future of the property), or embargos (court orders for
distraint or seizure).
|
| Payment
and Signing of Deeds |
return
to top of page |
| Your
next step is to complete the purchase of the property at the Notary's
office, usually, within a month or so, you will be ready to make the
final checks before signing the "Escritura Publica de Compraventa"
(title deed) in the presence of a Spanish Notario (Notary) who certifies
the contract is officially made. The notary does not certify all statements
are true, only that the parties have sworn to them. You will then
be required to pay the balance of the purchase money, taxes and Notary's
fees. |
| Notary
Charges |
return
to top of page |
| The
Notary's fee for preparing the deed is fixed by law, it is on a set
scale according to the property value, and whether the property is
mortgaged or not. This fee is usually around 1% of the purchase price
including VAT. Please note all professional fees including the notary's
and land registry's charges are subject to VAT at the prevailing rate. |
| Property
Registry |
return
to top of page |
| All
property in Spain should be registered in the Registro de la Propiedad
(the land registry). Here you can obtain the full details of the registered
owner, the exact size of the property and full details of any mortgages,
debts or judgements against the property. Only the persons or company
named on the Escritura Publica, the title deed, have the right to
sell the property, unless a notarised power of attorney has been given
to the third party. When the title deed is signed, you will become
the new owner automatically. To prevent a mortgage or other charge
being registered against the property, while it is still listed in
the name of the seller, you should register the 'Escritura Pública'
in the Property Registry Office as soon as possible. |
| Property
Registration Fees |
return
to top of page |
| Property
Registration fees are charged by the property registration office
to inscribe the new deed into your name. These are based on the official
registered value of the property. The length and complexity of the
deed and other factors are also considered. The fee does not exceed
1% of the registered value. It is not advisable to try and do this
yourself unless you are experienced and speak Spanish fluently. |
| Taxes |
return
to top of page |
| Property
Transfer tax or IVA (VAT.) The type of property you are purchasing
will determine Which of these two taxes is levied. Property Transfer
Tax is levied on resale properties and is charged at 6% of the new
escritura value (purchase price), whereas a newly built property purchased
from a developer will incur a different tax called IVA (VAT). This
is charged at 7% of the selling price plus 0.5% stamp duty. Plus Valia
(local municipal tax) This tax is based on an officially assessed
increase in the value of the land since the last time the property
was sold. In some cases this can be quite small, for example if purchasing
an apartment, but it can be expensive on a villa with a large plot,
which has not changed hands for years. You can find out the exact
amount from the town hall. However, do no confuse this tax with the
seller's capital gains tax on his profit on the sale. In practice
"who pays what" is negotiated with the final selling price and this
must be stipulated, as well as listing the contents/fittings to be
included in the sale, when the owner accepts your final offer (in
writing). |
| What
the Buyer pays |
return
to top of page |
| In
accordance with Spanish law, the buyer is responsible for: Transfer
Tax or IVA + stamp duty when buying from a developer. Property Registration
fees. Notary charges. |
| What
the Seller is responsible for |
return
to top of page |
| His
own capital gains tax on any increase in escritura value Plus Valia
tax. Notary fees. Selling agent fees. The normal custom is for the
seller to pay "Plus Valia". If, however, the buyer agrees to pay this
tax, please remember it is registered against the land and you will
have to pay if the vendor fails to do so. This tax is often not demanded
until some time after completion. |
| New
properties |
return
to top of page |
| For
new properties, ask the seller to show you the Declaracion de Obra
Nueva, the declaration of new construction, together with a copy of
the Declaracion de Alteracion de bienes de naturaleza Urbana, the
declaration of alteration of property of an urban nature, which both
demonstrate that the property has been registered for eventual payment
of IBI. |
| Witholding
Tax |
return
to top of page |
| If
you buy a property from a non-resident person or a company, you must
withhold 5% of the purchase price; The hacienda (tax office) make
it the buyer's responsibility that this amount is paid to the tax
authority on account of any liability by the vendor to Capital Gains
Tax. |
| Capital
Gains Tax |
return
to top of page |
|
As the buyer
must ensure that 5% of the purchase price is paid to the Hacienda,
it is clearly in the interests of the vendor to have this value
as low as possible. For example: If the 'vendor's original Escritura
value shows he purchased the property at €60,000,
and your Escritura is drawn up to show that you paid €100,000
- the buyer will show a profit of €40,000
which is taxable. So the seller may suggest that you pay €100,000
but €30,000 was for the furniture and fittings, giving an Escritura
value of only €70,000. This has three main effects; the buyer
now only has to retain €3,500 and not €5,000 for the Hacienda
retention. The vendor's taxable 'profit' is now €10,000 not
€40,000. It will be the same when the buyer sells, a low Escritura
'buy' price will become more 'profit' later. It is obviously in
the vendor's interest to show less than the real purchase price.
It is in the buyer's interest to show as much as possible of the
purchase price on the Escritura. A sensible compromise is usually
reached by mutual agreement. Escritura values that are clearly below
any reasonable market value may be penalised by the Hacienda at
a later date. It is fairly reasonable to allow €10,000 for
the furniture and fittings, thus, the Escritura value will be €10,000
below the actual price paid, and this is acceptable to the Hacienda.
|
| Spanish
Inheritance Tax |
return
to top of page |
| You
need to make a Spanish will disposing of your Spanish property in
order to avoid time-consuming and expensive legal problems for your
heirs. Make a separate will to dispose of assets located outside of
Spain. Use a Spanish lawyer. As a foreigner, you will probably find
that Spanish authorities do not oblige you to follow the Spanish law
of compulsory heirs, in which you must leave two-thirds of your estate
to your children. You can probably leave your estate to whomever you
choose, but you will be subject to Spanish inheritance tax, which
can be high when property is left to non-relatives. A Spanish lawyer
can tell you exactly how much your tax will be when you go to have
your will made. |
| Outstanding
Debt |
return
to top of page |
| If
there are any debts, outstanding mortgages, unpaid Community fees
etc, then you should make sure these are paid directly to the debtors
first, and the seller gets the balance of his money once all other
interests in the property have been settled from the purchaser's money.
The conveyancer will help you ensure all of the various bank certified
cheques required for the different parties are drawn up by the buyers
bankers - ready to hand over at the notary office on the day of completion. |
| Property
Owners' Associations |
return
to top of page |
| You
will automatically become a member of the property owners' association,
if you purchase an apartment in a block, townhouse or villa in an
urbanisation. As a member you will have the right to vote at the AGMs,
which administers general maintenance of zones of communal ownership,
(eg: gardens, hallways, swimming pool etc). An annual budget is normally
calculated to cover these costs and then divided between all owners
according to the size of their properties. Check the latest receipt
for the payment of monthly or yearly maintenance charges "cuotas de
comunidad" and find out how much you will have to pay. It is advisable
for your legal representative to obtain a certificate from the association
that there are no charges outstanding. Ask the president or the administrator
for a copy of the meeting minutes and the community regulations. The
minutes should highlight problems, such as failing water supply and
the regulations will confirm your rights. Please note as some communities
have special rules it is advisable to check up if there is anything
special such as "no dogs" etc. Other items such as domestic services,
electricity, water, & telephone are metered and charged as used. If
the building belongs to a community it is important that the property
has a public title deed Escritura in which the plot as well as the
house is shown. The community of owners is the legally registered
body that administers the urbanisation or apartment building. |
| Insurance |
return
to top of page |
| This
becomes your responsibility upon possession of the property. Spanish
insurance companies can offer a split policy, whereby the property
and its contents are assessed separately. Please note that in the
case of some property owners' associations, community fees may include
cover on the building. Fire insurance is compulsory by law when taking
out a mortgage and comprehensive household insurance should be taken
to protect your home and contents. It's also advisable to take out
life insurance to guarantee payment of the loan in case of death |
| Annual
costs and Taxes you pay every year |
return
to top of page |
| All
non-resident property owners are liable to annual taxes on their property.
Using either the valor catastral or the value in the escritura pública
whichever is higher. 1) Patrimonio (wealth tax) 2) IRPF (property
owners income tax) 3) IBI "Impuesto sobre Bienes Inmuebles" (the annual
real estate tax) Form 214 is what you want to remember, if you are
a non-resident property owner. Each year the non- resident property
owner is liable for two Spanish estate taxes on his ownership. |
| Patrimonio |
return
to top of page |
| This
is a tax on capital assets. Residents have an exemption on part of
the valuation for their principal home, but non-residents have no
exemption and must pay. IRPF Even if you do not let your property,
you are still committed to declare and pay tax at 25% of the amount
resulting from calculating 2% of the rateable value of the property
(see an example below). Non-resident property owner's imputed income
tax. Even if you do not let your property, you are still committed
to declare and pay tax at a rate 25% of 2% of the rateable value of
the property every year (see an example below). You file each year
for these two taxes on Form 214. If you neglect to do this, the Spanish
Tax Agency will catch up with you when you go to sell the property,
and you will be charged for the preceding four years. IBI You have
to pay your municipal real estate tax, the IBI, which you pay every
year to your town hall. This varies widely, according to the municipality
and the worth of your property. It is based on that famous "valor
catastral". If you are a non-resident in Spain for tax purposes, you
will be taxed on any income arising from a Spanish source. If you
let your property in Spain, the income arising will normally be charged
at 25% as Income tax. The IBI will show the Valor Catastral (rateable
value). This is the officially assessed value of the property. (Your
legal representative should ensure there are no debts due from previous
years). The local authority will annually levy this tax on your property,
the rate being around 0.7% of the rateable value of the property -
but it can slightly vary depending on the municipality. NIF (Tax Registration
Number) All property owners in Spain, whether resident or not, must
obtain this number from their local tax administration office as you
will not able to pay your taxes or register your property without
it. It is simply a fiscal ID number for non-residents. You also need
it for payment of your annual taxes to Hacienda. Again your legal
representative will advise you on this matter. IRPF (property owner's
income tax) is calculated from the base of 2% of the Valor Catastral
(this 2% is considered to be your income on the property) and you
pay on this imaginary income the rate of 25%. Note: the Valor Catastral
is normally much lower than the real value of the property. The owner
of the property on the 31/12 of the year is liable for the payment
of these taxes. For example: 2003 tax will become due any time from
January 2004 to December 2004, payable in hacienda office. The first
year you purchase you are only liable for the proportionate amount.
You have to pay "Patrimonio" (wealth tax) paid annually, it is calculated
upon the value declared in the deeds. |
| Banking |
return
to top of page |
| Both
residents and non-residents may open Spanish bank accounts. A non-resident
account works the same way as a resident's account, they are just
subject to different regulations. If you are a resident, 25% of your
interest earnings will be with held and paid to the Spanish taxman
in your name. If you are a non-resident no tax will be with held,
but you will be liable for tax in your own country. |
| Currency |
return
to top of page |
| If
the buyer wants to pay in a foreign currency, it is simply a matter
of fixing an exchange rate on the private purchase agreement. This
rate is used to calculate (i) the Escritura value which must be in
Euros, and (ii) the 5% retention if you are buying from a foreigner,
which must be paid to the Hacienda in Euros. After any other parties
with an interest in the property have been paid, the buyer can pay
the seller's balance in any currency the seller/buyer agree. |
| Bank
Certified Cheques |
return
to top of page |
| This
is the normal method of exchanging money at the Notary office, on
the day of signing. A bank certified cheque is as good as cash. The
bank has specially stamped the cheque, which guarantees the bank will
honour it when it is issued to the recipient. Allow 2 working days
for your bank to arrange the cheque. They simply require the name
of the recipient and the amount. There will usually be a charge for
the service. |
| Utility
Services |
return
to top of page |
| You
will need to arrange for the electricity/gas and telephone to be transferred
to your name. Utility companies in Spain do not hesitate in disconnecting
your services if your payments are late so we advise you arrange for
standing orders to make these payments. |
| Medical
Insurance |
return
to top of page |
| Many
foreigners abroad prefer to take out private medical insurance rather
than rely on the state system. There are various types of policy,
some offered by UK companies, others by Spanish companies. When deciding
the best policy for you the things to be taken into account are; if
you need medical assistance will you have to pay out of your own pocket,
then back from the company. If this is the case then be prepared as
hospital bills can be expensive with just the room that you occupy
costing around €130 per day. A visit to a doctor can cost anything
from €50 to €70. There are many companies who give clients
a credit type card or a cheque book that should they get sick they
take these to the doctors, who then claim back from the company. |
| Pensions |
return
to top of page |
| Pensioners
can arrange to have their pensions paid by the British Government
in euro cheques directly to their Spanish bank account. Banks are
not allowed to charge a commission on pensions as this is against
European Union banking regulations. UK pensioners taking up residence
in Spain will also be entitled to receive free medical treatment under
the same conditions as qualified Spanish pensioners. To establish
this entitlement the pensioners must obtain a form E121 from the DHSS
in the UK. With this form you should register with a local INSS (Institute
Nacional de Seguridad Social) office that will assign you to an out-patients
clinic (ambulatorio) and INSALUD doctor. |
| Moving |
return
to top of page |
| When
you come to Spain to take up residency you are allowed to import your
personal effects and possessions free of customs duty. You don't have
to purchase a property in order to qualify, but you do have to take
out an official residencia. Your choice of removal company is extremely
important, always make sure the one you use is familiar with the paper
work. They should have experienced agents at the borders and customs
departments who know how to keep paperwork in order to avoid your
goods being retained by Customs for months. |
| What
could go wrong? |
return
to top of page |
| For
many people, once the decision to buy a property has been made, their
thinking switches to what they can avoid doing as opposed to that
which must be done. The reasons usually concern trying to save money
but can often prove to be a false economy. Cutting out the lawyer
can save a few hundred pounds but, if he does his job correctly, he
is vital. If you buy a property in Spain you need the services of
a competent, experienced Spanish lawyer who knows the area well and
if you are buying a new property - knows the builder from whom you
are buying it. There is no point changing from one firm to another,
they all have access to the same property and all are bound by builders'
prices. Any and everything can go wrong and sometimes does, although
most of the problems are concerned with not reading contracts and
argument over what was to be included and what wasn't. It is therefore
highly recommended you read every very carefully and make notes at
all meetings and ensure any promises appear in writing, for example:
assurances that adjoining land earmarked for building will not be
built on, delivery dates which border on the ludicrous, additions
and extras at no charge to the buyer which don't materialise, air
conditioning installed as standard and many other things calculated
to cause you to buy. Many people seem prepared to sign anything, which
is put before them. They will spend hours cataloguing the changes
and additions they require for their new Spanish home and when presented
with the contract of amendments neatly drawn up in Spanish, promptly
sign it, despite being unable to read a single word apart from their
name and address. As a general rule of thumb believe nothing, check
everything and don't sign anything until you have had it translated
or you fully understand what you are signing for. You may want to
find your own property rather than use a real estate agent. It will
be very hard work and there are many pitfalls to avoid. Our best advice
is to always use professionals and take advice every step of the way.
|
| Useful
Terminology |
return
to top of page |
| Term: |
Description: |
| Abogado |
Solicitor |
| Actos
Juridicos Documentados (AJD) |
Stamp
duty Community Administrator Check for any outstanding fees
that need to be taken into account |
| Contrato
de Compraventa |
Contract
of sale, this is signed when the 10% deposit is paid, check
'completion time' |
| Escritura
value |
Purchase
price of the property and content value. Furniture inclusion
and other conditions of the sale |
| Copy of
Escritura |
This will
be certified copy of the title deed |
| Cuotas
de comunidad |
Community
service charges |
| Escritura
Publica de Compraventa |
The title
deed. This will show who the true owner/s are and define exactly
what is being purchased |
| Hacienda |
Tax Office.
Check there are no outstanding taxes and that previous wealth
tax submissions were made |
| Impuesto
Sobre Transmisiones Patrimoniales (ITP) |
Property
Transfer Tax |
| I.V.A. |
VAT |
| Legal
Definition of the property |
Exactly
what is being sold - (bit embarrassing to buy a villa, and then
find the deeds don´t include the land it stands on) |
| Liabilities
and debts |
The extent
of any borrowings or liabilities, if any, guaranteed by the
property and any outstanding debts on the property. |
| Nota Simple |
An extract
from the title, which confirms current ownership and shows any
mortgages or embargoes on the property.Available from the land
registry |
| Notario |
The public
impartial witness (Notary) |
| Plus Valia |
Capital
Gains tax on land |
| Registro
de la Propiedad |
The land
registry |
| Town Hall |
Checks
that the annual Municipal rates have been paid up to date |
|
| Legal
Disclaimer |
return
to top of page |
| The
material on this web site is subject to change, could be inaccurate,
and is meant for guidance only, so we cannot take responsibility for
your use of the information, including direct, indirect, punitive,
incidental, or consequential damages. We do not make any warranties
for products or services mentioned on this site, including advertisers.
The property particulars presented on this web site do not constitute
part of an offer or contract; any measurements, areas, distances or
plans are approximate and given as a guide only; descriptions of the
property are subjective and are given in good faith as opinion and
should not be construed as statements of fact; nothing in these particulars
shall be deemed to be a statement that the property is in good condition,
structural, or otherwise nor that any services, appliances, equipment
or facilities are in good working order; it should not be assumed
that any contents/furnishings/furniture, etc. shown in the photograph/s
are included in the sale or that the property remains as shown; neither
Spanishone2one.com nor anyone in our employ has any authority to make
or give any representations or warranty whatsoever or to bind our
Client to a formal contract; any further information supplied or opinion
given, whether oral or in writing, must be treated as given on the
same basis as these particulars. In all cases particularly to do with
the purchase of property or land you must always seek legal advice
and appoint a solicitor to handle the transaction on your behalf.
Within this website we have provided a guide on legal matters for
your perusal to give you an insight about the procedures. We will
therefore not accept any liability or be responsible for any claims
whatever, should they arise for reason whatever. In case of disputes,
the law of the United Kingdom of Great Britain and Northern Ireland
shall apply. |
|
|
|