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The Purchasing Process

Choosing the right Estate Agent
Please always select a well known real estate agent with good reputation who will find the right property for you and will be able to guide you through the preliminary negotiations with the seller.

Choosing the right Lawyer
It is advisable to use a lawyer based in Spain who will provide the legal guarantees for the purchase of the property, ensuring that Spanish legal requirements are met. Your lawyer will check to ensure that the property is bought free of encumbrances, liens, charges or debts and that all payments of local contributions and community charges are up to date.

Property Searches
The property searches may vary depending on the kind of property that you have chosen to purchase. Using a lawyer from your home country could substantially increase your legal fees and most certainly will delay the sales process.

Reservation Deposit and Contract
Once you have found the right property the purchase process begins with a reservation agreement which takes the property off the market and also “freezes” the purchase price. The deposit to be paid at this stage is between 3.000 and 12.000 Euros. Before arriving in Spain, ensure you have funds available. The best way to pay the reservation fee is by credit card or transfer. It is not advisable to pay by cheque, especially if drawn on a foreign bank account, as it can take approximately 14 days to clear at a Spanish bank. Such a delay could cost you your property.

Exchange of private Contracts
Within approximately 14 days of signing the reservation agreement the private purchase contract is to be signed between the buyer and the seller (or their authorized representatives). During this time the lawyer should have completed the investigations and searches in relation to the property and will have arranged with the seller the procedure for cancellation of any outstanding debts. At this point it is customary practice to pay between 10 to 50 % of the purchase price. Funds can be lodged in your own Spanish bank account and your lawyer can arrange for an account to be opened for you or on your lawyers escrow account. Diana Zuuring Lawyers have negotiated some competitive rates with local Spanish banks for their clients.

Formal Completion and Exchange at the Notary
A property sale is formally completed in Spain when the title deed (escritura de compraventa) is signed with a Public Notary in Spain, the agreed final payment is made and possession of the property is passed to the new owner. In the case of new buildings it can take up to 18 months before completion and usually payments are in stages of two to four months, for example by bankers draft, cheques from a Spanish bank account or bank transfer.

Once the title deed is signed, the notary will fax a copy of it to the local land registry. Your lawyer will pay on your behalf all the relevant transfer taxes and will deal with the formalities of registration of your title deed. Final registration of the title deed may take several months. Your lawyer will arrange for the transfer of the utility service accounts - such as water and electricity - to your Spanish bank account.

Purchasing a Property on a new Development
When purchasing a property on a new development, the developer should provide bank guarantees against each payment made on account of the purchase price. Many developers offer these bank guarantees free of charge whilst others make a percentage charge. A bank guarantee protects your payments. In the unlikely event that the developer fails to complete the property, it will go into liquidation or where they fail to complete on time and you do not wish to wait, all funds will be returned in full. New property is handed over without water and electricity connection. However this can be arranged by a lawyer. Connection of such services can take up to four weeks following completion. Therefore we suggest that you do not make any plans to use the property during that period. According to Spanish law the developer will issue you with a liability construction guarantee.

In principle there are three fees and one tax to pay when purchasing property in Spain. You should budget that the costs involved purchasing a property in Spain are approximately 11-14% of the purchase price. If you have a mortgage there is an additional cost of approximately 2% of the property purchase price.

The fees
  1. Legal fees: The legal fee depends on the service you require, plus VAT (IVA) currently charged at 21%. We have a transparent fee structure with clear advice of any charges and fees.
  2. Notary fees: the notary charges according to a fixed scale, depending upon the official value of the property. The charges may range from 300 to 1200 Euros.
  3. Property Registry: Generally 60-80% of the notary fee.

Potential further Charges
  • Transcription of existing contracts for water and electricity on your name - and necessary collection authorization
  • Tax law representation
  • Costs – defined by the owners community
  • Last will
  • Insurances
  • Costs for water and electricity connection, authorizations, opening of account, Application for NIE numbers (Spanish tax number)

Bear in mind Annual Property Costs.
  1. Community fees
  2. Local Real Estate Tax (IBI)
  3. Annual Income Tax (non resident tax)
  4. Utility Services
  5. Insurance

The Tax
  1. On a resale property, Transfer Tax (ITP) at 8% is applicable on purchases up to 400.000 Euros, from 400.000 Euros up to 700.000 Euros the rate is 9%, and from 700.000 Euros the rate changes to 10% , which is payable upon completion.
    Example: Purchase price of 450.000 Euros; then you pay 8% of 400.000 Euros and 9% of 50.000 Euros. The transfer tax has to be paid after completion. When buying from a developer you will pay VAT (IVA) at 10% which is payable with each instalment plus Stamp duty at 1,5 % of the property price. A VAT rate of 21% is applicable when buying commercial premises, plots of land or garage spaces.

Documents required by the Spanish bank to apply for a Mortgage
  1. Last three pay slips
  2. Last tax return
  3. Banks reference to include telephone, fax number, name of manager and account numbers
  4. Last three statements of your bank account
  5. Statements of current assets and liabilities
  6. If employed, a letter from your employer stating the length of employment, salary, etc. is required. If self-employed, profit and loss accounts signed by a Chartered Accountant are required.

You should make a separate Spanish will which is dealing exclusively with your Spanish assets in order to avoid time - consuming and expensive legal problems for your heirs. As a foreigner you will usually find that Spanish authorities do not oblige you to follow the Spanish law of compulsory heirs. You can leave your property to whomever you choose as long as your own national law permits it.

Selling a Property
  1. Capital gain is due on the sale of the property. The tax is calculated as the difference between the value of the property at the time of its acquisition and the value at the time of its sale. The tax rate is 21 % for both non-residents and residents.
  2. If the vendor is a non-resident in Spain, the purchase will need to retain 3% of the purchase price and pay it to the Tax Office Treasury on account of the potential liability to Capital Gains Tax. Your lawyer will inform you about existing exceptions. If you have no benefices on the sale, you can ask the Tax Office to refund this 3% (or a part of it) retained.
  3. Plus Valia: This is a Municipal tax paid on the increase in value of the land since the previous sale and is fixed by the local Tax Authorities. It is calculated based upon the size of the land. By Law, the vendor is obliged to pay this tax.
  4. Lawyers fees
  5. Real Estate commission
  6. Mortgage costs. If there is a mortgage on the property, you must consider the bank costs for the cancellation of the mortgage and the notary and registry fees.