Buying Property in Spain – What are the Costs?
Congratulations, you have found your perfect home but what happens now?
Below we have set out a brief outline of the Sales Procedure for buying property in Spain.
The first step is to appoint an Abogado (Solicitor) and we can help you with this. We have lawyers who can speak Spanish, English and German.
Once your lawyer has contacted all parties he/she will be able to start the legal process which is to prepare and sign a RESERVATION CONTRACT in order to reserve the property and take it off the market. It is also usual to be asked to pay a Reservation Deposit and this can vary depending on the value of the property.
Once signed the property is taken off the market and is reserved in your names the next step is to prepare a “Contrato Privado de Compraventa” this is a Private Purchase Contract.
Upon signing of the private purchase contract a 10% of the purchase price is paid.
A formal contract should include the following, a full description of the two parties involved in the sale, a complete description of the property to be purchased, the Inscription Number in the land registry and finally the price of the property to include the stage payment details.
Your solicitor in Spain will check that all the details are correct within the contract.
An important issue would be to do the SEARCH ON THE PROPERTY. The search will consist in several actions:
- To ask for a Certificate from the Land Registry. The Land Registry will advise of the current ownership and of any kind of debts and charges affecting the property.
- To check in the Town Hall that the property has the correspondent building licence and first occupancy licence.
- To check that the vendor has paid the Council tax, electricity & water, and community of owners Your solicitor in Spain will then send a report to you detailing the results of the searches.
Once the private contract has been signed your lawyer will have to organize all the paperwork and documentation in order to sign the title deeds. For example,
- NIE NUMBER. This is a Fiscal Identification Number for non residents and it will be required before you can make any transaction in Spain, such as purchasing a property, a car, pay taxes etc.
- NIE can be applied personally at the police station or your lawyer can apply for it using the power of attorney.
- POWER OF ATTORNEY. You may wish to ask your lawyer to act for you as “Power of Attorney” if you cannot come to sign title deeds on completion or cannot come to apply for the NIE number. Power of attorney will enable your lawyer to complete on your behalf without your being present.
- SPANISH BANK ACCOUNT: You will need one in Spain as your lawyer will order direct debit for water, electricity, Community of owners and IBI tax (council tax).
- Finally, immediately before completion your lawyer will check that there are no outstanding debts affecting the property you are buying. I refer to the Council tax, electricity & water and community of owners. Vendor will have to provide copy of the latest receipts duly paid at completion.
ESCRITURA (Title Deeds)
The signing of the Escritura always takes place in the Public Notary Office and completion must take place on a working day (Monday to Friday), principally because money transfer cannot take place at the weekend. On completion the balance of the price is paid, ownership and keys of the property are exchanged and you become the proud owners of you new home in Spain.
A new Certificate from the Land Registry is requested that day to secure that no charges have appeared since the initial search was done.
INSCRIPTION OF OWNERSHIP IN THE LAND REGISTRY.
After signing the title deeds your lawyer will pay the Notary fee and the transfer tax and finally register it at the local Land Registry.
The Land Registry maintains all the details of the property and records financial charges and other matters that may affect the title.
Registering the deed provides the highest public level of protection.
As explained before, after the Notary fee is paid, your lawyer will take the said deed to the local tax authorities in order to pay the TRANSFER TAX.
If you are buying a resale, the Transfer tax would be a 7% of the declared purchase price. However, if the value of the property is greater than €400.000, the tax shall be 8% of the difference of the amount.
If you are buying an off plan (from a developer) you will pay 7% VAT at completion and1% Stamp Duty after completion to the local tax authorities.
In order to complete the file, you lawyer will order direct debit of water, electricity, community of owners and Council tax / rubbish collection into your account in Spain.
PLEASE NOTE: The above information on taxation is subject to change always consult your abogado.
I.B.I & BASURA.
These are annual taxes to be paid to the town hall. The IBI is for the Council tax and the Basura is for the collection of refuse. You will receive a letter through the post confirming the amount to be paid and when it is due. Personally I suggest that you set up a direct debit with your bank to pay these charges as the Town hall will charge interest for late payment.
It is a tax charged by the Spanish Tax Office for all owners of properties in Spain.
Your solicitor will advise you yearly of the exact amount to pay.
Finally, JRP in SPAIN are delighted to recommend the legal services of:
ABRIL & RUIZ ABOGADOS
Avda de España, 3-Edif. Mirasol A, 3º G
Estepona 29680, Malaga
Email: [email protected]
Telephone: 0034 952 80 3162