BUYING A PROPERTY IN SPAIN
Please find a few notes below about the matters involved when buying Real Estate in Spain.
Before travelling off
Usually a buyer has to pay a deposit to the vendor (10%), when buying a property in Spain. Therefore it is recommended to make sure that you can pay such a deposit in short notice, once you actually want to buy. If you can’t arrange such a deposit on short notice, there is a chance of loosing the property to someone else, who can.
Checking the property
The Real Estate Agency will check that all documents are in order, such as the local Town Planning regulations if necessary and – in case you are buying a building plot – will make sure that you can really build on it (suelo urbano). You can check these matters at the local Town Office.
The agency will also make a legal search on the property – to ensure that it is free of liens and debts and/or liabilities. This would also show if there are any mortgages on the property. The agency will also ask a “Nota Simple” from the Property Land Registry. This document identifies the registered owner and details of mortgages or embargos on the property. The vendor should also supply the latest receipts for IBI (Impuestos sobre Bienes Inmuebles – annual property tax), utility supplies (water, electricity, telephone e.g.) and community fees where applicable.
Making an offer
As in many other countries, you can make an offer below the asking price and try to reach an agreement on the final purchase price
A private contract
When reached an agreement on the purchase price, a private contract is made up where agreed price is mentioned, both parties' details, the details of the property (including any liens, debts or mortgages) and a date at which time the public registration (Escritura) must be completed. Both parties (or their representatives) have to sign this document and at this point it is binding. At this stage the purchaser pays a deposit to the vendor (10%). If the purchaser does not complete this signed contract, he looses the deposit. If the vendor does not complete this contract, he must pay back double the deposit amount.
Mortgages
If a mortgage exists on a property, it may be beneficial for the purchaser to take it over, as the costs involved to obtain a new mortgage is usually higher.
The “Escritura”
The Escritura is the public document of the sale transaction – in effect the title deed. The signing of this document takes place at an agreed date and time at the office of a public notary. Both the purchaser and the vendor must be present here, or be legally represented. The notary will complete a legal search on the property to ascertain ownership, liens, mortgages etc. Also checks are made and certificates presented to confirm that all local taxes (IBI) and community fees have been paid up to date. If a mortgage exists and is not taken over by the purchaser, the mortgage will be cancelled by the notary at this time (costs to the vendor). If a new mortgage is made up, it will also be completed in front of the notary (costs to the purchaser). The details of the property, parties, payment details, tax retentions etc. are read out and finally checked by the notary. Both parties have to sign the Escritura and at this stage the keys are handed over and the remaining balance is to be paid to the vendor.
The Land Registry
The new Escritura is now sent to the land registry (Registro de la Propiedad) to notify that the property has been sold. Usually this registration takes about 2-4 months.
NIE
If you want to buy Real Estate in Spain you must have a Spanish ‘National Insurance Number’, a NIE. The notary takes care of it thought the real estate agency. To apply for NIE, you must have your passport to make a certified copy to the notary and fill in some forms.
Account number
In order to proceed to the purchase, you have to open a Spanish bank account as all transactions must be done on Spanish territory. Banks and notaries are asked where the funds come from.
Lawyers
The real estate agency will be here to check all details in the buying process and all risks are prevented but you can always ask a lawyer to supervise the transaction.
Anyway, the process will be longer; usually, the seller won’t engage himself if a private contract is not signed and deposit is not paid.
Purchase costs
Roughly spoken, you can estimate the purchase costs at about 11,5% of the official (Escritura) price, 12,5% for the properties over 1 million Euros. For resale properties you have to pay 10% transmission tax (“Impuesto de Transmissiones Patrimoniales” - “ITP”), 11% for properties over 1 million Euros. For new constructed properties you have to pay 10% added value tax (“Impuesto sobre el Valor Añadido” - “IVA”), plus 1,5% additional tax.
you will also have to pay the legal fees for the transaction – i.e. the notary and the land registry. You can estimate these costs at about 1,5%.
ITP is charged when you buy a property from a private person who doesn’t sell real estate professionally. This is 10% of the official price.
VAT is charged when you buy a property from a company. The percentage depends on the type of sale:
On a building plot 21% VAT will be charged.
On a building plot with the construction of a house, 10% VAT will be charged.
On a house or an apartment that is already finished – new construction or resale – 10% VAT is charged.
On a swimming pool, a garage, etc. constructed with an already existing house, 21% VAT is charged.
For smaller renovations (less than 25% of the tax based value), 21% VAT is charged.
For bigger renovations (more than 25% of the tax based value), 10% VAT is charged.
Additional costs for new constructions
For a new construction project, you will have to take into account:
The costs of an architect and a technical architect (aparejador).
The actual building costs as agreed with the constructor.
Building licence or building taxes (“Impuesto sobre construcciones, instalaciones y obras”). A percentage is calculated, depending on the authorities, of the declared value of the building.
Once the building is finished, the building costs has to be declared (“Declaración de Obra Nueva”) and officially registered. A small amount of tax has to be paid then, of about 0,5% of the tax based value of the new property.
Ongoing costs
Next to the purchase costs, you will be confronted with the following ongoing costs.
“Impuesto sobre Bienes Inmueubles”, or “IBI”). These are yearly local taxes for property owners, usually not more than several hundreds of Euros per year.
Local town hall taxes (“Tasas”), for rubbish removal, etc.
Community fees. When you buy a house or an apartment in a community, you will have to pay a certain amount per year for common expenses, such as gardening costs, maintenance of the swimming pool and building, insurances, administration fees, etc. The amount is fixed by the Community of Owners, of which you will automatically be a member.