The whole process of buying or selling property in Spain involves different legal procedures and administrative paperwork, which sometimes is unclear or difficult to understand by an inexperienced person.
The information contained in this brochure is intended as a general guide to Spanish conveyancing procedures for those buying or selling a property in Spain.
We try to explain in plain English, most of the steps to be undertaken in a conveyancing transaction in Spain.
We hope that the information herein contained will be of some assistance when you decide to buy or sell a property in Spain, buy if you have any more queries or need further clarification, please do not hesitate to contact us.
Outline of a Simple Freehold Conveyancing Transaction
The solicitor acting for the seller or the buyer should take instructions from the client. Instructions are normally confirmed to the client in writing, together with some information relating to the costs of the particular transaction as well as an estimate for the solicitor´s legal fees.
The solicitor will make searches and enquiries that are appropriate to the particular transaction. Also, the solicitor will need to have access to title deeds in order to check that the seller owns and is entitled to sell the property and that the are no outstanding charges. All documents will be examined in detail to ensure that there are no matters adversely affecting the property. Various other documents may need to be checked to make sure that there are no local authority notices, which affect the property. We will inform the client in writing to let him know if there are any problems with the property and explain all the significant points.
The solicitors will deal and prepare draft contracts buy and sell the property. The contract will contain all the terms and conditions of the transaction. Assuming that all goes as agreed deposit to the seller. Usually, purchasers are committed to paying a deposit of 3000 €, this is a preliminary contract. This deposit is normally non-returnable once contracts have been exchanged.
When the preliminary contract has been signed there is usually a period of 2-3 weeks for the buyers before they sign the main contract.
Completion will normally take place at the Notary Public office on the date agreed within the contract. The solicitor will have prepared all the necessary paperwork and whatever is required in order to transfer and convey the legal estate in the land to the buyer. The transfer deed must be executed by the necessary parties in the presence of the Notary Public and sets out, amongst other things, the parties involved, the agreed price, the date of completion and a full description of the property. On completion, the buyer is obliged to hand over the balance of the sale price and the seller is obliged to release the keys and vacate the property so the buyer can move in.
After completion, the solicitor will deal with filing and lodging the appropriate taxes to the Inland Revenue or Government tax office and then submit the title deed to the Land Registry to have the transfer of the property registered. When the registration of the title is complete, normally 3 months later, your solicitor collects the deeds and passes then to you.
Freehold title means an owner is entitled to absolute possession of the property for an indefinite time.
The purchase of a new property is a more complex transaction than the purchase of an existing one. Additional issues must be taken into account when dealing with new or under construction properties. Particular attention must be paid to planning permission, building regulations consent, structural guarantees, easements and reservations, advance payments securities, compensation for delay and existing mortgages.
The Legal Side of Buying a Home in Spain
How will you be able to help me buy a home in Spain?
We offer the following services:
· Advise you about who should be the owner of the property to minimise tax and inheritance problems.
· Advise you about your liability to taxes and other expenses in connection with the purchase.
· Do a land registry search to establish the current ownership of the property.
· Check that the property is free of debts and other charges.
· Advise you about the terms of your proposed contract.
· Where appropriate, check the property had all necessary planning permissions and licences.
· Where appropriate , check the property benefits from the necessary guarantees.
· Arrange for the completion of the purchase by the signing of the necessary deed (Escritura publica de compraventa) in front of a Spanish Notary Public.
· Arrange for the transfer of the necessary funds to Spain or elsewhere as required by the contract.
· Arrange for the payment of the fees and taxes due in respect of your purchase.
· Arrange for the registration of your title at the Spanish Land Registry.
· Receive the registered title back from the Land Registry, check it and forward it to you.
· Establish from you what further assistance you may require in connection with this transaction.
· Take out a mortgage to help buy the property.
· Obtaining your NIE (foreigners identification numbers). In order to buy property in Spain, you need to be registered with the Spanish tax authorities and to have a foreigners identification number (N.I.E).
· In many cases you may not wish to be in Spain at the time when the public title deed needs to be signed. In these circumstances we can prepare a Power of Attorney (authorising either someone nominated by you to sign on your behalf.)
· We believe that it saves a great deal of time, effort and money later in if you now review your Will and make a separate Spanish Will. For most people the cost of this is fairly small. It is generally much cheaper and simpler to deal with your affairs if you have made a Spanish Will. We will be please to help you to this.
· Changing the accounts for Electricity, Water & Telephone, or in the case of a new property arranging for connection o these services. It is usual to do this by arranging for your bank to pay the accounts directly to the suppliers.
· We will give a detailed estimate for the likely overall cost once we know more about your particular purchase.
What is the Escritura?
This is the title document transferring ownership of the property. Under Spanish law it is necessary for the escritura to be signed before a Spanish Notary Public. We will arrange to this for you.
Who is the Notary?
The Notary is a public official who is there simply to put on the public record the fact that the deed recording the sale/purchase has been signed in his or her presence and understood by the parties concerned.
Where should the money paid?
When the escritura is signed in front of the Notary either the purchase price is, in his or her presence, handed over to the person selling the house or the Seller confirms that the monies has already been handed over. Proof of such payment es then incorporated into the title deeds of the property.
Usually the price may be paid wherever in the world the parties agree.We will advise you as to the implications of this choice.
Do I have to be in Spain to complete the transaction?
The person buying the house may attend in person before the Notary, but, if this inconvencient, arrangements can be made for a Power of Attorney to be granted enabling antoher person to attend on their behalf. This must be in the Spanish form and signed in front of a Notary.
What about paying the taxes due?
Once the purchase formalities with the Notary have been completed we arrange, on your behalf, to pay any taxes due in relation to the transaction.
Is there a Land Registry system in Spain?
Yes. After the Escritura has been signed in front of the Notary we arrange for it to be presented to the appropriate Land Registry and for the payment of the Land Registry fees.
About 3 months can elapse before the process of registration is concluded, but as soon as we are notified that the deeds are ready we will have them collected, check them and then forward them to you.
Special points for new properties.
You must also make sure that the property specification is agreed in detail with the builder and that the property will be delivered to you complete with the necessary licence to occupy it as a home.
In whose name should you purchase the property?
There are a number of ways to purchase the property:
In your name, In the joint names of you and your wife or co-purchaser/s. In your children´s names or in the name of somebody who will eventually inherit the property from you. In the name of a limited company.
Everything depends on your own personal circumstances.
A Spanish tax year is the same as a calendar year (1st January to 31ST December)
The transfer of freehold properties will normally attract Transfer Tax at rate of 8% of the purchase price. This is a local Government tax payable by the buyer to the local tax office .
In the case of new residential property transactions, there is mandatory VAT to be charged normally at the rate of 10% of the purchase price. The purchase of commercial properties and plots of land will normally attract VAT at the rate of 21%. An additional 1% (Stamp Duty) of the purchase price will be levied by the local Government.
A liability to Capital Gains Tax may arise on the sale of a property. A sellers solicitor should be aware of the possibility of potential liability and advise the client accordingly. Similarly, a buyer who is purchasing property should be aware of potential tax liability that may be incurred in his subsequent disposal of the property.
Real State Tax/Rates (IBI). This is an annual local tax, i.e. levied by the City Hall which is payable by real estate owners
ISVTNU (plusvalía) Tax. A tax that may arise on the disposal of the property. This is based on the increased value of the property transferred up to the date of the sale. By law, and unless the purchase contract provides otherwise, the seller is liable to pay the tax to the City Hall.
Income Tax: Regarding property used by non Spanish resident owners as their own housing, the tax is based on an estimate income calculated on a general basis at 2% or 1,1% in some circumstances, of its municipality official registered value.
Wealth Tax: Non Spanish residents are required to file a return for this tax on estate owned in Spain on December 31 of each year.
Generally, the total of all fees and taxes, including our own, will amount to about 10% of the value of the property.