Buying property in Spain is a complete guide about the conveyancing process in Spain from local Property Law expert lawyers.
TABLE OF CONTENTS
This Legal Guide to Buying property in Spain splits into 14 sections / © 2020 Advocate Abroad
- About this Guide for buying property in Spain
- Information you will need for buying property in Spain that is a resale property
- What if you are buying property in Spain that is new rather than second-hand?
- Vendors’ legal and financial obligations towards buyers
- The Preliminary sale-purchase contract
- The Escritura or Property Deeds
- On what basis may a contract for buying property in Spain be legally withdrawn?
- What fees, taxes and charges do I pay when buying property in Spain?
- Obtain an NIE
- Getting a valuation of the Property
- Checks on the Land Registry
- The Role of the Public Notary when buying property in Spain
- Inscription of your New Title on the Land Registry
- Removal of the Previous Mortgage from the Registry
About this guide for Buying Property in Spain
Welcome to the Advocate Abroad® guide to buying property in Spain!
This property guide will give you an overview of the conveyancing process in Spain, including information on both your and the seller’s legal rights and obligations as well as pitfalls to avoid.
Of course, no guide can take the place of independent legal advice which is absolutely vital if you are getting involved with the real estate market in Spain.
Advocate Abroad® is a unique network of independent English-speaking lawyers, accountants, architects, translators and financial service companies in Spain.
You are guaranteed that all of the officially registered and regulated professional members of the network conform to strict protocols and standards for legal services, which are overseen by a legal professional in the UK and member of the Chartered Institute of Legal Executives.
Now, on with the guide!
What information do I need before buying property in Spain that is resale?
There are a number of legal issues that need to be considered when buying a property in Spain.
In particular, when facing a property purchase the vendor is legally obliged to provide the following documentation:
- Registry information regarding the property
- Receipt of payment of the most recent IBI tax bill (rates bill)
- Certification by the Community of the building or complex, signed by the Secretary on behalf of the President, confirming that the Community payments relating to the property are up to date
In addition, the buyer should be careful to confirm the following:
- Name of the current owner of the property
- If there is any mortgage or other charge over the property
- The physical property conforms to the description
- That the land is correctly zoned for building
- The buyer should also make sure there are no sitting tenants in the property
What if it is a new property?
Before buying a new property it is advisable to confirm the following:
- The existence of a project license in which the relevant technical department confirms that the building project has been carried-out in accordance with the original approval originally issued by the town hall.
- That the license of first occupation has been issued.
- The certificate of habitability of the properties should be available.
- Inscription in the property registry of the urbanization along with the necessary insurance for purposes of dealing with any defects in the building work.
- That any sums advanced (via instalments) for the purpose of purchasing a property off-plan are protected by bank guarantee.
What legal and financial obligations do sellers have towards the buyer?
The property owner selling the property has the following legal obligations:
- To conserve the property until it is handed over to the purchaser.
- Transfer the property.
- Make good certain defects or deficiencies in the property.
- To pay certain costs and taxes.
If there are any defects in the property known to the seller and which may have not been communicated to the buyer, the buyer may possibly rescind the contract or claim damages instead.
There is a six month time limit, from the date of purchase, in which to exercise this right.
Unless there is agreement to the contrary, the purchaser is obliged to pay the costs relating to the drawing up of the deeds of transfer as well as those costs necessary to effect the transfer of the property (this would include the notary fee).
Any capital gains tax that is due will be payable by the vendor.
What is a reservation contract?
Assuming that all of the preliminary checks determine that the property is as stated and can be purchased safely, the purchaser may need some time to put together the funds necessary to complete the purchase.
The Spanish property purchasing process provides for this by use of a “preliminary” or “deposit” contract.
Effectively this is a contract-to-contract and normally stipulates that before a stated future date, the property will have passed from the seller to the buyer.
Should either side fail to complete there are penalties.
The buyer will forfeit the deposit (up to 10% of the value of the property depending on the value) and the seller must return the deposit and pay to the purchaser a penalty equal to the amount of the deposit ie return twice that amount.
What is an Escritura?
The final contract or Escritura as it is known in Spanish, is when the title of the property passes and the buyer’s new title may be registered in the local property register.
The signing takes place in the office of the public notary who is a type of official registrar who must witness the contract signing in order for it to be legally binding.
On the day of the signing all interested parties meet in the office of the notary – this may include a representative of the bank if a mortgage is required.
The deed is read aloud by the notary and the parties then present their identification after which the deeds are signed by the vendor, the purchaser and the notary.
At this point the monies for the purchase are handed over in the form of a bank-guaranteed cheque.
On what basis may a contract for buying property in Spain be legally withdrawn?
The reasons for which a contract may be rescinded are normally included in the contract itself in order to protect the parties to the contract.
The following would however be the main reasons for rescinding a contract for the purchase of property:
- Failure to fulfil obligations under the contract.
- Loss of the property.
- Failure to pay.
- Hidden charges (over the property) or defects.
What fees, taxes and charges do I pay when buying a property in Spain?
Whether you are buying or selling a property in Spain there are a number of costs associated with the process. A number of these you will expect if you have been through the process in another country, but some you will not. In this guide the main charges will be covered and the party that is usually responsible is the buyer (unless otherwise indicated).
However, it should be borne in mind always that the concept of freedom to contract is a cornerstone of Spanish law and the parties may always assume whatever responsibilities they wish with regard to payment of the costs and taxes incurred when transferring property in Spain.
The purchase price of the property will be relevant in determining the property tax payable and it is also important to take into consideration that taxes in Spain can also be location dependant – if you are buying a property in the Costa del Sol you may find that the taxes you have to pay are different from those in the Costa Blanca, for example.
While stamp duty exists in Spain, it is not the most important tax to consider. The most important tax is the ITP or property transfer tax which is based on the declared property price. Care is needed here as some vendors will attempt to under declare the amount paid for the property and thus save themselves capital gains tax. While this will save the purchaser transfer tax, it is not advisable as the authorities in Spain have been very diligent of late in applying their own valuations to any property that appears to be below the market price – as determined by the Spanish tax agency.
Other fees that arise in the property buying process include estate agent fees. These fees are typically based on the property value and are usually around 5% of the purchase price. While this seems large compared to other countries, it is unlikely that you will find a sufficiently varied selection of properties available on the Spanish property market necessary to find your ideal home anywhere else other than via a real estate agent.
Obtain a NIE
Before being able to do, well almost anything in Spain (and certainly to purchase a property) you will need to is arranged either at the Spanish Consulate in your country of residence or in Spain at a specially designated “Office for Foreigners” (Oficina de Extranjería) or via the National Police.
It typically involves arranging an appointment date at the relevant location, nowadays often over of the form that needs to be presented at a nearby bank to pay the administrative cost and then return to present your identity documents and proof of payment.
Certain regions will require proof of the purpose for obtaining the NIE, such as buying property in Spain.
An NIE may also be arranged by your legal representative upon completion of a power of attorney or similar document. Advocate Abroad offers this service.
Opening a Bank Account in Spain
Spain has an active international network of residents and as a consequence, there’s a growing population of people wanting to open an account in Spain and it is not difficult to find a Spanish bank that caters specifically for foreigners looking to open bank accounts in Spain.
However, opening a bank account for non-residents in Spain can be a little trickier than you might think. If you’re looking to open a Spanish bank account, you’ll probably need to fulfill one of the following requirements: you need to be a national of Spain or you need to be an EU citizen; or, you need to have permanent residence in Spain. These are the requirements that affect the overall eligibility of an individual to open an account in Spain.
Spanish banks tend to have different rules for foreigners, with some being more strict than others. For example, some Spanish banks won’t deal with UK citizens unless they can provide proof of residence or that they are a property buyer. Be prepared to pay a fee and, indeed, ongoing fees at a higher rate than you would typically see in the UK. Spanish banks tend to be more expensive than in the UK and a premium will be attached if you are a non-resident.
Valuation of the property
This will usually be a requirement of the financial institution that may issue the mortgage although they will insist that you, the buyer, must pay.
The persona carrying out the survey must be certified by the Ministry of Finance under the Law Regulating the Mortgage Market (Ley 41/2007).
Note that the property value will be distinct from the catastral value (valor catastral). This is a value assigned to the property and held in the catastral registry (as opposed to the land registry) and is used as a starting-point with which to calculate a range of different property taxes.
The minimum amount chargeable for the carrying out of a valuation is €208 and will ultimately depend upon the following factors:
- Not all surveyors or survey companies charge the same.
- Where the property is located.
- Will the surveyor need to charge expenses (mileage etc) to reach the property.
- Does the surveyor need to access technical information (plans etc).
Ultimately, the financial institution will have to accept the surveyors report and so you will most likely use one recommended by them or by an independent surveyor like TINSA that is well known and has links with most of the financial institutions.
Checking the land registry
To ensure that the particulars of the property are correct i.e. the identity of the current owner(s), the mortgage charges and any other encumbrances that currently exist on the property and the existence of any court judgments affecting the property etc, it is necessary to check with the land registry at the local town hall where the property is located.
If you wish to do this yourself, the cost is a nominal administration charge of approx. €12.
It is possible to obtain this in English, but the cost is quite a lot higher.
The Role of the Public Notary when buying property in Spain
While strictly speaking it is legal to arrange for the transfer of a property in Spain via a private legal contract, this is not the typical, nor the recommended way of doing so.
This is because for any new property title to be registered in the public Land Register it is necessary to complete the transfer of the property by public deed or Escritura pública.
Failure to register the title would permit an unscrupulous vendor to sell the property to a third party who, upon registration of their title would be entitled to retain the property, while you – the poor earlier purchaser – would be left chasing repayment from a (probably) long-gone seller.
Also, failure to register a purchaser’s new title on the Land Register and thereby remove a prior title would allow the possibility of embargos being place on the property due to debts relating to the prior owner.
From a practical point of view, no financial institution will offer a mortgage to facilitate the purchase without a public title deed.
The procedure involves the drawing-up of the deeds of transfer by a public notary.
This is an independent official who oversees the process and ensures that the proceedings take place according to the law and that the documentation is verified.
The amount charged by the notary is prescribed by law and varies in function to the price of the property.
Inscription of new title on the land registry
Once the property has been transferred it is advisable to register the new ownership details with the public property register.
Apart from not being able to obtain a mortgage without doing so, failure to register can cause multiple problems in the future with regard to future property transfers, inheritances, defending title against third parties etc.
Removal of the previous mortgage from the registry
While not a legal requirement, it is preferable to have the previous mortgage removed from the property register and the cost is normally attributable to the seller, who sells free of encumbrance or charge.
It is best practice even though the mortgage has been paid off following the sale of the property.
The charge will still appear on the register and its removal incurs a number of charges, notably notary and registry charges.
The process of removal of the previous mortgage within the chain of actions toward buying property in Spain involves obtaining a certificate from the financial institution that issued the mortgage that the mortgage has been discharged.
This certificate is then presented to the notary who draws up a public deed to that effect.
The deed is then presented to the registry for inscription on the property register which thereby removes the mortgage charge from the property.
The subject of the cost of cancelling a mortgage is somewhat contentious and the matter has recently been raised by the Consumers Organization.
This organization (OCU) announced that following a study of charges made by notaries and registrars that consumers are being seriously overcharged.
Cancelling a standard mortgage should generate notary costs of approximately €70 instead of €260 which was found in the study, though they can be as high as €500, such as in Fuerteventura.
As far as the registry costs were concerned, the cost should be roughly €25 for cancelling a mortgage that has been completely discharged rather than the €144 that the study uncovered.
The matter has been sent by the consumers association to the Justice Ministry and to the supervisory body that oversees Spain’s notaries and registrars.
It is to be hoped that the action will result in a lowering of the charges in the near future.
UK Citizens Purchasing Property in Spain Post-Brexit
A number of options are available to UK citizens who wish to live in Spain following the vote by the UK to leave the European Union. These range from availing of the Golden Visa programme which allows British buyers purchasing property valued at €500,000 and above to obtain a residence permit.
However, foreign buyers of property are not the only ones who can obtain a residence permit. Anyone able to deposit approx. €27,000 in a Spanish bank account can also obtain a residency visa to live in Spain. This type of visa does not permit the holder to work in Spain, however.
More information is available on some interesting options available to British and non-EU citizens who want to Move to Spain after Brexit.
If you find yourself in the opposite case to buying property in Spain, read our guide to selling property in Spain.
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