TABLE OF CONTENTS
This How to Guide to Buying property in Spain is divided into 17 sections / © 2023 Advocate Abroad
- Is it a good idea to buy property in Spain?
- Buying a resale property in Spain
- What if you are buying a new property rather than second-hand?
- Sellers' 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- On what basis may a contract for buying property in Spain be legally withdrawn?
- Is it necessary to pay a deposit when buying a property in Spain?
- Negotiating the Terms of the Purchase
- What are the costs of buying property in Spain?
- What is an NIE number and how do I get one?
- How to Open a Bank Account in Spain
- Is a Valuation of the property necessary?
- What is the benefit of checking the land registry in Spain?
- What is a Public Notary and what do they do?
- Can UK Citizens buy Property in Spain Post-Brexit?
- Final Step: Inscription of your New Title on the Land Registry
First things first: is it a good idea to buy property in Spain?
Welcome to the Advocate Abroad® guide to buying property in Spain! Typical reasons given for buying a property in Spain include the fact that the average price of the properties are lower than most of northern Europe, the good weather and the lifestyle. However, before making a decision regarding purchasing a property in Spain, we recommend that you consider carefully the reasons why you are purchasing. The first thing to consider, before buying a property, is the reason for the purchase:
- Holiday home
- Permanent residence
- Long-term rent: if the reason of the purchase is basically investing in Spain, before buying it is important to check the profitability ratio but not only that. Most of the times, in the areas where the profitability ratio is higher, also the risk of non-payment (default risk) is higher, and this is an important aspect to consider before buying a property to rent.
- Short-term rent: it is really important to check that the property has the required licence to allow the owner to rent it our for short-term rents (less than 30 days). In most areas, particularly in the most touristic areas of Spain, special licences are required. If you rent it out for short-term without the appropriate licence, when required, you could receive a considerable fine. Profitability can be higher, but it is also important to count on a person of trust to take care of the property and of the business on your behalf, if you are not able to it yourself, for example if you don't plan to live in Spain yet.
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.
Holiday Home or Permanent Residence
When considering the purchase of a property in Spain as a home-holiday or for permanent residency, the criteria are different, as first of all, it is important for everybody to consider their own needs and requirements. In any case, it is always a good idea, before buying this kind of property, to also check
- That the property is not overpriced, comparing it with similar properties on the market; don't trust only the Realtor who is selling it to you, it is highly recommended to make deeper research.
- How easy it will be to sell/rent it out later on, even if, obviously, these factors might vary in the future, as circumstance might change.
As concerns particularly holiday homes, it is also possible to think about a combined purpose: using the property as a holiday home and also to rent it out on short-term lets. As stated previously, it is always important to check that the property has the necessary touristic licences for short-term rentals in Spain.
Requirements And Taxes
In order to buy a property in Spain, you will be required to hold a NIE (Identification number for foreigners). It can be obtained directly in Spain (either personally or via your lawyer through a power of attorney) or via the Spanish consulate in your country of residence (note that this can often take a considerable amount of time). Advocate Abroad also offers a unique express service in which you can obtain an NIE number in as little as 48 hours.
When buying a property in Spain, it is necessary to pay a tax calculated as a percentage of the purchase price (it varies according to the region, but the amount is usually 8 -10% of the value of the property), Notary Fees (as the contract should be signed before a Notary) and Land Registry fees.
In fact, it is highly recommended to register the property before the relevant Property Registrar, in order to have it legally registered in your name and avoid any issues.
As an owner of a property in Spain, you will be liable to pay a Real Estate Tax on it every year (IBI) and, in case you are non resident in Spain, you are liable to pay a non resident tax on the property.
Non-European Citizens: Is it a Good Idea To Buy A Property In Spain?
According to the current legislation, buying property/ies (one or more) for a total amount of 500.000.-€ (without mortgage) allows the the buyer to obtain a renewable Spanish residency visa. That is a really good option for non-European Nationals who wish to relocate to Spain. See section below: Can British citizens purchase property in Spain after Brexit?
In conclusion we can say that the decision to buy a property in Spain is not necessarily a good or a bad idea, it simply depends on the the circumstances of every single person and on the purpose of the purchase. Now, on with the details!
What information do I need before buying a resale property in Spain?
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 - particularly important if buying rural property in Spain
- 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.
- Additional considerations need to be made if instead of buying a residential property, you are buying commercial property or a farm in Spain, or indeed, buying land in Spain on which you wish to build a property.
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). For more detailed information, see: Costs of buying property in Spain. 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. (Read here for some advice relating to how much to offer on Spanish property).
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. For more information, see: payment of a deposit when purchasing a property in Spain.
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 or if you are buying a property that has been repossessed by the bank. 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.
- Right of Withdrawal
Is it necessary to pay a deposit when buying a property in Spain?
It is typical in Spain to expect to be asked for two deposits:
- An initial deposit of between 1,000 and 3,000 euros as a "reservation fee".
- A second deposit of 10% of the property price.
The initial deposit will be required if you have found the property through an agency. They will tell you that it is for the "reservation", but in reality it is not an actual reservation - even though you have paid this deposit they will not take the property off the market, nor will they remove the online ads, and of course they will not stop negotiating with other interested parties.
The real reason why they ask for this first deposit is to see that your offer is serious, that you are not there to waste their time. Here, Oscar, our lawyer in Barcelona discusses in more depth the deposit required when buying a property in Spain:
How to Negotiate the Terms of the Purchase?
Once you have reached a final agreement on the price, another negotiation starts, on a lot of details not less important, such as the time you need to pay the rest of the price, what happens if you do not get the expected financing, the inventory of what the owner leaves in the property, the state of the water, gas and electricity services, the state of the building where the property is located, if there are encumbrances, when will the keys be delivered, possibility of visits before the final signing to take measurements... and a long etc.
Our recommendation is that you hire a lawyer from the first minute to carry out all this negotiation, think that you are doing a business of quite a lot of money, so any mistake can be very expensive, in addition to that it is in a country that is not yours, being an operation that involves many difficulties, much bureaucracy and the risk of committing errors is very high, so we recommend that to avoid regrets tomorrow you hire a lawyer today.
It is also very important that you choose a lawyer specialised in dealing with Real Estate, because only they can carry-out a full and proper legal due diligence on the property; do not trust real estate agents, and above all do not trust the agency that intermediates on the purchase - its interests are very much aligned with you going ahead with the purchase, while for a lawyer, their interest lies in ensuring that you do not make a mistake and that the whole process is carried-out according to the law.
Everyone who is going to buy a property is usually optimistic and thinks that they will find a perfect property, without further legal or constructive complications and that the negotiation will be easy… and unfortunately this is seldom the case. From experience we can say that it is highly unlikely that this will be the case - there are many pitfalls when buying a property in Spain and in practically 100% of conveyances, some problem arises. There is always something that can represent some danger to the buyer, and the work of the lawyer is to discover that hazard and resolve it effectively. It is very important at this point to keep cool and not rush, as this is the most delicate moment of the whole negotiation process and what is decided now will have long-term consequences, so you have to resist the pressures of the seller and the agency and deal with all the issues in detail. Rely on your lawyer.
An important detail to bear in mind is not to accept the template contract offered by the agency.
Firstly because it is usually only in Spanish, and also because it is a generic model to which only the names of the buyer and seller and the property change. It is best to have your lawyer draw up a personalised contract for your specific situation and for the specific property you are buying.
And one recommendation is that this contract is translated into English, it's your money, your business, and you have the right to know everything it says, not only what your lawyer translates for you or what you can understand over Google Translate, but you must understand everything, absolutely everything, even if you trust your lawyer. An additional pair of eyes is to be recommended, and you should definitely ask about anything you do not understand.
What are the costs of buying 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).
The cost of buying a house in Spain can broadly be divided into two categories: professional services and Spanish government tax. They may be summarised as follows:
Transfer Tax The purchase of a property in Spain is subject to a Transfer Tax which is payable by the purchaser. The tax rate varies depending on the region of Spain and it is usually between 7-10%. As an example, the tax rates applicable in Andalucía are as follows:
When you purchase a property from a developer, Spanish Property Transfer Tax is not applicable but rather VAT (currently 10% of the purchase price) is payable instead.
Additionally, Stamp Duty on documentation associated with the property conveyance is also payable and this property tax rate also varies depending on the region of Spain. This can vary between 0.5% and 1.5% and, for example, in Andalucía it is 1,5% of the purchase price.
Notary fees and land registry fees.- In Spain all property transactions have to be signed before a notary public and then this deed is duly registered at the land registry of the municipality when the property is located. These costs are approximately 0.5% of the purchase price.
Professional fees.- Depending on the value of the property and the complexity of the transaction, these fees are between 0.5% and 1.5% of the purchase price, subject to negotiation between the parties.
Mortgage costs.- If you need Spanish bank finance for the purchase of the property, you will need to be aware that there will be additional notary fees, land registry fees and Stamp Duty. Sadly enough, by adding the bank commissions the total costs would be in the region of 2-3% of the mortgage capital.
All of the above presupposes that you buying the property in your own name(s). If you are buying property in Spain through a company, then different charges/taxes would apply.
Valuation of the Property
The first step in a typical home purchase is to have the property valued. This is often at the insistence of the financial institution that may issue the mortgage although they will insist that you, the buyer, must pay.
The person carrying out the survey must be certified by the Ministry of Finance under the Law Regulating the Mortgage Market (Ley 41/2007).
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. You can find a list of suitable English-speaking architects in Spain.
Property Register Check
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 property register at the local town hall where the property is located.
If you do this yourself the cost is a nominal administration charge of approx. €10.
While it is perfectly legal to arrange for the transfer of a property in Spain via a private legal contract, this is not the typical way of doing so.
The reason is that for the new property title to be registered in the public property register it is necessary to complete the transfer of the property by public deed or ‘escritura publica’.
From a practical point of view, no financial institution will offer a mortgage to facilitate the purchase without a public deed.
This 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.
Below is a table with approximate costs according to house price. Please note these may vary and the cost must always be confirmed by the notary before proceeding to avoid any problems:
Inscription on the Property Register
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.
Below are approximate costs for having this carried out. It will be necessary to check specific prices with the individual registry.
Removal of the Previous Mortgage From the Register
While not a legal requirement, it is preferable to have the previous mortgage removed from the property register.
This is the case even though the mortgage has been paid off following the sale of the property. The charge will still appear on the register and it’s removal incurs a number of charges, notably notary and registry charges.
The process 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.
What are the taxes payable when owning a property in Spain
Income tax.- When a property is not rented to third parties, the property owners have to pay an annual tax based on the deemed rental value of their homes. The 'taxable base' is 2% of the cadastral value of the property (1.1% if this value has been revised during the last 10 years), and the tax rate is 24%. No property costs can be deductible. However, for EU residents the tax rate will be 20% in 2015, and will be reduced to 19% from the 1st of January 2016.
If the property is rented to third parties, the rental income needs to be declared and the tax paid to the Spanish tax office. For EU citizens, the tax rate is 20% (19% in 2016) of the net rental income, whereas for non-EU citizens the tax rate is based on the gross rental income.
For EU citizens, only the costs that are directly related to the generation of the rental income are deductible (e.g. agents fees, cleaning, laundry, repairs and maintenance). In the case of all other property costs (e.g. local rates, community fees, utilities or interest on bank mortgages) they are only deductible pro rata to the number of days the property is rented.
For the number of days, within a calendar year, a property is not rented out, it remains subject to deemed rental income as explained at the beginning of this section.
The tax declaration is called Modelo 210 and the deadline for the payment is 31 December each year.
Wealth tax.- Non-resident individuals are subject to wealth tax on the value of their Spanish assets, but only for the net value that exceeds 700.000 € per property owner. The tax bands and tax rates are as follows:
The tax declaration is called Modelo 714 and the deadline for the payment is on 30 June each year.
Local rates (IBI and Basura).- This is the annual municipal tax called ‘Impuesto sobre Bienes Inmuebles’ (IBI), which is based on the cadastral value of the property. This tax varies depending on the municipality in which the property is located. There is an additional rubbish collection tax which is paid twice a year.
The Spanish Town Halls are not obliged to ensure that the tax demands are properly received in the property’s address as they are sent by normal post. Therefore you should ensure that you arrange for the payment of these taxes by direct debit.
Property owners, need help dealing with non-resident and rental income tax in Spain?
What is an NIE number and how do I get one?
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.
How to Open 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.
Is a Valuation of the property necessary?
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. Of course, the value of the property is not the same as the cost to acquire it - for more information on that read: Cost of buying property in Spain.
What is the benefit of checking the land registry in Spain?
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.
What is a Public Notary and what do they do?
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.
Can British Citizens buy Property in Spain Post-Brexit?
A number of options are available to British 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 considering Moving to Spain after Brexit.
Final Step: Inscription of a 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.In conclusion, there is a lot to consider when buying a property in Spain.
However, if you seek good quality legal advice, you should have no problems whatsoever - in fact, getting good legal advice is the best way to avoid losing money - see our article 10 ways an independent solicitor can save you a fortune when buying a property in Spain.
You can also find more information on the most typical problems that people face in this article with advice for those buying property in Spain: 10 Things to Know when Buying Property in Spain!
© Copyright 2020 Advocate Abroad SL