►Choosing the Property

►Using an Agent

►Through the Internet

►Make an Offer

►Legal Matters

►Holding Deposit

►Opening a Bank Account

►Complete at the Notary

►The Costs

►Annual Costs

►Insurances

►Tax advantages

►N.I.E. Numbers

►Mortgages  (for more info. click here)

►Utilities

►Investment

►Businesses for sale

►Buying 'Off-Plan'

►Bank Guarantee

►Certificate of Habitation

►On Completion

Choosing the Property
 

Those who come out to Spain with an open mind and are not sure what it is that they want, tend to go home with nothing.

Also,  it is important to be fully aware of the legal process and the costs involved in your purchasing property. The following is intended as a guide only and is in no way a substitute for professional advice.

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Using an Agent

An agent can be very helpful to a buyer.  He should be able to provide you with a varied selection of properties and should have plenty of local information.  He may also help you to seek out the right property even though he doesn'tt have it listed already.  Care should be taken to select a bilingual agent who knows the country well and has the experience to answer all of your questions.

Agents do not always  charge  prospective buyers and therefore it makes sense for you to use the very helpful services of an agent.  Agent’s fees may be paid by the developer or vendor and built in to the purchase price, or the agent will let you know up front what his charges are.

There are many different types of people in Spain dealing with property sales and you need to be very wary of the ‘intermediaries’.  These people can be found everywhere, in hotels, bars and on the streets, watching, listening and looking for British people (and other nationalities) who are here in Spain with the intention of buying property.  These 'intermediaries' will appear friendly and plausible, speak very convincingly and yet are just looking to make fast, easy money wherever they can.

Often they will be looking for you when you come out of an estate agent's office and will follow you until they find an opportune moment in which to introduce themselves,  “Hello, are you English?  Are you looking to buy property?  I just happen to know of man who sells houses….” etc. etc. and then you will be whisked off unsuspecting to another intermediary with whom these unscrupulous people have a prior financial arrangement – i.e. a client-finders commission, which is paid by yourselves in addition to the your agent’s charges !!!

You should be sure that you deal only with a legally registered company (one with an S.L., S.A. or similar after their name) and one that is affiliated to a network of Estate Agents (G.I.P.E. or A.P.I. for the Spanish agents, the British agents will be members of FOPDAC, NAEA, or some other like organization). 

Also please make sure that you use a lawyer for the purchasing procedure – the laws in Spain are not the same as those in the U.K. and you need to have legal representation.  Although there are people who will tell you that you can do it by yourself at the Notary, it is worth paying a little extra to have it done right and to have no nasty surprises a couple of years down the line.

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Through the Internet

The Internet is a great way to find your agent (after all, here we are...) but both good information and bad can be passed on this way, so be extremely vigilant.  As a general guide, please read the following....

Is the agent in the area that you have decided you want to be?. Several coastal estate agents have recently started advertising properties inland, even though they do not really know the area.  It is advisable to use an agent who is based in the area of your choice, as they will be able to give you up to the minute local information and the after-sales service that you will require. Some of the larger agents in the cities may sound as if they know what they are doing, but basic common sense should tell you that they are not going to drive 3 to 4 hours away just to deal with the queries you will have once the sale has been finalized.

Do they have the type of properties you want, within your budget?  If they seriously have your best interests at heart, they will ask you endless questions about your requirements and arrange the viewings of properties that match up to your criteria.

Do you get a timely response to your emails and calls? Some estate agents do not reply to emails. If this is the case, leave them and move on to someone who does. If they cannot be bothered to reply to your basic enquiries they are not going to look after you once the sale is complete. 

Does the agent operate a Client / Bonded Account. A client account is a specially controlled account that holds your deposit until the paperwork has been checked. This type of account is sometimes found on the coast but rarely inland. If this type of account does not exist, your deposit either goes to the vendor or is held by the agent until completion, in which case if the deal does not go through for whatever reason, you may have some difficulty getting your deposit back.

How much information are they giving you? Some websites are nothing more than a property showcase and give little practical assistance to the newcomer looking to buy in Spain. The more useful and, hopefully up to date information that can be found on the website the better. Also look for some negative information, lovely as it is, life in Spain is not perfect so there should be a few cautions as well.  Also there should be clear contact information, including a business address.

How long have they been in business?  No information on who they are and where they are from, may mean that it's a new business and as such there may be a greater risk of things going wrong.
 

Search engine position and links from other sites. If there are a good number of links from other websites pointing to the agent's websites  (and vice versa) and it is well placed in the major search engines such as Google and Yahoo then the company is more likely to have been around for a while. 

Media Interest. Has there been any positive media interest in the agent through press or TV?

Does the website feel good to you? This is the intuitive part and very important. Do listen to your feelings about the website and the people behind it. If it feels right it probably is right.

You are extremely unlikely to find an agent that is able to comply with all of the above criteria. However if you know what an agent should be aspiring too then, at least, you can ask the right questions.

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Make an Offer

If you are buying something 'off-plan' the price will already be set by the developer / builder, so this section will not apply.

When you have decided on the (re-sale) property, the first step is to make a verbal offer through your agent or his legal representative. Negotiations will then proceed until a price is agreed.  Beware of unscrupulous so-called 'agents'  who do not use a lawyer and who cannot vouch for the legality of the property you wish to buy.  For example, always make sure up front that the property has an 'escritura' and is legally registered. 

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Legal Matters

Whilst it is not a necessity to have a solicitor (Abogado), to purchase a house in Spain - it is highly recommended, as the Spanish legal system is complex. You may appoint a solicitor of your choice, or if you prefer we can recommend one.   A lawyer will normally charge 1% + tax, money well spent for peace of mind. The ‘Abogado’ will be able to check out any outstanding debts which may exist on the property as well as help with contracts, bank accounts and NIE numbers.. (see below)

The first check is normally to obtain a “Nota Simple” from the Property Registry, which will identify the registered owner and provide details of any debts on the property. In Spain, debts are carried by the property and not by the owner, which makes it very important to have the lawyer check this out before you complete the sale. 

All property in Spain is registered in the ‘Registro de Propiedad’ where you will see who owns it, the exact size of it and whether there are any mortgages etc. outstanding.  Only the people named on the title deed ('Escritura') have the right to sell the property.

You should obtain from the vendor, receipts for payment of IBI (Impuestos sobre Bienes Inmuebles), the annual real estate tax (known locally as 'contribución').  These will show the ”Valor Cadastral”, the assessed value of the property on which your property income tax will be based. 

If you are buying a new property ask to see the ”Declaración de Obra  Nueva” and the  “Declaración de Alteración de Bienes Naturaleza Urbana”.  Where there is a community involved, ask for receipts of community charges and obtain minutes of meetings from the president to identify any problems.  A chat with the neighbours would also be a good idea.
 

The vendor of a second-hand home should provide the following documents:

The 'escritura' of the property.  A  real estate tax receipt for the last year.  Receipt for the tax on the increased value of Urban Land. Certificate that all community  charges (if applicable) have been paid up to date. Latest copies of domestic bills so that you can take over the services such as electricity and water.
 

The vendor or developer of a new property should provide you with:

Deed of declaration of new construction. Occupancy permit.  Certificate of rateable value of the property. Normally before the purchase of a property is made official, there is a prior agreement drawn up between the purchaser and vendor.  This document will identify the two parties and set out the terms of purchase. You must seek legal advice before signing this and you must be sure that this is the property you want to buy. You can lose any deposit you have paid if you pull out of the purchase and there is a penalty clause in the contract.  In the case of the vendor defaulting then he has to pay twice the amount. When it comes to signing the contract, this must be before a notary, in the form of a public deed. This ensures that the details are entered onto the public records.  Also by law, all 'new build' properties must be sold with insurance to cover the property against structural faults for ten years, (see below – Bank Guarantee / Insurance Contract).

New Legislation

In recent months there have been a few legal changes which will affect you if you are buying a property in Spain....

Firstly, your NIE number (please see section NIE Number).  This is most important.

The second concerns the introduction of the new Valuation Law (Ley de Tasaciones) aimed at slowing down property price rises. The content is a bit long winded  but the main point is that mortgage valuations may now turn out to be lower than expected. As a result we do not recommend anyone to automatically assume that they will be able to get an 80% mortgage, especially in rural areas.  (Please see our section on Mortgages).  To be on the safe side, we suggest you always have at least 40% of the purchase price available.

Next is the 'Brief Informative Document' ('Documento Informativo Abreviado' or 'DIA'). 

This document, available in Andalucia since February 7th 2006, may be requested from any developer, agent or landlord (renting property), and must contain all the necessary information on the property in question and on the financial conditions pertaining to the particular transaction.

In the case buying 'off-plan' it should  include  information about the developer, the licenses, (such as the building license and the registration details in the Land Registry), the progress being made in the construction with approximate dates for completion, the drafts of the property and its location, the total floor area, the quality of the materials and the description of services, together with the sale price and the methods of payment

The purchaser will be informed that he may ask for an informative note about the method of payment with all the financial conditions, including those regarding the mortgage offer that is being proposed

This decree is also available for the sale of second-hand houses.  The agent must give the purchaser a sheet with the details of the property being purchased, such as the full address of the property, a basic description of the building, the total floor area, the price, the expenses involved and the terms of payment.

By the same token, the vendor must produce receipts to prove that he is up to date with the IBI (annual contribution) payments and any other charges that the purchaser may  become liable for.  

The full details of the agent with whom the purchaser is dealing should also be on the sheet.

Lastly, the purchaser may insist on any of the conditions of sale that were mentioned in the sales promotion and / or advertising - even though these may not actually be stated on the actual contract.

Any advertising must specifically state the location, description and floor area of the property together with the approximate date of completion and the developers contact details.  It should also be stated that the purchaser has a ‘right’ to request this DIA document.

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Holding Deposit

If you are purchasing off-plan, the developer will ask for 30-40% as deposit and then for stage payments to be made on the property. These will vary depending on the construction.  Purchasing 'off-plan' is considered to be quite safe as the developer must offer a bank guarantee (by law) to protect your deposit money.

You should pay a small holding deposit in cash (5,000 euros) as a down payment to reserve the property. Once this deposit has been received by the Vendor, the property is taken off the market whilst the lawyer checks that the paperwork is in order. 

He will then carry out all necessary searches on the property, to ensure that it is actually owned by the vendor, that it has had building permission, and that there are no outstanding debts or charges on the property or other legal encumbrances. 

Once that is done, (usually a week to 10 days) you will be expected to pay the full deposit of 10% of the purchase price and arrange a date for completion.  Your lawyer will prepare a formal offer and agreement for this purpose.  This deposit will hold the property until you can arrange to transfer the balance and is an official confirmation of your intent to purchase that property. 

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Opening a Bank Account

However, please note that there will probably be bank charges at this end when you receive your money.  We do try to get you the best rates and for this reason we will suggest certain banks to you.  We will also help you with the opening of your account.

Once the searches on the property are satisfactorily completed and the deposit has been paid to the vendor in accordance with the terms and conditions of the contract, a date for completion is set, when the remaining 90% (minus the original 5,000 euros) is payable and the title deeds are signed by both the purchaser and the vendor before the Notary. 

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Complete at the Notary

On the assigned day, both purchaser and vendor or their authorized representatives ( it is a good idea to give your lawyer “power of attorney” to do this for you), must attend the office of the Notary to sign the “Escritura de Compraventa” (the bill of sale), which should state that the property is sold free of charges, mortgages, and tenants. 
The Notary is a body appointed by the Spanish government to witness the signing of all legal public documents. He represents both the purchaser and the vendor.
he Notary fees  must be paid at the time of signing the deeds. The Notary will apply for a formal change in the land registry and will retain the original signed document. 

The purchaser will receive an initial legal copy of the ‘escritura’ (bill of sale), which is signed and stamped by the Notary.  The official title deed can take a while to be processed and until then this is your official proof of ownership and must be kept in a safe place.  The Notary does not check the terms, but solely certifies that the parties have agreed them.  At this point the balance of payment is made and possession passes to the purchaser.   

Your lawyer will arrange payment of taxes and fees, and register your title deed at the Property Registry.  This should be done promptly.  Don’t forget to have the property insured.

Keys to the property will be handed to the purchaser when (and not before) the vendor has received all monies due him.  This can sometimes take a couple of days if a) he must wait for cheques or bank transfers to clear, or b) the vendor does not live in the area and has used a power of attorney.

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The Costs
 

Please bear in mind that buying or selling property in Spain can be quite costly. 

AGENTS FEES: can range from 3% to 8%, for commissions, travel expenses, advertising etc. 

LAWYERS FEES: usually 1% of the purchase price plus 16% IVA.

NOTARY FEES: fixed by law and normally in the range of 400 € (£275) to 900 € (£650).

REGISTRY FEES: approximately 40% of the Notary fees.

TRANSFER TAX:  7% of the purchase price. When buying from a developer, this is replaced by 7% IVA plus 0.5% stamp duty.

PLUS VALIA:  this is a local municipal tax and is based on the officially assessed increase in the value of the land since the last time the property changed hands. It can vary considerably from a few euros to several thousand euros. The calculation is based on the rateable value of the property and is a “one-off’’ payment. You can find out the exact amount from the town hall, but the vendor usually pays this.

  We then recommend  that you then allow another 10% - 12% for the legals, taxes etc. as detailed here below:-

Who Pay’s What

It is normal practice for the purchaser to pay the above fees and taxes, however everything is negotiable and should be stipulated in the contracts. The vendor will pay his own Capital Gains Tax.

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Annual Costs

The local town hall will charge you IBI, which is an annual real estate tax, (known locally as 'contribución'). This is like the old English rates system and is based on the declared value of the property.  The average price paid is around 120 - 200 €uros per year.  You will also be liable for a wealth tax, payable annually and based on the value of the property and a property owners income tax based on your income from the property. (see below).*

If you purchase a property in an apartment block or urbanization you will automatically become a member of the "Community of Property Owners" and are obliged to pay the community fees. The last owner should give you copies of previous bills. The services will vary in each community but generally the fees go towards the up-keep & maintenance of the building, gardens, pool and communal areas.  As a member you have the right to voice your opinions and vote at the ‘AGM'.

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Insurances

Fire insurance is compulsory by law when taking out a mortgage. Comprehensive household insurance is available to protect your home and contents. Life insurance can be taken out to guarantee payment of the loan in the case of death.  We can normally recommend Insurance Brokers who speak English.

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Tax advantages for property owners
 

If you spend more than six months a year in Spain, you are obliged by law to apply for a residents permit. This law is currently being abolished.  There are however, several tax advantages for residents of Spain that do not apply to non-residents.

Imputed income tax is an annual tax on an imaginary income coming  from ownership of a property and is charged as 0.5% of the cadastral value. If you are a resident you will not be charged this on your principal home.

Wealth tax is a tax on all assets in Spain and is charged at between 0.2% and 0.5% of the cadastral value of any house owned. For residents the first 108,000€ is exempt and for a joint ownership this amount becomes a little over 150,000 €.

These two taxes are paid annually as long as you own the property. Non-residents do not receive any relief so therefore have to pay 0.7% of the cadastral value every year. 

When you come to sell the property, capital gains tax will be charged on any profit you have made. This is 35% for non-residents but only 20% for residents. A further concession for residents is that if you are over the age of 65 and have lived in your property for at least three years, you are totally exempt from capital gains tax. 
 

Finally, if you are 60 years of age or more and have lived in your property for at least three years, you can bequeath your property to your spouse or children and avoid paying inheritance tax on 95% of the valuation.  The inheritor must also be a resident of Spain and agree not to sell the property for at least ten years. 

*Please see Spain Business for more information on Spanish taxes.

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NIE number (Numero de Identificacion de Extranjeros).

An N.I.E. number (your I.D.) is essential for any major purchase in Spain i.e. House, Car etc., and now (since July 2006) even to apply for a mortgage. (Please see section on Mortgages).  Your solicitor or agent can help you to complete the short application form and take it to the Local Police Station with your passports, plus copies.  The papers may take 14 - 30 days to come through, when you must go back to the Police Station in person to collect them.  It is recommended that you apply for your N.I.E. as soon as possible after your arrival.

Once you have purchased your property, you should also register at the town hall ('Empadronamiento') which puts you on the census and allows you to be an active part of the local community (i.e. voting, sending children to school, etc.)  Just go to the town hall with your passport and a copy of a utility bill with your new address on it and fill out the form with all your details.

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Mortgages

You can choose to apply for a mortgage in Spain or in the UK.  Mortgage rates in Spain tend to be lower than those in the UK, currently around 4½% (as of August 2006 this has risen slightly) and applying for a mortgage in Spain is a straight-forward process.  However, you will need to prove that you have an income, or at least sufficient funds to pay the instalments.

The level of mortgage offered is directly dependent on your financial status and the value of the property estimated by the Lender. There are 2 levels of mortgage offered, one for residents and one for non-residents.  For non-residents the mortgage offered is generally around 60% of the declared value of the property.

For residents it always used to be around 80%, however because of the introduction of the new Valuation Law (Ley de Tasaciones), aimed at lowering property prices, mortgage valuations - especially in rural areas - may now turn out to be lower than expected, (see Legal Matters – New Legislation).

It is often easier to obtain a mortgage on urban property than on rustic - this is well worth remembering if you would like to live in the countryside.

To be on the safe side, we suggest you either have at least 40% of the purchase price available, or that you set up a mortgage in the U.K. before coming to Spain to buy property.  For more information on mortgages please click here.

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Utilities - Water, Electricity and Gas
 

Both water and electricity charges are metered, so you only pay for what you consume.  You must remember to change your names on both of the registers soon after purchasing the property.  This is something else that we (or the lawyer) can help you with. 

If you prefer to 'go it alone’ then to contact Sevillana Endesa (Electricity) phone  900.848.384 or go on-line at http://www.endesaonline.com.  Bills are paid every two months.  To have them paid by Direct Debit from your bank account you must ask to have them put on Direct Debit ('domiciliado').

To connect your water supply, simply contact your local town hall ('Ayuntamiento') to find out who provides the service in your area.  You will need your passport when you apply for a contract.

When buying 'off-plan' the builders will usually supply temporary water and electricity supplies. They pay for it until completion when the habitation certificate will be issued. You should then contract for the supply from the appropriate utility company. Builders and developers are in business to make a profit, so the temporary or 'builder's supply' is usually low on voltage or water pressure. Make sure it is agreed that water and electricity are connected before completion.

Gas is usually in bottles ('bombonas') although some areas are now using 'Natural Gas'.  You will need to sign a contract with the supplier (usually Repsol) for a bottle, which will only be issued after a safety check of the premises has been carried out.  Bottles can be delivered to your door, check at your nearest Repsol gas station for the number of the local distributor.

Telephone

The standard charge for a telephone line installation from Telefonica is around 250 euros.  The line rental and call charges are then payable every 2 months.  Again, it is not easy to obtain a telephone line for country properties.  Most people here use mobile phones and there are internet cafes in the majority of towns and villages.

Useful numbers are:-

Investment
 

Over the past few years, there have been many people buying 'off-plan' property as a sure way to make a killing.  These investors, particularly on the 'Sol'  paid the first 30% - 40% towards a property  and then sold it on before the balance of payment became due, thus making their profit without ever having to pay the full price.  Many developers have now put a stop to this practice so if this is your intention, please check with the developer first or you may find yourself paying the full price for something that you don't necessarily want.

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Businesses for sale

Businesses in Spain will normally not be freehold.  Bars, shops etc. are usually leased for a period of between 10 to 15 years.  The purchaser pays a lump sum for the lease ('traspaso') and then pays a monthly rent for the duration of the lease.  When leaving, he must therefore sell the lease on again.

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Buying 'Off-Plan' Property

Off-plan property is that which is still in the process of being built and does not yet have a full 'escritura'.  You need to have the lawyer check that the building license is in order, that the certificates from both the town hall and the architect have been obtained for completion of the building - ('Certificado de Fin de Obra'), that the bank guarantee and insurance policy are in place and  that the property has a  legally registered plan ('plan parcial') which is also lodged at the town hall ('Ayutanmiento').

Bank Guarantee for 'Off Plan' Property 
 

The Insurance Contract / Bank Guarantee (Aval Bancario)  laws  were established in 1968,  to protect purchasers of 'Off Plan' properties in Spain.