Buyers guide

Purchasing a Property

Once we have identified your dream property, negotiated and settled on the right price with the vendor, it’s important to seek professional advice to ensure the following:

  • The vendor is the true owner
  • The property is legal
  • There are no debts, charges or other legal encumbrances that could be passed on to you

Lawyers and Legal Advice

We always recommend that you take independent legal advice before purchasing a property.

We work with multiple lawyers and all of our legal partners are independent and fully qualified to give you the legal advice you require before buying a property.

We can arrange a free of charge, meeting with any lawyer to talk you through the buying process and answer any questions you might have.

Financing

Your financing options are either cash financing from your home country via a mortgage on an existing property, or via a Spanish bank.

Spanish banks will offer you a mortgage (hipoteca) with competitive rates and conditions. The average Spanish mortgage terms, for non-residents, are up to 80% of the valuation of the property, with a 15-30 year repayment period and current interest rates are set at approximately 3%.

The formalities and loan procedures with the Spanish banks are straightforward. They require far less personal information to perform a credit check than you would be asked for at home.

The Spanish banks estimate the credit valuation more on the property valuation than on your current credit history. Spanish banks usually take two weeks to conduct a credit check and to confirm a mortgage. If you buy off-plan from a property developer they often have their own ‘in-house’ financing schemes.

Contracts

Once you have identified your dream property and you are ready to initiate the purchase process by paying a 6,000 Euro reservation deposit, your property will be taken off the market. This amount can be deposited with a lawyer of your choice.

The reservation deposit will allow the property to be reserved for a 7-14 day period during which the lawyer is able to carry out the necessary searches and negotiate the ‘pre-sale contract’ with the vendor.

The contract will set out the conditions of the purchase hence, what is included in the price, the payment schedule that is responsible for the transaction costs and ‘subject to’ conditions if appropriate.

The full deposit (normally 10%) is then paid.

This contract is legally binding for both parties, with the purchaser forfeiting his deposit if he changes his mind, and the vendor being liable to pay back double the deposit if he changes his mind.

The final public contract or title deed (escritura de compraventa) is formalized by the public notary upon completion (normally within 30 days) and confirms the contract is legal and the purchase money has been paid. The title deed is then presented to the property register (Notary) for inscription.

Your lawyer will provide you with a NIE/fiscal number (numero de identification de extranjeros), which is essential for property purchases and tax payment. He will also obtain a copy of the nota simple or title deed from the land registry, to prove the following:

  • Ownership
  • Legal constructed area
  • Plot size
  • Boundaries of the property

Your lawyer will also check mortgages or any other charges against the property, if the local rates have been paid, and whether community charges apply.

In the case of a resale property, the lawyer will request to view the last receipts of the property and wealth tax, as these can be passed onto the purchaser if left unpaid.

If purchasing from a new development, the deed of declaration of the new construction, the construction licenses, and occupancy permission will also be requested.

The lawyer will also check to see if the local authority’s planning department has any development plans in progress that may affect the area in which the property is located.

Taxes

The rule of thumb is to allow an additional 10% of the ‘declared’ purchase price to cover the transfer tax (impuesto sobre transmisiones), notary and lawyer fees.

The transfer tax for Costa del Sol is calculated at one of the following rates.

  • 7% of the declared purchase price on the title deed for a resale property
  • IVA (impuesto sobre el valor anadido) at 7% + 0.5% stamp duty if buying a new property from a developer
  • 15% if purchasing a building plot or commercial premises.

There is also a tax (plus valia) based on the increase in the value of the land since the last sale.

The notary will normally charge up to 1-2% (including tax & registration fees), and your lawyer will charge approximately 1%.

If applying for a mortgage your bank will also have a scale of charges.

On-going Fees, Annual Taxes & Utilities

Owners of property in Spain are liable for municipal real estate taxes or rates (impuesto sobre bienes inmuebles) based on the official rate-able value of the property (valor catastral).

In addition, there is a yearly wealth tax to pay on your ‘net’ assets. These taxes are significantly lower than throughout the rest of Europe.

If your property is part of an apartment complex or urbanization, then community fees will be charged to cover the cleaning, maintenance, lighting and upkeep of the common areas, swimming pools & gardens.

Electricity and gas are commonly cheaper than in northern Europe and water is normally metered, meaning you only pay for what you use. Telephone and Internet connections are usually in-line with the latest technology.

The above information is intended as a guide and should not be taken as a substitute for qualified legal advice as property laws in Spain can change from area to area and time to time.