You should budget on 8 - 10% of the value of the property to cover taxes and fees relating to the legal aspects of the purchase. The breakdown is as follows:
7% VAT on new properties or
6% transfer tax on second-hand properties
1% legal fees.
Choosing the Area
Remember, the cheapest property is not necessarily the best buy. From the point of view of investment potential, the same rule applies in Spain as in the UK.
Location, Location, Location!
If you are not sure of the location we will give you the best advise based on your requirements and budget.
Holding Deposit
Having found the property you wish to purchase, the first step is to pay a holding deposit (normally about 3,000 euros) which removes the property from the market. This sum is usually lodged to your Spanish solicitor's client account.
Appointing Your Solicitor
It is generally advisable to engage the services of a Spanish solicitor (or a solicitor well-versed in Spanish property law) to look after your purchase. We can recommend a number of experienced bilingual solicitors. Your solicitor will first of all ensure that the property has no debts attaching to it and that it is correctly registered.
The Purchase Contract
This is the private contract between vendor and purchaser and is binding on both parties. It is usually drawn up between 2 and 3 weeks after the holding deposit has been put down. It should specify the name(s) of the purchaser(s), the completion date and the terms and conditions governing the sale. At this point the balance of the deposit (usually 10% of the purchase price) has to be paid.
Signing of the Deed
This is done in front of the Notary in Spain or by someone (usually your solicitor) with power of attorney from you to sign on your behalf. Full payment is required before the title deed can be transferred into the name(s) of the owner(s). Spanish inheritance taxes are high, so it is advisable to include the names of any children who would inherit your property upon your demise. Some purchasers may decide that it is financially more beneficial to purchase the property through a company, and in this case the company name would appear on the title deed.
Taking Possession
The handing over of the property and the keys will normally take place only when the full purchase price has been paid.
Transfer of Services
Having completed the purchase, it is necessary to connect or transfer services. Electricity and water need to be in your name.
Building and Content Insurance
This is your responsibility upon taking possession of your property.
Payments of Charges and Taxes
As in the case of owning a property anywhere, certain periodic payments have to be made. Your solicitor will usually be willing to look after these matters, but you can appoint a Gestor (fiscal representative) to make the necessary payments and take care of whatever paper-work is involved. Local rates are paid to the town hall (ayuntamiento). You need to obtain a fiscal number from the local tax-administration office.
Community Fees
If you purchase a property within a complex or apartment block, you are obliged to join its residents association which administers the general maintenance of the areas of common ownership, such as gardens, hallways, lifts, swimming pools, exterior lighting etc. An annual budget is calculated to cover these costs, which is divided between all the owners according to the size of their properties. All owners have a vote to agree the budget at the annual general meeting.
Patrimonio Tax
This is wealth tax, calculated at 0.2% of the declared value of the property and is payable each year by non-residents.
Impuesta de la Renta
An annual tax payable by non-residents, which is based on the estimated value of the property on the assumption the property is rented out, whether it is or not. The amount is approximately 0.5% of the property value.
Plusvalia Tax
A one off tax on the sale of a property, it is calculated on the appreciative value of the land the property is on and varies between towns. It is common for this tax to be paid by the purchaser.
The Escritura
These are the freehold title deeds, which are presented before the notary-public, showing ownership of the property.
The Notary
A lawyer appointed by the Spanish government to ensure that the change of title is properly executed. It is his/her job to make sure that the seller is legally entitled to sell and the taxes are paid. The notary will register the change of ownership in the land registry office, this in turn is registered at the central registry of foreign investments in Madrid. The local land registry office is where all the escrituras relating to property transfers are recorded after the taxes have been paid
These documents are available for public inspection.
Property Guarantees
Spanish law states that all new properties must be guaranteed for 10 years, the architect and the builder being legally responsible.
Most new developments also include a bank bond within the terms of their contract, guaranteeing each stage-payment and frequently a no-later-than completion date.
Making a Will
Because Spanish inheritance-laws are different from ours, it is generally recommended that you instruct your solicitor to draw up a Spanish will covering the succession rights to your property.
PLEASE NOTE:
Because the terms and conditions governing property purchase in Spain are subject to periodic changes, all points of information included in this buyers guide are intended as a guideline only.