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Buy A Property In Spain
THE
SPANISH BUYING PROCESS
Before traveling to Spain, as with any contemplated major purchase, you should ensure that you have done some basic homework.
• Do you know what type of property you really want?
• Are you prepared to pay more to get a beach front or golf frontage home?
• Are you buying in Spain to live here, or will your new home be used for holidays or perhaps for renting out to produce an income for you?
• Are you planning to buy an existing property (a “resale”), or do you intend to buy a newly constructed property off-plan (a “new build”)?
• Do you have a realistic budget available for what you wish to buy? Do not rely on prices that you have recently seen on one of the many property programmes on the TV. They are probably out of date by the time they are screened, or worse still, you may have been watching yet another repeat, quoting prices that are several years old. Remember that, despite a slow down in the market, property prices on the Costa del Sol continue to rise at 10% to 15% each year.
Make sure that by the time you arrive in Spain you bring with you sufficient, accessible funds to cover the initial reservation deposit. Once you have found your property, with the help of one our selected collaborating estate agents, and you have agreed the purchase price with the vendor, you will be required to put down a reservation deposit. This deposit is commonly €3,000 - €6,000 (approx. £2,000 - £4,000), but this amount could rise if you are considering a higher priced property.
The reservation fee is almost always paid in cash or by credit card. A cheque drawn on a non-Spanish bank can take up to a month to clear, during which time your reservation is deemed not to have been made. If you do not have the means to put down the required reservation fee immediately, you run the risk of losing that property to someone else who does.
YOUR
SPANISH LAWYER’S RESPONSIBILITIES
At this stage, it is strongly advised that you consult an independent Spanish lawyer. Do not rely on using the estate agent’s or developer’s lawyer. They could possibly have a vested interest in order to maintain a lucrative source of introduced business.
Wallace Church & Associates S.L. will introduce you to one of its panel of multi-lingual, independent lawyers who will ensure that the vendor actually owns the property and that it is free of any debts or charges. In Spain, any such charges are registered against the property and if not identified and settled before the purchase is completed, these charges, such as an existing mortgage, will be passed on to you, the buyer. In addition, if you are buying off-plan, your lawyer will confirm that the builder/developer has correctly obtained all the relevant building licences. The lawyer will then draw up a Private Contract (Contracto Privado de Compraventa). On signing the Private Contract, usually within 30 days of lodging the reservation deposit, the remainder of the agreed deposit will be payable. It is wise to pay any money via your lawyer rather than directly to the vendor or the estate agent. The Private Contract will specify your deposit, which will normally vary from 10% to 30% of the purchase price, depending on what has been agreed. This sales agreement should specify a date for the completion of the purchase. It is possible to sign the purchase contract without such a deposit and technically you are permitted to sue a vendor who subsequently withdraws; but with a contractual agreement in place, should the vendor decide to withdraw you are entitled to twice the agreed deposit as compensation. The balance of the purchase price and all fees will be payable when the vendor and the purchaser sign the Escritura de Compraventa, the definitive contract equivalent to the title deeds to the property.
The Escritura de Compraventa is signed by both parties, or by the lawyers if you cannot be present and have given your lawyer your Power of Attorney to act on your behalf – a common practice in Spain, in front of a Notary. In Spain, a Notary is a public official who is required to check and witness any legal document or transaction, including the deed of sale and the mortgage deed if finance is required, but expert, legal independent advice should always be taken to protect your own interests. The Notary is also responsible for sending off the relevant documentation after signing, to ensure that the property is registered in your name at the Land Registry. Your lawyer will also ensure that water and electricity services are supplied to your new home and that accounts are opened in your name.
As a general rule, with the obvious exception of properties bought off-plan, the whole purchase and mortgage process in Spain takes approximately six to eight weeks.
THE
COSTS ASSOCIATED WITH YOUR PURCHASE
As a
rough guide you should allow an additional 11% over and above the
purchase price of your new home to complete the purchase. There are
several fees, taxes and charges to pay when purchasing property in
Spain. These costs may be broken down as follows:
The fees
are:
• Legal
fees: min. €1,200 - €1,800 or 1% of the purchase price whichever is
the greater. Value Added Tax (IVA) will be added to the lawyer’s
fee. This is currently charged at 16%.
• Notary
fees: the scale of fees is fixed by law and may range from €300 -
€840, depending on the purchase price of the property.
• Property
Registry fees: as a rule of thumb, 60% of what the Notary charges.
The
taxes are:
• Transfer
Tax (ITP) at 7% or, when buying a new property from a developer or
promoter, IVA (VAT) at 7% plus Stamp Duty at 0.5%. The IVA rate of
16% will apply when purchasing plots of land, commercial premises or
garage spaces.
• Plus
Valia: a tax a little similar to Capital Gains Tax in the UK, this
is usually paid by the vendor but it may be stipulated in the
Private Contract that the purchaser pays. This tax may range from a
few euros to several thousand euros on larger properties with large
amount amounts of land. Who actually pays this tax should be
discussed in the negotiations and in consultation with your lawyer.
The
charges are:
• The
mortgage lender’s setting up charge. This can be between 1% - 2% of
the mortgage loan.
• The
lender’s fee for arranging the valuation of the property. This will
vary depending on the size and cost of the property, but for most
purchases the valuation fee will be between €300 and €600.
Please note that, unlike in the UK, (with one exception) these
additional costs cannot be added to the mortgage loan and will have
to be found from your own resources in addition to your deposit.
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Need a mortgage in Spain?
