Buying a home in Spain without assistance can be a complicated and confusing process for those who are not familiar with the Spanish legal system, involving unfamiliar legal procedures and large sums of money.
There is also a significant amount of legal work involved to ensure that the transaction is made safely and in compliance with all legal and tax Spanish regulations. If you are planning to purchase a house, a plot of land or any kind of commercial property in Spain, the first move you should make is to contact a Spanish solicitor, an independent professional who will protect your interests and make the transaction trouble free. Do not part with any money or deposits until you have appointed your legal representative. Choosing your solicitor is very important and it is worth finding one whom you feel comfortable with, in respect of both service and price. Unless you know better, avoid solicitors recommended by the estate agent, mortgage broker or other party who may have an interest in the sale of the property. It is the best way to avoid any collusion that might exist.
Your house in Spain will probably be one of the largest financial commitments you will make and it is essential that a professional guides you step by step through the maze.
Before purchasing it is very relevant to know the complexities of the procedure and their importance:
Requirements to be an owner of a property in Spain:
Taxes to be paid for the transaction:
Taxes to be paid in the future for having the property:
The main outlays and costs to be paid on the transaction:
For those of you that have not bought a property in Spain before, we present a Summary of the purchase process from a practical and legal point of view.
After you have decided on a property, a full set of information about the property must be obtained from the seller such as: Title Deeds, official number Land Registry Number, Local Tax receipts paid, water and electricity receipts, etc.).
There are a number of searches to be made in advance to ensure that you get a good title to the property. The first Golden Rule is to check the Land Registry files to ensure that there are no charges or encumbrances on the property and that there is a clear Title to the Deed. It is also important to establish whether or not there are any public works affecting the property (such as motorway schemes) and whether there are any planning restrictions.
If the property and Title are in order from a legal point of view, a private purchase contract can be signed. On exchange of contracts, the purchaser will be asked to pay a pre-agreed deposit (normally 10% of the price) and to agree a completion date.
On completion day, the Purchase Title Deed will be signed before a Notary Public and the balance of the full purchase price is paid. It is at this moment that Ownership is legally transferred to the purchaser.
After completion, it is important to deal with all the remaining paperwork as soon as possible, namely, payment of taxes (Stamp duty or Transfer tax) and to register the new owner of the property at the Land Registry. The whole process can takes up to two months and it completes with your receiving your deeds (Escritura) showing you officially as the new registered owner.
Following these few pieces of advice and ensuring professional guidance I am sure your property experience in Spain will be straightforward and hassle free. Good luck.
SOME HOT TIPS
- Never sign anything until approved by your lawyer, documents signed in any language other than Spanish are not valid under Spanish Law.
- Make sure that the I.B.I. has also been paid as well as all telephone, water and electric bills.
- Declared Value: It used to be common practise to grossly under declare the sale price in order to reduce transfer tax [usually 6%] or IVA on new properties [7%]and capital gain's taxes [up to35% for non resident owners]. Tax inspectors now make their own assessment based on market values. There are penalties for both the seller and especially the buyer that will be swiftly applied if it is considered the declared price is not the market value. Your abogado (solicitor) will advise you on what you should declare and if it is in your interest.
The amount of capital gains tax payable on the sale of a properties purchased now, and since 1995 reduces annually inline with inflation.
Good news if you are a resident and sell a property which is your principal residence in Spain, as long as you have owned it for at least 3 years, and all the capital is reinvested into a more expensive property, and the new property is also your principle residence in Spain, then any capital gained from the sale will not be taxed. [this is effectively a tax on property speculation]
See also - Selling you property in Spain