Spain Buyers' Guide

COUNTRY OVERVIEW 

Since the 60s, foreign buyers have been snapping up Spanish property, from tumbledown Fincas in need of TLC, new ‘lock up and leave’ resort homes and city centre accommodation. Attracted by 300-plus days of sunshine a year, low prices and a relaxed lifestyle, Spain is still a number one choice for many. Other pluses are mainstream and budget airlines fying to many regions, good roads and healthcare.

Hit by the economic crisis, average national values fell by 31% since 2007, with the average house price at €244,000. However, Spain’s economy is still vulnerable and there is a large supply of un?nished properties which could dilute the market when the demand returns. Good research and the right location will be key to a good investment. 

PROPERTY HOTSPOTS 

The Costa del Sol remains one of the most popular areas for foreign buyers. Typically, inland locations represent better value than pricier seaside spots, and farther-flung areas, such as Almeria, Murcia and newcomer Aragon, are attracting those desiring more for their pound. And with Barcelona a leading financial and cultural centre, canny purchasers are buying just outside the city on the Costa Brava to enjoy what the city has to offer, as well as the nearby coast and countryside. 

BUY-TO-LET MARKET 

Rental values have been on the wane on the Costa del Sol, as competition has been fierce due to a surfeit of new homes constructed before the economic crash. The area is still popular for holidaymakers and retirees choosing to rent. Spain gets 55 million tourists a year, ranking in fourth place in the list of the most visited cities of the world (World Tourism Organization, 2012) and many are keen to rent rather than stay in a hotel. A new trend is to buy in Spain’s vibrant and historic towns and cities; for instance, Seville, Cadiz, Madrid and Jerez, broadening the opportunity to rent not only to tourists, but also to local young professionals and families. 

TAXATION 

In January 2013, the Spanish authorities increased the IVA property tax to 10% after reducing it to 4% for two years to boost property sales. Confusingly, new taxes in the Balearic Islands means paying from 7-10% on a property’s value in stages. Legal, notary and land registry fees account for an additional 1-2% of the purchase price. Beware of the seller under-declaring a property’s value to avoid taxes, as new laws mean the notary will vigorously check the true value as they are liable to be heavily fined if the home’s undervalued by more than 20%. 

KEY LEGAL ISSUES 

There have been a number of high-profile legal property cases, notably Valencia’s notorious ‘land grab’ laws, which homeowners face hefty fees and even have their homes demolished because they were built on land later claimed for further development. However, the European Court has ruled this practice illegal and is pursuing the Valencian government through the courts. You may well be offered the services of a Spanish abogado (lawyer) through the vendor of a property, particularly large developers. Seek your own independent legal advice, as there’s a confict of interest when using a lawyer representing both the buyer and the seller. 

TOP TIPS 

Hire an independent, English-speaking lawyer. 

 If you’re letting your home, ensure it’s in a town or resort with good amenities. 

A ‘bargain’ might not always be what it appears – check why the price has been reduced. 

Advice on buying Spanish property

Why Buy in Spain?

Spain has a great variety of landscapes, from mountains and lakes in the north to sandy beaches, olive groves and vineyards in the south. The drive from Burgos in the north-west to Malaga in the south-east takes you through so many different panoramas; you could be forgiven for thinking you are driving through several different countries.

For years the south-eastern Mediterranean coast has been one of Europe's most popular holiday destinations and is the place of choice for most British second homes. However, in recent years the north-west (Galicia) with its craggy shores on the Atlantic is attracting a large amount of attention amongst buyers looking for more rural retreats away from the tourist hubs of the Costas - at more sensible prices.

Spain has many charming and captivating religious festivals, pilgrimages, carnivals and fairs such as 'El dia de los muertos' and the running of the bulls. You will find yourself a part of these festivals as you are carried along by the warmth and enthusiasm of the cheering crowds - sometimes literally!

Only in the last two or three decades, and since Spain's entry into the European Union, have things really begun to move ahead and to modernise. For those who live in the countryside however, life remains quite traditional and unchanged, blissfully so to visitors who look back to a more intimate and unspoilt village life that is long past in most countries.

People are also attracted by the relaxed and slower way of life in Spain and the culinary delights like paella and tortillas are legendary... and affordable. Overall, there are loads of reasons that Spain is the number one destination for Britons buying abroad.

Getting Started - is it possible for you to buy in Spain?

Buying a property and living in Spain is straightforward if you are a national from another EEC (European Economic Community) country. If however, your nationality falls outside the Euro zone you may be able to buy a property but there might be time restrictions as to how long you can stay in the country. Furthermore, there are certain guidelines as to work permits for non EEC nationals. You can find out information pertinent to you by accessing the Spanish Embassy website or through a variety of internet websites. There are also specialist emigration organisations that will often do a free consultation letting you know your options.

Finance - how much does it cost to buy a property in Spain?

In Spain purchase costs could be 10%+ over and above the purchase price and when considering the dramatic changes in currency exchange rates, this percentage could climb much higher. So, if your property price is £100,000 it could cost £110,000 (or more) by the time you complete and take possession of the property. It's important from the start that you clearly understand how much a property will cost you as this will determine what price range you can look at.

While researching the Internet, attending property trade shows and emailing estate agents, start to investigate what is included in the property price versus what gets added on. In Spain the purchase price includes the estate agency fee (usually 5%, but nowadays maybe 3%). For all property and land, 8% of the purchase price is paid as a transfer tax that goes to the Spanish Treasury. In addition, there are notary fees and a land/property registration fee, which varies according to the purchase price of the property. Also consider solicitors and mortgage fees. Solicitors usually charge 1% of the purchase price + VAT at 18%.

Finding a property Spain - where should you start?

Search for property in Spain with Rightmoveoverseas.co.uk - the best place to search for Spanish property and part of Rightmove.co.uk, the UK's number one property website. Home to sun, sea, beaches and tapas - and a long standing favourite with Brits - Spain holds strong as the most popular overseas destinations for holidaymakers and investors alike! The lure of the dream villa in Spain is still as strong as ever with more Brits having bought property in Spain in order to regularly holiday there or relocate permanently. With villas, fincas, apartments and larger houses for sale, there is a great range of property in Spain and Rightmoveoverseas.co.uk is the best place to find the very latest property in Spain.

Legalities - should you use a lawyer in Spain?

Based on news stories about property buyers in Spain having their property demolished, I think it's safe to say that buyers now realise that it's not only imperative to get a solicitor, but it's absolutely necessary to get a good solicitor.

Stating that, I suggest that you contact a solicitor before setting off to view properties in Spain otherwise if you do decide to buy you will be rushed for time and may be pushed into using a solicitor who may not act in your best interests. In the UK there are many legal firms that specialise in Spanish Law and house purchase. They can act as an intermediary between you and a local solicitor.

Another vital factor is that you need to find a solicitor who is independent from the estate agent, developer or company showing you the properties, so that you know the solicitor is working for you and not the property professional. Some solicitors may draw up a contract of sale which is in favour of the estate agent (or end seller), and the reason behind this is quite disingenuous. By safeguarding the agent the solicitors will be assured of retaining their valuable business. Compare your one transaction to the many the solicitor stands to gain from the agent or developer and you will understand the clear conflict of interest here.

Make sure that you have done your homework and that you are using a reliable and trustworthy solicitor. This may include asking for personal referrals - and these must not include your developer or agent - or using specialised Spanish websites. If the solicitor does not fully comprehend English or you have any reservations at all - move on and find someone else. You may find an English speaking solicitor in Spain is neither English nor Spanish, they might be German or Dutch for example, but they will be competent to deal with your purchase. Solicitors must be registered to practise in Spain and are usually found in the popular coastal areas or larger towns.

Your solicitor will review the sale agreement, verify titles, and carry out other checks to ensure that you're protected. They, or a notary, may be responsible for paying any taxes and registering the property with the land registry if this is required. Charges vary for legal and notary services but can cost around 1% to 2% of the sale value of the property. In Spain the cost is determined by the government.

You need to bear in mind that the legal system in Spain may not work in your favour if trouble strikes, so it is of paramount importance that you hire qualified people who can ensure that you do not have to take legal action. Don't put yourself in the position of needing legal redress. You may have the law on your side but the legal system abroad can keep you tied up for years and cost a fortune. Make sure you - and your solicitor - get it right from the start and the purchase will move forward easily, most purchases in Spain do, you only hear about those that don't.

Settling into Spain - how can you make friends?

It may take a little while before you feel at home, however, there are a few things you may want to do to push the process along:

  • Pop in and introduce yourself to your neighbours. Don't worry about the fact that you don't speak Spanish (if that is the case) - just the gesture will be appreciated
  • Host a housewarming party. You don't know anybody? Well, now's your chance. Ask that lovely lady you met in the chemist, ask the neighbours, set out to meet a few people that you feel you can invite... A few bottles of Spanish wine will work wonders
  • Buy or read your local English news sheet - if indeed there is one. That way you may well find out about local events that you can participate in
  • Join local clubs.
  • Shop locally and get into conversation with everybody in sight. Learn a few Spanish words such as 'hello' (Hola) and you'll be well on your way.
  • Although you may want to submerge yourself in the local culture, you may want to consider joining an expat club. It can be quite comforting to hear your own language from time to time...

Like so many things in life, it may all seem a little daunting at first. Spain is a country with a traditional culture and different ways. The key is to embrace these differences, not battle them. Some of the bureaucracy and formality may be annoying, but perhaps it was this slower pace that enchanted you about Spain in the first place? Relax... and soon it will feel like home to you.

Becoming a resident in Spain

One important thing to consider when you buy property in Spain is how much time you are likely to spend there and whether it means that you will need to apply to become a resident.
The rule is simple. If you spend more than three months a year in Spain, you will be required to apply for Spanish residency. For many, this will be an advantage, but for a few, perhaps not.

During the past year, the Spanish Government has brought in new laws about residency , but please bear in mind that the rules are constantly changing, so you should always consult a Spanish lawyer or accountant to obtain the most up-to-date information.

If you are from a country within the EU, you and your family have a right to live and work in Spain. You are required to apply for a Residence Certificate as an EU resident and, following a law passed in July 2012, you might be asked to prove you have adequate funds to support yourself and members of your family.

Additionally, you will need to show that you are covered by private or public healthcare. Non EU citizens also need a Residency card and once obtained, they and their family are entitled to the same rights as a person from the EU living in Spain.

EU residents will need to go to an Oficina de Extranjeros (foreigners office) in their province or to particular police stations. Whereas before you were issued with a residency card with your photo, you will now receive a Residence Certificate which shows your name, address, nationality and NIE number (Número de Indentifación Extranjeros) with the date of your registration. You are required to renew this if you change your address at any time.

You will need to bring certain documents with you. Make sure you have everything as you will have to return at a later stage if all the necessary paperwork is not in order. Everyone must bring their passport and those employed will need to bring a declaration showing they have been hired by an employer or a certificate of employment. These documents must show all information pertinent to the employer.

Self-employed people will need to show evidence that they are self-employed in Spain, for example their registration on the Censo de Actividades Economics  (Registration on the Economic Activites List).

For people who do not work in Spain, it is necessary to comply with certain conditions:

? They can show that they are covered by public or private health insurance contracted in Spain or in another country and that they will be covered for the full period of their residence with the same cover as provided by the Spanish health authorities. Pensioners need only prove they that they are entitled to health care paid for by the country from which they come. There are forms available from the International Pension Centre, Newcastle upon Tyne.

? They can show they have adequate funds for themselves and their family members so as not to become a burden on the Spanish social welfare system whilst resident in Spain. Bank accountant statements, documents showing income from capital, private pensions and similar will be acceptable.

Non-EU citizens staying more than three months in Spain will need a Visado de Residencia  or Residence Visa. You should request these from the Spanish Embassy in your country before you come to Spain.

This differs from a three month tourist visa in that it allows you to be able to start your application for a residence permit/card. You should go to the Oficina de Extrajeneros as explained above and take with you your passport and a photocopy, three passport sized photos, the completed application form and three copies, proof of your address in Spain and a receipt for payment of the administrative fees, stamps by a bank. More documents may be required and it would be wise to check at the Oficina de Extrajeneros in your town or province.

For non-EU citizens, the Residence Card is initially valid for one year and can be renewed annually for up to five years.

As with everything to do with government offices, it is vital to check precisely what you need to take with you.

The process may sound daunting, but armed with the correct paperwork, the worst you may have to deal with is a longish wait at the Oficina de Extrajeneros.

THE BUYING PROCESS

 Where should I buy:

 The first order of business for any buyer is to decide on WHERE he wants to buy. The process of choosing the location should be arrived at using a pyramid system, i.e., starting from a more general location to a very specific one. The questions that must be asked to identify the specific location are as follows:

•    What are the reasons why I wish to buy a property? Travel accessibility, availability of facilities that are desired or needed, environmental ambiance and social compatibility must all be considered. Once done, you will be in a position to arrive at a decision as to which location meets these criteria.

•    Once the general location is identified, which specific area within this general location suits my needs? Am I for a long term investment and therefore do not mind buying in an undeveloped area that may give me better returns in the future, or do I want something fully developed to provide me with immediate comfort?

The Property:

 It will be much easier if buyers can pre-establish their essential requirements or definite features to be avoided. Accessibility, stairs and steps, views, privacy, noise, style of construction, parking, etc. and of course size, number of bedrooms and bathrooms, size of kitchen and living room.

Price and getting a feel for the market:

 To facilitate your search for the right property, it is essential that a maximum budget be decided before beginning to view properties. In this way, you avoid wasting time and provide vital information to the agent, so that he may focus on properties available that are within your means.

To get a better feel of the market, if the property meets your general necessities on paper, by all means visit it. This will not only give you a clear idea of what types of properties are available, but also provide you with valuable information of the values. With this knowledge of market values, when the time comes to negotiate the purchase, you will feel assured that the appropriate price for the property is being paid.

Having established these three initial guidelines, an agent will then be able to focus his attention on showing your properties that meet your criteria. Often, having viewed a few selections, a buyer will realize that he perhaps did not have the right requirements. As you view, it is important you pass your opinions on to your agent, as then the search can become better focused to your specific requirements.

Remember, a good agent is there to help you find the right property.

Choose a reliable agent:

 This is the singular most important factor in your search for the right property.

In choosing an agent, knowledge of the area and experience is of utmost necessity. Holmes Property Sales, S.L. has worked in Sotogrande since 1979. It is the longest established real estate agency of the area and has always focused its attention exclusively in Sotogrande. Just like we recognize our limitations in selling in other areas outside Sotogrande, we too are recognized by our peers as the experts and professionals to rely on when in comes to finding property in Sotogrande.

In Spain you will find that everyone is “in the business”. Beware of the taxi driver, the waiter, and the most dangerous of all, “the friendly face” that introduces himself to you at the bar, by the pool, in the hotel. It is dealing with them where horror stories begin.

A good agent is one who tries his best to act professionally, ethically and honestly to both buyer and seller, as his reputation within the community is of utmost importance.

A good agent will have good working relationships with other good local agents. So you may well find, that if you are comfortable with the agent you are with, it is best to “stick with him”. If you do, he will check with his associate agents, and he instead of you will do the running around in order to find the right property.

Why use an agent?

 The immediate advantages a buyer has in referring himself to a reputable agent are as follows:

1.    At no cost to him, the buyer is able to avail of the agent’s valuable know-how of the area.

2.    The larger inventory of properties that a reputable agent has will offer the buyer a wider choice to enable him to find the right property and at the right price.

3.    When a direct vendor, a developer, or a promoter sells, because of their bias, they will always claim that their property is the best. Whereas being unbiased and making use of his wide inventory, a reputable agent’s goal will be to direct you to the property you need.

In the end, the buyer should feel relieved to know that with the knowledge the agent has provided him, he will have bought the property that best suits his needs at the best price.

Choose a lawyer:

 Unless you already have been recommended to a reliable lawyer, only heed the advice from someone who is independent. A developer or an agent is not necessarily the best person to make a recommendation, unless they provide you with a selection of lawyers to choose from.

The lawyer you choose must speak your language and make you feel comfortable. It will be your lawyer that will ultimately ensure your buying process is safe.

Should you be considering a re-sale property, we strongly advise that you pay for an independent house buyer’s survey report from a qualified surveyor, structural engineer or architect.

Cost of purchase:

 Transfer tax (I.T.P.) of 8% (up to 400.000 €), 9% (for any amount over 400.000 € up to 700.000 €) and 10% (for any amount over 700.000 euros) – By law, this tax is payable by the buyer. It is a tax applied for the purchase of a property. The tax is calculated on the higher amount of the following, the  purchase price, the  ”Fiscal value” of the property,  (the rate-able value multiplied by a multiple set by the Town Hall)  or the “Bank Valuation” of the property if the property is being purchased with a mortgage and the valuation is included in the mortgage deed,  It is therefore important to check what value the I.T.P is likely to be calculated on before committing to a purchase.

I.V.A (VAT) Is applied to the sales price of properties owned and being sold by developers instead of I.T.P. Usually when this is the first time the property in its current state is being sold. I.V.A on constructed properties is 10% of the purchase price plus 1.5% Stamp duty. Check that the entity that is selling the property can apply I.V.A to the sale before you pay the I.V.A, if they are not entitled to charge I.V.A on the transaction you could still also be liable for the I.T.P.

NOTE: For plots of land, commercial premises or commercial garage spaces owned by a developer, promoter or juridical entity, the tax to be paid is V.A.T. (21%), plus Stamp Duty of (1.5%).

Notary Fees - By law, the first copy of the title deed is payable by vendor. The cost (no more than 0.5%) increases according to the number of pages and complexity of the title deed and the value of the property.

Registry Fees - By law, this is payable by the buyer. These are calculated on the same basis as the notary fees explained above and are at most 0.5%.

Lawyer’s Fees - Lawyer’s fees are in the order of 1% of the selling price, more or less, depending on the lawyer and the price of the property.

Mortgage Costs- If you plan to purchase with a mortgage you need to consider that there are additional cost involved.

1. Arrangement fees = approx 1-1.5% of the Mortgage amount.

2. I.T.P on the Mortgage Value = Rule of thumb approx 1.2% of the Mortgage amount.

3. Notary Fees = Approx 0.5% of the Mortgage Value. (Mortgage amount plus total interests and penalties)

4. Registry Fees = Approx 0.5 % of the Mortgage Value. (Mortgage amount plus total interests and penalties)

Municipal Added Value Tax (Plusvalía Municipal) - This tax can be as little as a few hundred Euros or as much as many thousands of Euros, depending how large the land is and for how many years it has been owned. By law, payment of this tax corresponds to the vendor, but sometimes the vendor tries to have the buyer pay for it. Before accepting it, check with your lawyer to see what the amount is to be paid.

Summary - The total costs of purchase involved normally amount to a total of 9-10% if the vendor is an individual, and 12.5% if it is a developer entity. To this costs, you need to add the 1% lawyer’s fees. If you are buying with a Mortgage you will also need to add the Mortgage costs.

Role of the Notary in Spain.

The moment you start the process of buying a property in Spain, you will be advised that you will need a notary and a lawyer. The lawyer is not strictly necessary in the process, though anyone from abroad intent on purchasing a home in Spain is really advised to engage one, preferably a lawyer who speaks your language. You will pay him/her to look after your interests during the sale and after. The notary however has a completely different role.
 
Essentially, the notary is a public official - but paid by the buyer of a property - who is there to see fair play during a sales transaction and to make sure that both sides fully understand the sales contract and all its clauses. They are also there to make sure that the current law is adhered to and that any relevant taxes are duly paid.
 
In Britain, once you have signed and exchanged contracts and paid the seller, you are free to register your title to the property in the Land Register. It works differently in Spain as it is only possible to register ownership if a notary has been present to witness the deeds of sale. Therefore if you buy a property without a notary you cannot inscribe it on the Property Register (Spanish version of the Land Register). Many Spaniards have not bothered to have their property registered as this means they don’t need a notary, nor to pay the associated fees, but for any foreigner buying in Spain, it is vital that they have their property put onto the Property Register, or else there is no real proof that they are indeed the owners. 
 
Having your title on the Property Register has further advantages, for example if you need a mortgage against the property or to protect you from the seller’s debts and creditors. Really, there is no reason not pay for the notary and have your title to a property correctly recorded.
 
A visit to the notary can be a little daunting for many foreign buyers as all parties, vendor, purchaser and their respective lawyers will meet at an appointed time at the notary’s office and often have to wait a while for the notary to appear. He or she will then confirm all details concerning the seller and buyer, date and place of birth, passport number, etc, before reading through the sales contract. 
 
Some notaries speak English but most will read the contract in Spanish. (This is where your English speaking lawyer will be particularly useful, despite what certain estate agents will tell you as the notary is not there to give you, the purchaser, any special protection). Once the contract has been read and providing there are no objections, he will ask all interested parties present to sign each page of the contract, which can take some considerable time. It is then that you produce the funds for payment, a banker’s draft or other agreed form. You are advised against any under the table payment, though it does happen, but never in the presence of the notary, who usually finds an excuse to leave the room for a short time which is when the cash is transferred to the vendor.
 
The notary will give the purchaser a copy of the deeds (nota simple). You can ask for several copies, but each will carry a fee of around €30-€40. This copy is required to open utility accounts and also to pay your taxes. A couple of weeks later the original copy will be available but the notary should have already sent a fax to notify the authorities that you have purchased the property. The notary's fees are set by the Spanish government, but as a general rule they are between 0.1 per cent and 0.4 per cent of the sale value. 
 
Notaries have other roles to play too. They oversee the writing of wills, verify original documents such as marriage and birth certificates - often needed to gain residence if the holder comes from outside the EU. You will need a notary to write an official letter, for example to inform a tenant of your property that you want to terminate the tenancy when the lease comes up for renewal. A notary is there to register company charters and the official minutes of a property owners’ community.
 

Introduction to the Buying Process for UK Buyers.

This guide is aimed at providing some basic information about buying in Spain and tries to answer the majority of the common questions that we are asked about.  However it is recommended that you seek advice from a professional before proceeding .

Is the legal system in Spain the same as the UK?

No, they are very different, but there is an interaction between them when you buy a property in Spain. That is why the best person to advise you on your purchase in Spain is somebody who understands both Spanish and UK law.

Do I need a lawyer to help me buy in Spain?

Surprisingly this is the most common question that we get asked. No, you don’t – just like you don’t neces- sarily need a lawyer when buying in the UK. However, in reality you would always use a lawyer when buying in the UK so what is so different about buying in another country where you probably don’t have experience of buying before?

I have been told that I don’t need a lawyer but need a Notary. Is this true?

The Notary is important in Spain but tends only to get involved at the end of the transaction. His role is to carry out some basic checks at the end and attend to the signature of the title deed and in some cases to register the property. He doesn’t normally advise on whether the contract is OK to sign, whether you should pay the deposit, who should own the property, and so on.

I have heard that there are problems with buying property in Spain. What is the situation?

Certainly there are potential problems when buying in Spain, just like there can be in any country including the UK. Most of the potential problems that you read about can be avoided by using common sense and by instructing an independent lawyer to advise you on the purchase. We often see people with problems with their property and they invariably tell us that they didn’t use a lawyer or used the lawyer given to them by the seller or estate agent.

Are the costs more in Spain than in the UK?

Yes, the total costs in addition to the purchase price are higher than you will be used to in the UK. It is therefore important to factor these into your budget from the beginning. Luckily property prices are currently rock bottom which not only reduces some of these costs but also makes the purchase price much cheaper.

 

Costs 

The total cost of buying in Spain is higher than in the UK. As a rough rule of thumb you should budget for something in the region of 11% to 12% of the value of the property although the costs vary across the coun- try. This should cover all legal fees, Notary fees, taxes and so on. If you are taking out a mortgage the cost will be slightly higher as there are normally bank costs and extra taxes to take into consideration.

You may be asked to sign a reservation contract and pay a small deposit (typically around 3,000) to take the property off the market for a couple of weeks. This doesn’t commit you to buy but it is still worth having your solicitor to check that the contract is OK before signing. Just because a contract says “Reservation Contract” on it doesn’t mean that it is one.

After that you would work towards a full purchase contract and pay typically around 10% deposit. That con- tract commits you to buy the property.

On a new property you may have to make stage payments throughout the course of construction. The balance is paid upon signature of the title deeds and registration.

 

Mortgages

There are two ways of financing your purchase in Spain through a mortgage.

The first is to release equity from your UK assets to buy the property in Spain. The second is to mortgage the property in Spain. Each has advantages and disad- vantages but getting it wrong can cost you dearly so take advice on this.

If you wish we can put you in contact with mortgage brokers either in the UK or in Spain. We do not re- ceive a commission for doing so and are not tied into a particular broker we simply recommend them because they have given our clients good service in the past.

Obtaining a mortgage in Spain is more difficult than it has been in the past. If you are buying a property in Spain that already has a mortgage on it then it may be possible to take over that mortgage from the current owner.

This is often seen as an easy way of obtaining a mort- gage but you should be aware that that mortgage might have been the right one for the seller but may not be the best one for you.

 

Surveys

If you are buying a property we would always recommend that you obtain a survey. If you obtain a mort- gage the valuation carried out for the mortgage company will only look at whether the property is worth the amount you have negotiated.

Any defects in the property which do not affect the value will not normally be shown on the report. A sur- vey will rate the condition of all permanent structures and will highlight any important problems that could affect the property value. Depending on the survey this may also give advice as to future maintenance. The survey should reduce the chance of discovering any nasty surprises with the condition of the property once a purchaser has bought the property. If there are any defects the survey will help the buyer negotiate the price or require certain works to be carried out before the property is purchased.

The survey may also reveal that certain works have been carried out or highlight rights that are necessary for the property which we can investigate before the property is purchased.

 

Buying any property involves a lot of cost.

When you are converting from one currency to another the difference between one exchange rate and an- other can literally make a difference of thousands of pounds on your purchase.

Do not underestimate the difference that a good exchange rate can make.
We know people who have sold properties and have made more money on the exchange rate difference

than they have on the sale of their property.

We are not banks or currency dealers, but would recommend that you investigate the cheapest way of send- ing your money abroad. If you would like we can put you in contact with currency dealers that we know will give you a good exchange rate and a good service.

Currency dealers have increasingly sophisticated products. You can agree rates for the future. You can get them advising you when to buy or agreeing to buy for you when the rate hits a certain level. You can even agree a fixed rate for longer periods of time if you make regular payments abroad (for example for a mort- gage or moving your pension money).

We work with Currencies Direct who can give you a good exchange rate for your purchase and whom we have known for years. We do not receive a commission for introducing them to you.

 

Power of attorney

A Power of Attorney is a document which allows somebody to do something on your behalf.

If the title deeds are not being signed in the UK then often clients prefer to grant a Power of Attorney to somebody to sign the title deeds on their behalf.

This has several advantages;

You are normally busy and haven’t time to go out to Spain to sign the title deeds.

Signing title deeds is not particularly exciting and most people prefer to use their time off enjoying the prop- erty rather than signing pieces of paper.

It normally works out cheaper than you going out to Spain to sign.

You should only give a Power of Attorney to somebody that you trust as they allow that person to do things legally on your behalf.

In Spain Powers of Attorney have much wider faculties than we are used to in the UK and often have very general clauses in them “just in case”. We try and limit the Powers of Attorney down as much as possible whilst still allowing the person appointed the freedom to do what you need them to do.

COSTS: £200 plus tax for drafting up a Power of Attorney. On top of that you will have Notary fees, foreign and Commonwealth Legalisation fee (£30 per document) and often Courier fees. 

 


Fractional Ownership is not a new concept and has been around for many years although back then we called it Co-ownership.

Put simply Fractional Ownership is where several people buy a property together. This can be members of a family, friends, work colleagues or even complete strangers.

You buy a share in the property and also share the running costs.

The best Fractional Ownership schemes are those where the cost of buying is closest to the value of the actual share in the property i.e. the ones where there are not huge margins built into the sale.

Timeshare is a type of Fractional Ownership but Fractional Ownership is not necessarily Timeshare as there are strict definitions as to what Timeshare is.

 

NIE

The NIE (Numero de Identidad de Extranjeros, which translated literally is your Foreigner’s Identity Num- ber) is your Tax Identity Number in Spain.

There are several times when you are likely to be required to produce your NIE number;

  • ?  When you buy a property

  • ?  Opening a bank account

  • ?  Dealing with the utility companies

  • ?  Taking out insurance

  • ?  Dealing with the tax authorities

  • ?  Buying or selling shares, bonds and stocks

  • ?  Buying a car

    The rules on NIEs change regularly and between geographical areas. Sometimes you have to obtain this your- self and sometimes it can be done by somebody on your behalf. We will therefore advise you how this is working and costs at the time that you contact us. 

 


This is probably the most important decision that you can make. Getting this right can save you thousands in costs and taxes. Getting it wrong can be an expensive mistake.

The way that you would buy a property in your home country is not necessarily the best way to buy in Spain so don’t assume that you can adopt what you have done here to your purchase in Spain.

There are many options – ranging from personal ownership to company ownership but there is no “one size fits all” solution that works for everybody.

Your circumstances and priorities are different from the next person. We are able to look at your circum- stances and your priorities and advise you who should own the property based on that information. The so- lution may not necessarily be immediately obvious

When deciding on the best form of ownership we would need to take into consideration both Spanish and UK tax and also a range of other circumstances such as your plans for the property in the future.

 

Miscellaneous

Residents Association (Comunidad de Propietarios)

If you are buying in a complex then there will be a Community of Owners. We would need to make sure that all Community charges have been paid up to date before you buy.

Water and Electricity

It is important to check that there is a connection and that the charges are paid up to date.

If you are buying a new property we will need to check that the property has the appropriate Habitation Certificate which allows the services to be connected.

Land Registry (Registro de la Propiedad)

Almost all land and properties in Spain are now registered.

We would obtain a search at the local Land Registry for office copy entries (Nota Simple) of the previous owner’s deed which will show who the registered owner is and whether there are any charges on the title.

Town Hall (Ayuntamiento)

Checks should be made at the Town Hall to make sure that the Council Tax (Impuesto sobre Bienes Inmuebles IBI) has been paid up to date. It is also possible to obtain a certificate from the Town Hall show- ing that the property has the necessary building permit and complies with local planning and building regula- tions.

Moving in

Just like back home you will need to arrange to have the utilities and services in your name and often have to set up a direct debit at your Spanish bank to pay the bills. You also need to inform the local Council and the Residents Association that you own the property.

 

Spanish inheritance laws are probably very different to those that you are used to in your home country.

We can advise you on the various different options regarding your Spanish Will. It is possible to have two wills one in the Spain covering your Spanish assets and one in the UK covering your other assets. Both Wills need to be drafted carefully to make sure that they do not revoke each other.

You can leave your assets in Spain to somebody with a UK will but this doesn’t make sense – the cost of the subsequent inheritance will be more and it is possible that you will inadvertently cause inheritance tax prob- lems.

The cost and extra complications of leaving no Will at all is great and should be avoided.

Whilst as a foreigner you do not have to follow the same rules that Spanish people do in terms of who you have to leave your property to, it often makes sense to do so as this can save your beneficiaries huge amounts in tax.

A Spanish Will can be prepared and signed in your local area or in our offices there is no need to go to Spain. We can arrange for the registration of your Will at the Central Wills Registry in Madrid.

We charge £200 plus VAT for drafting a simple Will for one person. On top of that there are Foreign and Commonwealth Office Legalisation fees (currently £30) and Notary fees, which will depend on the Notary.

The Spanish Will can be signed in the UK or Spain.

 

inheritance

Spanish Inheritance Law states that when you die your property will be shared among your heirs according to the law of your residence. It is a common misconception that as a foreigner you have to leave your assets in accordance with Spanish law, which imposes certain “forced heirs”. A “foreigner” that is resident in Spain can make a Spanish Will leaving his own property to the person of their choice. This Will must contain a dec- laration that their personal law is governed by the principle of free disposition of property by testament. This is then acceptable to the Central Wills Registry in Spain. Generally speaking a valid Spanish will is sufficient to dispose of the estate as you wish.

If a foreign resident dies domiciled in Spain the estate will be distributed according to Spanish law. Domicile is not the same as Tax Residence.

Inheritance tax on property or assets in Spain has to be paid in Spain. The property or assets also have to be declared back in the UK although due to Double Taxation Laws you can offset the tax paid in Spain against the tax payable in the UK.

The rate of inheritance tax payable in Spain will depend on three things;

  1. The relationship between the person who died and the beneficiaries

  2. The amount that each beneficiary receives

  3. The individual wealth of each beneficiary

The tax is a tax on the individual beneficiaries rather than the estate as a whole.

The closest relatives have a tax free sum of 15,956.87 and are;

  • ?  Husband / Wife

  • ?  Children

  • ?  Grandchildren

  • ?  Parents

  • ?  Grandparents

 

The next group has a tax free sum of 7,993.46 and are;

  • ?  Brothers and Sisters

  • ?  Uncles and Aunts

  • ?  Nephews and Nieces

  • ?  In-laws

    More distant relatives or people who are not related to the deceased do not have a tax fee sum at all and pay tax on the full amount they receive.

    The rates of Inheritance Tax in Spain for a given amount change according to the area of Spain. An example is as follows. Multipliers may also apply

Amount

Base Tax Payable

Remainder Taxed at

Up to 7,993.46

0

7.65%

7,993.46

611.50

8.50%

15,980.91

1,290.43

9.35%

23,968.36

2,037.26

10.20%

31,955.81

2,851.98

11.05%

39,943.26

3,734.59

11.90%

47,930.72

4,685.10

12.75%

55,918.17

5,703.50

13.60%

63,905.62

6,789.79

14.45%

71,893.07

7,943.98

15.30%

79,880.52

9,166.06

16.15%

119,757.67

15,606.22

18.70%

159,634.83

23,063.25

21.25%

239,389.13

40,011.04

25.25%

398,777.54

80,655.08

31.75%

797,555.08

207,266.95

36.50%

 

Ongoing Obligations

After you buy a property in Spain there are ongoing obligations that you need to meet;

Insurance

It makes sense to insure your property and contents.

Council Tax (Impuesto Sobre Bienes Inmuebles)

This is normally paid annually in one lump sum between 15th September and 15th November. The amount will depend on the location, size and age of the property.

Non payment of IBI can lead to legal proceedings being taken against you and an embargo on the property.

Utilities

You will be responsible for the utility charges electricity, gas, water sewerage, rubbish collection etc. from the time that you buy the property and should make arrangements for these to be put into your name.

Community Charges (Cuota Comunidad de Propietarios)

You should pay these otherwise the property can be confiscated and auctioned in order to settle the debt.

Income Tax

If you are non-resident you must declare any income you have earned in Spain. This applies even if you re- ceive this income by renting out to people from your home country and the money never touches Spain.

Even if you do not receive any rent from the property it is assumed that you have received some sort of ben- efit and you are taxed on this (but only at 0.5% of the Valor Catastral).

You will also normally have to declare this income in the country where you are tax resident but can normal- ly offset the tax paid in Spain through Double Taxation Treaties.

 

The taxes that you pay when you buy a property in Spain will normally depend on whether you are tax resi- dent there or not.

Tax residence is a determined by a number of factors;

How long you spend in that country? Is it 183 days or more a year (not necessarily continuously). If so you are likely to be tax resident there.

Is your main home there? If it is then you are likely to be tax resident there.

Is your immediate family (spouse and dependent children) based there? If so you are likely to be tax resident there.

Is your main economic interest there? If so you are likely to be tax resident there.

If you do become tax resident in a country then you will normally stop paying taxes in your home country and start to pay taxes in the new country.

Do not be tempted to have selective amnesia when it comes to declaring taxes the authorities in both Spain and the UK are clamping down on people who do not do not do things properly.

Sometimes you should declare something for tax purposes in one country and also in another. Spain and the UK have a Double Taxation Treaty which means that you don’t normally pay tax twice and can offset the tax paid in the other country against the tax that you would otherwise pay in your home country.

 

Fees and taxes

IVA (VAT) is payable by the purchaser where the vendor is considered a developer who pays IVA and / or this is the first time that the property has been sold / transferred.

The VAT rate depends on the type of property being sold as follow;

  • ?  Residential properties 10%

  • ?  Plots of land 21%

  • ?  Commercial premises 21%

    Stamp Duty is payable at the rate of 1.2% where VAT is payable

    Transfer Tax (Impuesto sobre las Transmisiones Patrimonilaes ITP) is payable if the property is a resale (second transfer). This is paid by the buyer at the rate of between 8 and 10% depending on value and area. This has to be paid to the Spanish Treasury within 30 days of the date of signing the title deed and is needed in order to register the property.

    Plusvalia is a tax based on the increase in the value of the land since the last transfer. The rate varies ac- cording to where the property is. Technically the vendor pays this although often it is agreed that the buyer will pay this. This is not normally a huge amount.

    A Retention of 3% of the value of the property is made when you buy from a person or company that is non-resident in Spain. This is so that the authority can make sure that the seller has paid all their taxes. If the seller has paid their taxes they can then reclaim that amount, typically in around a year. If the retention is not made than any outstanding amount due to the authorities can be claimed from the buyer.

    If the vendor is a private individual and can prove that they are tax resident in Spain or bought the property before 31 December 1986 and no improvements have been made to the property then the retention may not apply.

 

Legal Fees

Usually 1% of the purchase price subject to a minimum of £1,500. If the property title is defective or unexpected additional work is required then there may be additional charges. 

Our charges include;

  • ?  Legal advice on the terms of your offer to purchase

  • ?  Searches at the Town Hall

  • ?  Searches at the Land Registry

  • ?  Obtaining certificate from the Community of Owners (if appropriate)

  • ?  Checking the legal status of the property and the seller’s right to sell

  • ?  If appropriate checking the guarantee provided by the vendor

  • ?  Preparing a report on our searches and advising you on the purchase

  • ?  Arranging the signature of the title deed

  • ?  Arranging payment of the relevant taxes

  • ?  Arranging registration of the property at the Land Registry

  • ?  General hand holding and advice throughout the transaction

    Other work required may include obtaining NIE numbers, signing the title deed on your behalf, transfer of utility contracts etc. which are charged extra 

 

Useful terms

Abogado

Lawyer or solicitor

Agente de propiedad inmobiliario

Estate Agent

Apartamento / piso

Apartment

Arquitecto

Architect

Asesor fiscal

Tax consultant

Ayuntamiento

Town Hall

Baño

Bathroom

Cocina

Kitchen

Comunidad de Propietarios

Community of owners / Residents Association

Compra / compraventa

Purchase / Buying and selling

Contrato de compraventa

Purchase contract

Contrato de reserva

Reservation contract

Declaración de obra nueva

Declaration of new building work (At the No- tary)

Dirección

Address

Dormitorio

Bedroom

Escritura

Title Deeds

Garantía

Guarantee

Hipoteca

Mortgage

IBI (Impuesto Sobre Bienes Inmuebles)

Council Tax

Impuesto

Tax

Inmobiliaria

Estate Agency

IVA (Impuesto Valor Añadido)

VAT (Value Added Tax)

Llave

Key

Ley

Law


 

Useful terms

Licencia

Licence

Luz

Light (but often refers to electricity)

Muebles

Furniture

NIE (Numero de Identificación de Extranjeros)

Foreigner’s Identification Number

Nota Simple

Land Registry Search

Notario

Notary Public

Permiso de obra

Planning permission

Piscina

Swimming Pool

Poder

Power of Attorney

Póliza de seguros

Insurance policy

Promotor

Developer

Propiedad

Property

Registro de propiedad

Land Registry

Renta

Income

Residente

Resident

Seguros(s)

Insurance

Sociedad

Company

Terrasa

T errace

Terreno

Plot

Testamento

Will

Trastero

Storage room

Valor Catastral

Official value of the property

 

Checklist

To do

Completed

1

Decide what you are buying, where and why. If necessary take advice on this.

2

Instruct your independent lawyer (hopefully Judicare)

3

Look at the cost of buying. Fix a budget. Stick to it.

4

Investigate finance and think about how to finance deposit.

5

Learn about the process of buying

6

Look at who should own the property.

7

View properties / choose a property. Be honest with the estate agent about what you are looking for that will save a lot of time for you and them.

8

Survey and valuation

9

Send any contract to us to check prior to signature.

10

Speak to currency dealer about getting the best rate for your purchase

11

If it is a reservation contract pay a small reservation fee

12

Lawyer carries out checks on the property and advises you on whether it is safe to proceed with the full purchase contract

13

Payment of Full purchase deposit

14

Lawyer deals with purchase

15

If you are moving to Spain arrange removal company

16

Arrange NIE

17

Arrange Power of Attorney if needed

18

Arrange insurance contents / buildings / health

19

Signature of title deeds and registration at the Land registry

20

Make a Spanish Will and review your English Will

21

Arrange for Fiscal representation

22

Enjoy a well deserved holiday in your new property

 

 

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