property purchase buying advice:

A guide to some of the terminology and legal practices involved when buying a property in Spain.

Purchase costs

Apart from the actual cost of a property, you need to allow approximately 10% of the purchase price to cover solicitor's fees, translator's fees, land registry cost, notary's charges, stamp duty and VAT.

It is important to seek professional advice from a local solicitor (Abogado). Their standard fee for the purchase of a property is 1% of the purchase price plus VAT. Using a non-local solicitor will be more expensive. The Spanish legal system is very different from other European countries and, to avoid misunderstandings, disappointments and possible fraud, it is essential to seek expert professional advice from the beginning.

Process Of Buying a Property in spain

The contract. Once you've decided on a property, a contract is drafted and you need to make provisions for a 10% deposit. The deposit is payable upon signing the contract (Contrato de Compraventa), which will include a completion date and the transaction conditions which usually contains an assurance by the sellers that the property is sold free of charges, tenants and mortgages.

Once both parties have signed this contract and the deposit has been paid, you have secured the property. This is a binding contract for both sides with penalties for breaking it or for failing to honour the terms of the contract.

After you have signed and paid your initial 10% deposit on the property, it is imperative to review the important legal details. Check the receipt for the paid IBI, the Impuestos sobre Bienes Inmuebles, the annual real estate tax. This receipt gives the all-important Valor Catastral the official assessed value of the property, on which your property owner's income taxes will be based. Check with the local town hall that the receipts have been paid. Any outstanding balance may be requested of the vendor (this will done by the lawyer).

Do not buy Spanish property until you have obtained a current Nota Simple (an extract from the title) from the Registro de la Propiedad.

The next stage is to complete the purchase at the Notary's office, usually, within a month or so, you will be ready to make the final checks before signing the "Escritura Publica de Compraventa" (title deed) in the presence of a Spanish Notario (Notary) who certifies that the contract is officially made. The notary does not certify that all statements are true, only that the parties have sworn to them. There you will be required to pay the balance of the purchase money, taxes and Notary's fees.

These are collected by the Notary for preparing the deed and presiding over it's signing. His fee is fixed by law, is on a set scale according to the property value, and whether the property is mortgaged or not, is not normally more then 1% of the purchase price including VAT.

Please note all professional fees including the notary's and land registry's charges are subject to 16% VAT.

All property in Spain should be registered in the Registro de la Propiedad (the land registry), where you can obtain the full details of the owner, the exact size of the property and full details of any mortgages, debts or judgments against the property will normally be registered. Only the persons or company named on the Escritura Publica, the title deed, have the right to sell the property, unless a notarised power of attorney has been given to the third party.

When the title deed is signed, you will automatically become the new owner. The final step is to have the 'Escritura Pública' registered in the Property Registry Office as soon as possible to prevent a mortgage or other charge being registered against the property, while it is still listed in the name of the seller.

Property Registration fees is charged by the property registration office to inscribe the new deed into your name. These are based on the official registered value of the property. The length and complexity of the deed and other factors are also considered. The fee does not exceed 1% of the registered value.

It is not advisable to try and do this yourself unless you are experienced and speak Spanish fluently.

Property Transfer tax or IVA (V.A.T.)
Which of these two taxes is levied will depend on the type of property you are purchasing. The property transfer tax is levied on resale properties and is charged at 7% of the new escritura value (purchase price).

If you purchase a newly built property from a developer you will pay a different tax called I.V.A. (V.A.T.) is charged at 7% of the selling price plus 0.5% stamp duty.

Plus Valia (local municipal tax)
This tax is based on an officially assessed increase in the value of the land since the last time the property was sold. This can be quite small if purchasing an apartment, but expensive on a villa with a large plot, which has not changed hands for years. Find out the exact amount from the town hall. Do not confuse this tax with the seller's capital gains tax on his profit on the sale.

In practice "who pays what" is negotiated with the final selling price and this must be stipulated, as well as listing the contents/fittings to be included in the sale, when the owner accepts your final offer (in writing).

In accordance with Spanish law:-

The buyer is responsible for:

• Transfer Tax or (I.V.A. + stamp duty when buying from a developer)
• Property Registration fees
• Notary charges

The Seller is responsible for:

• His own capital gains tax on any increase in escritura value
• valia tax
• Notary fees
• Selling agent fees

Buying tips in spain - The shortened version in laymans terms click

Land purchase advice: advice on land purchase

Terminology