Buying Property in Spain - Legal and Financial Issues

THE REAL ESTATE AGENT
Choose the right Estate Agent with experience and knowledge of the property market and area. They will help you to find a suitable property to meet your specific criteria, show you a selection of properties and advise as to the best areas to invest in comparing prices, quality and facilities.

Ask for details of annual outgoings such as electricity bills, water rates, community fees where relevant and local taxes.

When you make a decision as to the property you want to buy you will be asked to pay a reservation deposit ensuring that the property is not sold to another purchaser. You then have a period of up to 15 days to exchange contracts but before doing so you should seek legal advice.

LEGAL ADVICE
There are many excellent English speaking lawyers in Spain who will assist you in the various steps from reservation until after completion of purchase. Your lawyer is your guarantee that all Spanish legal requirements are met, that the property is registered in the vendor's name and that it is free from mortgages, charges, encumbrances, debts or other liabilities. Your lawyer will negotiate and discuss the purchase terms with the vendor's lawyer. The terms will include details of completion date, form of payment and final inventory.

The next step is to evidence the terms of purchase in writing at which stage the lawyers will draw up the private contract. It is customary to pay a deposit of 10% of the purchase price on exchange of contracts, which is not normally refundable if the purchaser defaults. Conversely, if the vendor fails to perform his obligations, you will be entitled to the resolution of the contract and claim damages or demand the obligatory fulfilment of the contract. Before your lawyer exchanges contracts he will have completed his searches and investigations in the Land Registry in respect of the property.

Finally on the day fixed for completion your lawyer will go to the Notary Public to sign the Title Deed and make the final payment to the vendor who will simultaneously pass over possession of the property to you, handing you the keys. At this stage the sale is completed. Immediately after completion, the notary will fax details of the title deed to the local Land Register to inform them of the identity of the new owner. In this way the Notary and the Land Register act together to protect and guarantee your interests. You will then have to pay the relevant taxes and have the original title deed submitted to the Land Register for registration of your title. Your Lawyer can also arrange for the transfer to your name of utilities and services such as water and electricity and organise their payment through a local bank.

FEES

• The Lawyer will typically charge between 1% to 2% of the purchase price plus VAT for professional services.
• The Notary charges according to a fixed scale typically between 0.1% and 0.3% of the purchase price.
• The Land Registry charge is typically 40% of the Notary charge.

TAXES

• If buying a new property or one in the course of construction from a promoter or developer then VAT at 7% plus stamp duty at 1% is payable.
• If buying a re-sale property a transfer tax (ITP) of 7% is payable.
• Plusvalia tax is commonly and legally paid by the vendor. This is a tax levied by the local Town Hall based on the area where the property is located, on the surface area of the land, on the catastral value and of the date of the previous title deed. This tax can range from under 100 euros to several thousand euros for larger properties with lots of land.

FINANCIAL

BANKS
Most of the banks in Spain now have some, if not all, staff who speak English. Some will offer agreements and documents in English.