What should I ask the Estate Agent?

You should ask for details of the outgoings payable every year to maintain the property, namely the Annual Real Estate Tax (IBI), the community fees, the charges for rubbish collection, the water rates, the electricity charges and the Property Income and Wealth Tax in respect of the property you wish to buy. If you are purchasing a re-sale property do not forget to ask how old the property is.

Do I need a surveyor?

It is customary in the UK for instance to use a surveyor. However, in Spain this is not the case and is a personal preference. The property will be valued by a bank surveyor should you choose to have a mortgage but this is different to surveying the property as to its market value and condition. Obviously, if the area is prone to subsidence or there appears to be some structural damage, then it would be advisable to use a surveyor.

Do I really need a lawyer to purchase a property?

You should always seek legal advice when buying or selling property in Spain, as prevention is always better than cure. From now on until and after completion of the purchase, the lawyer will take care and assist you in all the different steps involved in the transaction. There are many excellent English-speaking Spanish lawyers in Spain. Choosing the right lawyer is your guarantee that Spanish legal requirements are met, that the property is registered in the vendor’s name and that it is free of any mortgages, charges, encumbrances, debts or other liabilities. Your lawyer will negotiate and discuss the purchase terms with the seller’s lawyer. The terms should not be limited solely to price but should cover in detail all your requirements such as the completion date, the form of payment, etc.

Once I have chosen a property, what happens next?

Once you have appointed your chosen law firm they will explain the procedure involved in buying in Spain and the associated costs. When you have made a decision as to the property you want to buy you will be asked to make a payment of a Reservation Deposit, thereby ensuring that the property is not sold to another purchaser and to fix the price. You will then have a period of between 10 to 15 days to exchange contracts but before doing so, you should seek proper legal advice. The next step after paying the Reservation Deposit is to evidence the terms of purchase in writing. At this stage the lawyers will draw up the private contract. It is customary to pay a Deposit of ten per cent of the 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 either 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 assist you in attending completion at the Public Notary.

What does completion involved?

Completion means the culmination of the due diligence process, searches and negotiation of the purchase terms. It means the signature of the Title Deed, making 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 so as to prevent the property being sold twice. 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 into your name of utilities and services such as water and electricity and organise their payment through a local bank.

What should I budget for in the way of extra expenses on top of the purchase price I have agreed with the Seller?

As a rule of thumb, a purchaser may expect to pay 10 – 11 % on top of the purchase price.
A purchaser of a property in Spain will incur the following expenses:

Fees:

Notary Fees. A Notary will charge according to a fixed scale, his/her charges goes from 500 € to 3.000 € depending of the purchase price and the number of pages of the Title Deed.
Land Registry Fees. The registrar will charge approximately 70% of what the Notary charges.
Lawyer Fees. The legal advice ranges from 1 % to 1.5 % of the purchase price. Depending upon the time involved and the difficulty of the transaction.
Taxes :

If you are buying a re-sale property you are obliged to pay Transfer Tax (ITP) currently at 7 %.
If you buy a new property before the end of 2012 the VAT is reduced to 4 %. Plus 1 % of Stamp Duty.
If you are buying a new property or a property in the course of construction from a promoter or developer after the 31st of December 2012, then you will be required to pay VAT (IVA) at 10 % plus Stamp Duty at 1 %.
Plusvalía is a tax levied by the local Town Hall based on the particular area where the property is located, on the surface area of the land, on the cadastral value and on the date of the previous title deed. This tax may range from a few hundred euros, to a few thousand euros on larger properties or where a considerable period of time has elapsed since the date of the last transfer of ownership. By law the vendor is obliged to pay this tax but it is common practise for the parties to negotiate on who is to assume this liability.

Finally bear in mind that your lawyer will charge fees for his/her professional services that normally will range from 1 % to 1.5 % of the price plus VAT (currently at 21 %).
Bear in mind that purchasing a property with a mortgage will incur extra fees and taxes.
Please note that this information is in general and each particular case will have to be viewed independently.

What is the Plusvalía?

This tax — known officially as ‘Impuesto Sobre el Incremento del Valor de Los Terrenos de Naturaleza Urbana’ — is a local capital gains tax on the deemed increase in value of the land between the dates of the last and present transfer. Each Town Hall sets its own basis of calculation and this is reviewed periodically. It is also necessary to note that in the case of larger property or where a considerable period of time has elapsed since the date of the last transmission, the amount could be considerably higher. It has been the custom that this tax is payable by the vendor, however it could be agreed otherwise between buyer and seller.

What is a NIE number? (Foreign Identification Number)

Every person in Spain is assigned a Fiscal Identification Number which is used for all tax returns and correspondence with the Tax Administration. In the case of Spanish nationals, this number is the same as the National Identity Number, ‘DNI’, while in the case of foreign individuals, the number is the Foreign Individual Identity Number, ‘NIE’, which is obtained at the General Directorate of Police. It is important to have your NIE number ready for completion in order to avoid any problems at completion or any delay on the registration of your Title Deed.

Insurance

It is important to take out home insurance. If you have a mortgage, you will be required to arrange for the insurance directly with the Bank; otherwise, you can do so through us by filling a form. We will advise you of the annual premium before you sign the policy, and the premium will be directly debited to your account. The home insurance policy will be renewed automatically every year unless you cancel it by phoning the Customer Service number shown on the policy. You may have many other questions such as how to obtain a Spanish Mortgage or how to open a Spanish Bank Account?

If you have any further questions or concerns, feel free to contact us!

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