Thousand of properties are
bought and sold on the coast every year - and the numbers are increasing.
For most people, buying a house is a major investment which is complicated
enough in their own country. In Spain, the legalities of property purchase
may be particularly daunting if you are a foreign resident and unfamiliar
with both the laws and the language.
- Use a Lawyer
This is the crucial first step. The second
is that he or she speaks English. A good lawyer can guide you through all
the steps of house purchase, from ensuring that the purchase contract is
correct through negotiating payment terms, taking care of the title search
and ensuring that your house is registered in the property registry. A
lawyer is cheap insurance against possible future problems and will only
cost you around one to one-and-a-half percent of the purchase price, plus
VAT currently charged at 16%. It is standard practice that a lawyer will ask
for a pre-payment, called a provision de fondos to cover expenses and fees.
- Deposit
One you have found your dream house, the
most important next step is to secure it by paying a deposit. This is
generally around 2% of the purchase and will be held by the agent. A further
percentage of around 8% is paid within a week or so of reaching an
agreement.
- Community Costs
If the property is on an urbanisation or
part of a residential complex, then you will automatically become a member
of the Community of Property Owners, responsible for general maintenance,
gardening, etc. Make sure that all fees are paid up to date and that you are
aware of how much your annual community costs will be.
- Title Search
Next, your lawyer must check at the local
Property Registry to ensure there are no outstanding liens or mortgages
against the property, or whether it has been embargoed for non-payment of a
mortgage or taxes.
Your will receive a copy of the entry for
the property in the registry books. This Nota Simple shows who owns the
property and includes a detailed description with boundaries. Some
properties are held in the name of an offshore company, which used to be
common practice as it avoided Spanish transfer and inheritance taxes.
Sometimes you will receive two Notas Simples, one at the beginning of
negotiations for the purchase and again immediately before you sign the
contract.
- Check the Town Hall
Property in Spain is subject to an annual
municipal tax - IBI - and the seller should provide you with up-to-date
receipts, which will state the exact amount of this annual tax, as well as
the "Valor Catastral", which is the official value of the property as
assessed for tax purposes and necessary when you prepare your annual tax
return. There may be additional rates, such as for rubbish collection or
other services.
- Costs of Notary and Registry
The approximate cost for the notary and
registry is 450,8€ for a property of 60.101 e, 601€ for a property of
150.253€ and 901,5€ for a property of 300.506€. Costs for the land registry
will be slightly less.
- Plus Valia
A Municipal Tax known as the Plus Valia is
assessed on the difference in value of the property now and the last time it
was transferred. This varies according to the time elapses since the last
transfer.
Spanish law suggests that the Plus Valia
should be paid by the seller, but the practice of assigning all taxes and
fees to the buyer is so firmly established in resort areas like the Costa
del Sol that it is more usual for the buyer to pay the Plus Valia, though
this is a point which your lawyer can negotiate. In any case, the purchase
contract should state whether the seller is paying all fees and taxes.
Property purchases are also subject to a
transfer tax or VAT. If you are buying from an individual, you must pay a 6%
tax, however this increases to 7% if you are buying from a promoter or
builder, plus an addition 0.5% document tax. If you are purchasing from a
non-resident, Spanish law requires you to withhold 5% of the purchase price
and pay it to the Spanish tax department, Hacienda, as a guarantee of
payment of the seller's Capital Gains Tax. (If the tax amount is lower than
the deposit, the seller can later claim the difference from Hacienda).
- The Contract or "Escritura"
Approximately a month after you have made
your deposit, you can expect the completion of the sale to take place. The
contract must be in Spanish, although you can obtain a translation if
necessary. A legal property purchase contract in Spanish is called
"Escritura de Compraventa" and is signed by both parties in the presence of
a Spanish Notary Public who will keep the original copy of the contract in
his files.
The contract should describe the property
and its location in detail, as well as the identity of the purchaser and
seller.
If the purchase is financed with a mortgage,
the bank representatives are present in order to pay and sign the mortgage.
The final step is to take your copy of the
Escritura to the Property Registry and have it officially registered, at
which time you will obtain your Escritura Pública, the title deed.
The property is now legally yours.... well
done!.
|
