Buying Spanish Property
How to Buy a Property in Spain: Costs and Common Pitfalls.
Enjoy the process of buying and keep problems away from you.
Buying a property abroad is such an important decision, a dream for many people who wants to spend their perfect holidays or a new life in Spain. It can be complicated sometimes as the laws may be similar but not the same as in your country, but with the right professionals in this sector, the process of buying becomes easy and safe.
BUYING A HOUSE IN SPAIN AS A FOREIGNER
In order to buy a home in Spain you need to obtain the NIE (Foreigner Identification Number). This personal number can be requested at the Spanish Police or through the Spanish Embassy in your country. In addition, if you wish, you can grant power of attorney to the person you designate, such as your lawyer in Spain, to request it on your behalf.
The expenses and taxes associated with the purchase of the property must be paid in Spain: VAT if the house is new or ITP tax if it is second-hand, and notary and Registry costs.
In addition, each year you have to pay local (IBI) and government tax for the property (IRNR). The IRNR (Income tax non resident), is a direct tax for the benefit obtained in Spanish territory by individuals and not resident citizens in Spain, although the property is empty. If you also rent your Spanish property and you are a non-resident, you must pay the non-resident rental tax.
Non-residents can also obtain mortgages in Spain for the purchase of properties in Spain. The bank will request certain personal and financial information from you to study your specific case.
Spain currently offers a ‘golden visa’ for property owners. This is a form of investor’s visa. If you invest more than 500000 Euros in Spanish property, buying one or more properties, you will be able to request a residency visa, which is not a work permit, but it will allow you to live in the country.
Related: How to get a mortgage in Spain?
STEPS TO BUY A PROPERTY IN SPAIN
Here we are going to summarise the main steps to buy a property in Spain safely:
- Step 1: Once you have found the property you like and have done a research on the area, it is strongly recommended you contract a lawyer who speaks your language. Your lawyer should protect your interests, check if all property taxes are paid, if there is any charge on the property or any unpaid utility and/or community bills and verify all the property documents.
- Step 2: When you have the confirmation from your lawyer that all property documents and checks are done and in order, then a purchase private contract is signed and a deposit paid. Your solicitor may prepare the contract and give you information about how to pay the deposit to take the property out of the market.
- Step 3: You need to apply for a NIE (Spanish number for foreigner needed to register you with the Spanish system). You can apply for it yourself at the National Police and in the Spanish Embassy or Spanish Consulate of your country, or, but also it can be obtained on your behalf if you grant power of attorney (normally to your solicitor who will represent you during purchase process).
- Step 4: Completion will be done at the Notary office, where purchase title deeds are signed, final payment is done and keys received.
- Step 5: After title deeds are signed at the Notary, you need to pay the notary fees, transmission taxes and registry invoice to register the property into your name at the Land Registry office. Also you need to change property bills into your name.
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COMMON PITFALLS OF BUYING A PROPERTY IN SPAIN
Which are the most common pitfalls of buying a property in Spain?
- Not choosing the right location according to your needs: make a list of your requirements and do a research on the area to make sure it is adjusted to want you want, as for example, near from supermarkets, schools, hospitals, etc.
- Not having your personal documents in order: you need to have your personal documents in order, as for example, your NIE, or you will not be able to buy.
- The property is not registered or was built ilegally: it is very important that your solicitor verifies, before you sign the purchase contract and pay a deposit, if the property is fully legal, as not all buildings can be regularized, and if they could, they should be under the seller’s costs.
- Not having calculated in your budget the legal expenses to transfer the property into your name: there are aditional costs related to the procedure of the purchase of a property, as Notary invoice for the purchase deeds, property taxes, Land Registry invoice and legal fees. These mentioned costs means around an extra 14 % on top of the property price.
- Signing a purchase contract you do not understand and not checked by your solicitor: it is very important that you wait until the contract is checked by your solicitor and your questions answered with regards to the contract, to avoid problems between the parts.
COSTS ASSOCIATED TO THE PURCHASE OF A PROPERTY IN SPAIN
As a buyer of property in Spain, you need to pay certain costs and taxes over on top of the property price. Depending if you are buying a new property from the builder or a resale property you will have to pay VAT and Stamp Duty, or a transfer tax.
The common costs whether you are buying a new property or resale one are:
- Notary costs for the purchase deeds. The calculation of notary fees in Spain is regulated by Spanish law. The Notary is a civil servant of the State Professional Law. The notary fees covers the the office, salary of the professional team, liability insurance, computerization, binding and conservation of the acts and maintenance of the Notarial Schools. In Spain, the notary’s fees are set by Royal Decree of 17 November 1989 published on 28 November in the Official State Bulletin (BOE). If you want to know how much is the notary bill for the purchase of your home, contact us and we will calculate an estimate.
- Land Registry costs. The registration of your property in the Property Registry is also subjected to fixedSpanish land Registry fees, but they depend on the location, type, etc. of the property. If you want to know how much is the Property Registry bill for the purchase of your home, contact us and we will calculate an estimate as well.
- If you are buying a new house from the builder, you have to pay VAT and Stamp Duty tax. At the moment VAT (called IVA) is 10 % in Spain (excluding Canaries which have a different rate) for houses and appartments. The Stamp Duty (called AJD) changes from the region, being in Alicante’s province 1’5% of the price of the purchase.
- If you are buying a resale house, you have to pay Spanish Transfer Tax (Impuesto sobre Transmisiones Patrimoniales – ITP): The Transfer Tax rate changes from the region, being in Alicante’s province 10 % of the price of the property. In this case there is not VAT to pay.
- Legal fees: This is an aditional expense, but it is highly recommended that you contract the services of a lawyer to help you during the buying process.
- Spanish mortgage costs: This is only if you finance the property with a Spanish mortgage. You will have additional costes, like valuation costes, opening fee in some cases, …
- Other costes associated when buying a house in Spain:
- Bank expenses
- Annual local tax
- Payment of utility bills and community fees
- Annual payment of non resident tax
- Rental tax in case you rent the property purchased
- House insurance
PAYMENT OF DEPOSIT TO BUY A PROPERTY IN SPAIN
Once you have seen the property you want to purchase and contacted with a lawyer in Spain to do the verification of the property, it is normally paid a deposit when signing the reservation contract. This deposit is normally a small amount, that sometimes goes from 3000 Euros up to the 10% of the purchase price.
It is very important to make sure what it is signed in the reservation contract with regards of rescission of the contract, to know what are the implications in case of not continue with the purchase. In general, if the buyer does not want to continue with the purchase, he will not get the deposit back, but there are other harder and risky possibilities. Also, there are other cases where the reservation contract express possibility of returning of the deposit under certain circumstances as for example if the buyer doesn’t obtain finance in a determined period of time.
Being assisted by a qualified lawyer before you sign the reservation contract and pay the deposit will ensure the purchase process goes smoothly. The solicitor will make sure that all aspects of the reservation contract are included to protect your interests, so they need to be respected thereafter. The reservation contract will contain details as form and date of payment, price, expenses, etc. Deposit normally is paid by bank card or bank transfer.
BUYING A LAND IN SPAIN
There are not many, but some non-residents currently consider to buy a land in Spain and build their own dream villa. This may be cheaper that buying the villa already built, but to do it correctly, it is very important to choose the right plot of land in order to avoid future problems.
If you are interested in buying land in Spain, we recommend you to check the following documents:
- The land is registered in the vendor’s name. It can seems obvious, but in some cases the registered owner has passed away recently and the inheritance deeds have not been registered yet at the beneficiaries name. Until the inheritance is not registered into the beneficiaries, the sale can not take place. This case may happen sometimes in rural lands and/or small villages where the land passes from generations without changing the ownership at the Land Registry. It is very important to request a land registry report to the Land Registry Office to see who is owner and who will sign as vendor.
- Check that there is a title deed for the land and that it is correct. Sometimes it can appear discrepancies between the real extension of the land, and the details that appear on the documents.
- Check that there are no charges, encumbrances or debts against the property.
- Check right-of way ( some plots of land may have a lien to allows access to a neighbour’s property), hunting right, right of view, right of water from a well, stream, etc.
- If there is already built a villa on the land, make sure it was built with planning permission for a villa, and not for “Casa de aperos” (tool shed) and that the land Registry report shows registered all components of the villa and all square meters.
- Check if the land is connected to the main water, electricity and sewerage.
- Check land category and its restrictions.> Suelo urbano (urban land): It normally has all the services established, however it is impotnat to check, as in some cases, they could need finishing them, which the costes that would arise
> Suelo urbanizable: This land is in process of being rezoned and the Town Hall can change the classification to “urbano” at any moment.
> Suelo rústico (rustic land): Rustic land is a land considered non-urbanized, but in some cases, it is authorized to build new constructions.
- It is very important you ask at the right department of the Town Hall where the land is situated which are the local building norms, requirements and regulations to have everything legal.
- Contract an accurate topographical survey. The topograph will analyze the nature of the field, measure it, check if the accuracy of the construction is within the limits marked in the reference planes, etc.
PROPERTY DEEDS IN SPAIN (“ESCRITURA DE PROPIEDAD”)
The “escritura de compraventa” (purchase deeds) is the public document that certifies the change of legal ownership. Once the Notary signs it with the buyer and seller or their representatives, it will then need to be registered at the land registry to change the ownership details.
The deeds contains several details as personal details for seller and buyer and/or representatives involved, details of the translator (if any of the parts do not understand Spanish), details of the property from the Land Registry and Cadastre, certificate from the community of owners stating that the property is up to dated with communal payments, property price, schedule of the payments done and information about taxes applicable to buyer and vendor from this transaction.
The deeds are signed by the parts involved, as seller, buyer, translator and Notary. The content of the deeds is in Spanish, so inf you want a copy in other language, you will need to arrange it by your own.
If you lose the copy of the deeds signed, you can request a copy to the Notary that you signed it. You will need to bring to the Notary your identification to apply for it.