Introduction to buying a property in Spain..

For many years Spain has been a favourite holiday destination for millions of British tourists every year and an estimated 500,000 own a property in Spain, either as a second home or they have retired there.

If you are in the market for a Spanish property, you will need some basic facts you help you.

Unlike Italy or France, you do not have to pay estate agents’ fees. But remember: an agent acts on behalf of the seller and works on commission, like a UK agent, and the law is not so strict in terms of any claims an agent might make about a property.
Buyer Beware has never been more pertinent, than when buying a Spanish Property.

Legal fees are usually between 1% and 1.5% of the purchase price, plus 16% VAT (called IVA). They are non negotiable, as you will learn with all things Spanish, there is no such thing are a free market, so don’t expect any special deals.

Notary fees are fixed by law and normally in the range of 300 to 1,200 euros depending on the region. There is also a registry fee of approximately 80% of notary fees.

Transfer tax, the UK equevelent of stamp duty costs 6% of the purchase price, but when buying from a developer this is replaced by 7% IVA, plus 0.5% stamp duty.

“Plus Valia” This is a local municipal tax and is based on the officially assessed increase in the value of the land since the last time the property changed hands. It can vary considerably from a few hundred to several tens of thousands of euros. You can find out the exact amount from the town hall.

Council Taxes, there are three main taxes.

Impuesto sobre la renta de las personas fisicas (IRPF).
It applies to all non-residents. The local town hall will charge you according to the rateable value of the your property (known as the catastral). They assume you're making 2% of this value each year from letting your property and charge you 25% of that “income".

IBI Tax (impuesto bienes sobre inmuebles).
This is like UK council tax and usually includes rubbish collection although this is sometimes charged separately. It can vary from under £100 a year in isolated rural areas to more than £1,000 a year in the most exclusive areas.

Non residents are also liable to wealth tax (impuesto sobre patrimonio), on any assets in Spain (primarily property). For assets totalling less than 160,000 euros, the tax is 0.2%.

If and/or when you decide to move on, average commissions are around 6% but some agents charge l 0% or more. Again they all charge very similar fees, it’s the Spanish way. If you can sell privately, the are significant savings to be made, try EuroPropertyDirect.com, they will advertise your property until sold for just £49.00 click here to go to their website.

When you come to sell the property, capital gains tax will be charged on any profit. This is 35% for non-residents, but only 20% for residents. A further concession for residents is that if you are over the age of 65 and have lived in your property for at least three years, you are exempt from capital gains tax entirely.

Finally, if you are 60 years of age or more and have lived in your property for at least three years, you can bequeath your property to your spouse or children and avoid paying inheritance tax on 95% of the valuation. The inheritor must also be a resident of Spain and agree not to sell the property for at least 10 years.

To buy a property in Spain, there are several stages, or even obstacles when buy particularly Spanish property, to overcome and consider.

When you have decided on the property the first step is to make a verbal offer through your agent. This may often be 5% - 10% below the asking price. Negotiations will then proceed until a price is agreed when you should appoint a lawyer (abogado) to formalise the agreement.

The first check is normally to obtain from the property registry a “nota simple" which will identify the registered owner and provide details of mortgages or embargos on the property.

You should obtain from the seller receipts for payment of IBI (impuestos sobre bienes inmuebles), the annual real estate tax. These will show the valor catastral, the assessed value of the property on which your property income tax will be based.

If you are buying a new property ask to see the declaracion de obra nueva, a statement that this is a new-build home, and the declaracion de alteracion de bienes naturaleza urbana, which certifies that the property has been altered.

Where there is a community involved, ask for receipts for community charges and obtain minutes of meetings from the president to identify any problems. A chat with the neighbours would also be a good idea.

After the price is agreed and the nota simple has been checked you will have to pay a small holding deposit to take the property off the market and reserve it until you can reach completion. Your lawyer will prepare a formal offer and agreement contract for this purpose.

The exchange of private contracts or the signing of an option to buy would normally take place about two weeks after the formal acceptance of an offer, when the lawyer would have completed his searches. The contract would set out all the agreed terms and set a date for completion. It is usual for the buyer to pay a 10% deposit at this stage.

If the buyer withdraws from the purchase after signing the agreement, he loses any deposit paid. If the seller changes his mind, in some cases, he will have to pay twice the amount, depending on the wording of the agreement.

On the assigned day, buyer and seller (or their authorised representatives) will attend the office of the notary, to sign the escritura de compraventa (the title deed), which should state that the property is sold free of charges, mortgages and tenants. The notary does not check the terms, but solely certifies that the parties have agreed them. At this point the balance of the payment is made and possession passes to the buyer.

Your lawyer will arrange payment of taxes and fees, and register your title deed at the property registry. This should be done promptly. Don't forget to have the property insured. All property in Spain is registered in the Registro de Propriedad that denotes who owns the property, its exact size and if there are any mortgages on it. Only the people named on the title deed have the right to sell the property.

A Spanish mortgage will usually fund up to 70% of the value of your property on a capital repayment basis, usually over a maximum term of 20 years. Click here for Spanish mortgage brokers

Renting out your Spanish property. You are liable to Spanish income tax on any income you have in Spain arising from rentals. If you are a resident, you should declare your rental income as part of your earnings and you will be taxed at your normal income tax rate. If you are a non-resident, you are subject to tax on income arising in Spain at the flat rate of 25%.

There is a “double taxation” agreement with the UK, which means you are liable only to one set of taxes. You should always get advice from an expert in that particular tax “jurisdiction”.

Documentation, the seller of a second-hand home should provide the following documents:

The title deed of the property
Receipt of payment of the real estate tax for the last year
Receipt of payment of the tax on the increased value of the land
State that any community charges have been paid up to date (you will be liable for them otherwise.
Latest copies of domestic bills so that you can take over the services such as electricity and water

The seller or developer of a new property should provide you with:
Deed of declaration of new construction
Occupancy permit
Certificate of rateable value of the property

Once you have completed the purchase of your Spanish Property it is advisable to Make a Will in Spain. Buyers are advised to write a Spanish will because the Spanish authorities will not recognise an English will for inheritance purposes. Make sure your UK will dovetails with the Spanish will and the two do not contradict each other.

This list has been complied and intended for guidance only. It should not be considered a substitute for individual professional legal advice.

Click here for a list of Notary in Spain
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