Initial
Costs
You should budget on
8 - 10% of the value of the property to cover taxes and fees relating to
the legal aspects of the purchase.
The breakdown is as follows:
7% VAT on new properties or
6% transfer tax on second-hand properties
1% legal fees.
Choosing
the Area
Remember, the cheapest
property is not necessarily the best buy. From the point of view of investment
potential, the same rule applies in Spain as in the UK.
Location,
Location, Location!
If you are not sure of the
location we will give you the best advise based on your requirements and budget.
Holding
Deposit
Having found the property
you wish to purchase, the first step is to pay a holding deposit (normally about
3,000 euros) which removes the property from the market. This sum is usually
lodged to your Spanish solicitor's client account.
Appointing
Your Solicitor
It is generally advisable to
engage the services of a Spanish solicitor (or a solicitor well-versed in
Spanish property law) to look after your purchase. We can
recommend a number of experienced bilingual solicitors. Your solicitor will
first of all ensure that the property has no debts attaching to it and that it
is correctly registered.
The
Purchase Contract
This is the private contract
between vendor and purchaser and is binding on both parties. It is usually drawn
up between 2 and 3 weeks after the holding deposit has been put down. It should
specify the name(s) of the purchaser(s), the completion date and the terms and
conditions governing the sale. At this point the balance of the deposit (usually
10% of the purchase price) has to be paid.
Signing of
the Deed
This is done in front of the
Notary in Spain or by someone (usually your solicitor) with power of attorney
from you to sign on your behalf. Full payment is required before the title deed
can be transferred into the name(s) of the owner(s). Spanish inheritance taxes
are high, so it is advisable to include the names of any children who would
inherit your property upon your demise. Some purchasers may decide that it is
financially more beneficial to purchase the property through a company, and in
this case the company name would appear on the title deed.
Taking
Possession
The handing over of the
property and the keys will normally take place only when the full purchase price
has been paid.
Transfer of
Services
Having completed the
purchase, it is necessary to connect or transfer services. Electricity and water
need to be in your name.
Building
and Content Insurance
This is your responsibility
upon taking possession of your property.
Payments of
Charges and Taxes
As in the case of owning a
property anywhere, certain periodic payments have to be made. Your solicitor
will usually be willing to look after these matters, but you can appoint a
Gestor (fiscal representative) to make the necessary payments and take care of
whatever paper-work is involved. Local rates are paid to the town hall (ayuntamiento).
You need to obtain a fiscal number from the local tax-administration office.
Community
Fees
If you purchase a property
within a complex or apartment block, you are obliged to join its residents
association which administers the general maintenance of the areas of common
ownership, such as gardens, hallways, lifts, swimming pools, exterior lighting
etc. An annual budget is calculated to cover these costs, which is divided
between all the owners according to the size of their properties. All owners
have a vote to agree the budget at the annual general meeting.
Patrimonio
Tax
This is wealth tax,
calculated at 0.2% of the declared value of the property and is payable each
year by non-residents.
Impuesta de
la Renta
An annual tax payable by
non-residents, which is based on the estimated value of the property on the
assumption the property is rented out, whether it is or not. The amount is
approximately 0.5% of the property value.
Plusvalia
Tax
A one off tax on the sale of
a property, it is calculated on the appreciative value of the land the property
is on and varies between towns. It is common for this tax to be paid by the
purchaser.
The
Escritura
These are the freehold title
deeds, which are presented before the notary-public, showing ownership of the
property.
The Notary
A lawyer appointed by the
Spanish government to ensure that the change of title is properly executed. It
is his/her job to make sure that the seller is legally entitled to sell and the
taxes are paid. The notary will register the change of ownership in the land
registry office, this in turn is registered at the central registry of foreign
investments in Madrid. The local land registry office is where all the
escrituras relating to property transfers are recorded after the taxes have been
paid
These documents are
available for public inspection.
Property
Guarantees
Spanish law states that all
new properties must be guaranteed for 10 years, the architect and the builder
being legally responsible.
Most new developments also
include a bank bond within the terms of their contract, guaranteeing each
stage-payment and frequently a no-later-than completion date.
Making a
Will
Because Spanish
inheritance-laws are different from ours, it is generally recommended that you
instruct your solicitor to draw up a Spanish will covering the succession rights
to your property.
PLEASE
NOTE:
Because the terms and
conditions governing property purchase in Spain are subject to periodic changes,
all points of information included in this buyers guide are intended as a
guideline only.
NOTE: This information is just a general guide and it is not a
substitute for professional advice.
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