Once you have decided to buy a property in Spain you should follow two golden rules:
Firstly, choose a good Real Estate Agent. If possible, speak to friends who have already bought and get a recommendation, or perhaps undertake some research on the Internet. Be mindful that there is no government back Real Estate regulation in Spain - so make sure your agent has a street based office (to be accountable for anything you need!), some good online reviews, and has most importantly been operating in your area of choice for a number of years! Remember that there is no need to register with lots of agents. All this does is guarantee you will receive unwanted calls until you decide to change your phone number. By registering with affinity you are, in effect, registering with over 1000 agents but with only one point of contact - us!
Think of affinity as your personal property PA - feel free to send us property details or references from other websites and we will do everything else, from obtaining photographs to arranging your list of appointments.
Secondly, find a good efficient Lawyer to advise and assist you. Again, you may have friends who can recommend one to you, or your Estate Agent should be able to recommend a range of independent lawyers, enabling you to make your own choice. Affinity will be more than happy to help with suggesting a good Lawyer.
Once you have chosen a good Estate Agent, with the right experience and knowledge of the property market and the local area, they will be able to help you find the most suitable property; a penthouse in Marbella, a villa in Puerto Banus or a townhouse is Benahavís, we endeavor to find the most suitable property to match your search requirements.
A good agent will listen to your requirements and show you the best selection of properties available taking into consideration up and coming areas to invest in and at the same time comparing prices and quality.
When you have found the right property, ensure you request all the details relating to the outgoings payable every year to maintain it; namely the charges imposed by the Town Hall, community fees, charges for waste collection, water rates, electricity charges, and Property Income and Wealth Tax. It's very important you understand the annual running costs associated with the property and its purchase.
When you have then made a decision as to the property you want to buy, you will be asked to make an immediate payment of a refundable Reservation Deposit (normally €6,000), this deposit ensures that the property is taken off the market whilst your agent negotiates the best price for you, at the same time showing the vendor that you are serious about purchasing their property and ensuring that it is not sold to another purchaser whilst the negotiations take place. Once a price has been agreed the deposit becomes non refundable, and you will generally have a period of between ten and fifteen days to exchange contracts and pay a further 10% of the purchase price. During this time your lawyer will carry out all the necessary legal searches on the property you wish to purchase.
From here on, until completion of the purchase, the lawyer will assist you in all the different steps involved in the transaction. There are many excellent English-speaking Spanish lawyers in Spain and 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 vendor's lawyer. The terms should not be limited solely to price, but should cover in detail all your requirements such as the completion date, method of payment, etc. They will also assist you with your applications for an NIE number (a tax identification number) and the opening of a Spanish bank account - both legal requirements for owning a property in Spain.
Once all the searches have been satisfactorily carried out, the lawyers will draw up the private purchase contract. On a resale property, you will normally pay a deposit of 10% of the purchase price on exchange of contracts. This deposit is not normally refundable if you then back out of the purchase for any reason. Conversely, if the vendor fails to perform their obligations, you will be entitled to the resolution of the contract enabling you to claim damages or to demand the obligatory fulfillment of the contract.
On a new development purchase, you will generally exchange contracts with a payment of between 20% and 30% (plus the 10% IVA on that payment) of the purchase price, although this percentage can vary according to the development. There may be additional stage payments to make during the construction period - again this depends on the Developer's terms of payment.
Finally on the day fixed for completion, your lawyer will go to the Public Notary to sign the Title Deeds, making the final payment to the vendor's lawyer, who will simultaneously pass over possession of the property to you, handing over the keys.
At this stage, the sale is complete and immediately your lawyer will have the original title deed submitted to the Land Registry for registration of your title. Your lawyer can also arrange for the transfer of utilities and services such as water and electricity, into your name, and organise their payment through your Spanish bank account.
The purchase of a property in Spain will involve the following expenses:
1.1) 8% IVA/transfer tax on the purchase price for properties up to €400,000.
1.2) 9% IVA/transfer tax on the purchase price for properties from €400,001 to €700,000.
1.3) 10% IVA/transfer tax on the purchase price for properties from €700,001+.
These figures are for resale properties - this rate increases to 16% if you are purchasing plots of land, commercial premises, or garage spaces.
2) 1% legal fees (plus IVA).
3) Approx 2% in stamp duty, notary and land registry fees.
If you need to, or prefer to raise finance in Spain, there is no longer an extra cost to do this, although you will find many agents will still inform you that there is a cost (they used to be a further 2% to 3% to pay). These costs were made up of the mortgage arrangement fee and additional notary and land registry fees for the registration of the mortgage, meaning your total purchase costs woild have been approximately 14% to 15% of the purchase price!
Plusvalia is a tax levied by the local Town Hall and is 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 as much as several thousand Euros on larger properties with substantial land. By law the vendor is obliged to pay this tax, but it is common practice for the parties to negotiate on who is to assume this liability.
Raising finance is generally straight forward in Spain dependent upon your personal circumstances, however we recommend you take professional advice as to whether it is beneficial for you to do this in your home country or in Spain.
Once your purchase has completed, we would also recommend that your lawyer draws up a Spanish will for you, to ensure that your Spanish assets are dealt with as you would wish them to be.
If you would like any further help or advice from affinity, with regards to financial or legal matters, please contact us on +34 952 812 897 or 020 3930 9672, and we will be delighted to put you in touch with a number of professional law firms and/or qualified financial advisors, or check out our Links page where we have listed reputable firms whom we have dealt with on many occasions in the past.
Below we have detailed a brief description of certain terms you may hear your agent or Lawyer mention!
The fees for representing you in the purchase of the property are normally 1% of the purchase price with a minimum of 1500 euros. This service includes:
Assistance closing: general assistance and negotiation in the closing and acceptance of a purchase and sale offer.
Assistance in Reservation / Private Purchase Contract / Completion phase:
Step by step guidance and instructions
Review of documentation
Drafting of agreements / contracts / deeds
Exchange agreements / contracts / deeds and/or legal representation
Financial transaction (Escrow account, bank cheques, transfers etc)
Due diligence: Searching and written report on ownership, planning and taxes / services / encumbrances.
Physical property status check before completion of purchase (general state of property, keys, electricity meter, water meter).
Coordination registration process
VAT on legal fees is as established by Spanish Law: 21%.
Provision of funds Searching costs: Cost for obtaining search documentation. This includes information from Town Hall and a Nota Simple which is an extract from the Land Registry confirming the latest status of the property (ownership, debts, mortgages, claims, etc).
NIE numbers: NIE numbers are Spanish fiscal registration numbers and all purchasers need to have one. The amount covers the full application process with associated costs to official bodies plus the first registration with the fiscal authorities.
Provision of funds Bank commissions: A provision to cover commissions charged by the bank for making transfers and issuing bank cheques related to the purchase.
Tax on Property Purchase
Property Tax: Depending on the situation of the property; either one of the below:
NEW PROPERTY: 11.5% of the purchase price being 10% VAT and 1.5% Stamp Duty.
RESALE: 8% transfer tax calculated on the purchase price (for purchases under 400.000 €)
Power of attorney: In order for your Lawyer to represent you in the mortgage and purchase operations you will have to sign a Power of Attorney. This provision covers drafting of the document, assistance in the signing, collection from the notary and further administration. The cost to the Notary is normally around €80 - do this in the UK and expect to pay in excess of £500!
Provision of funds Notary fees (property): The signing of the Title Deeds must be done before a Spanish Notary. The amount represents the fees charged by the Notary for this public document relevant to the purchase.
Provision of funds Land Registry fees (property): Registration costs of Title Deeds of the property purchase under your name into the Land Registry. The fees are charged by the Land Registry.
Registration of Deeds: Cost for Gestoria services. Gestoria is responsible for liaising between Notary and Land Registry in order to carry out a correct registration of the Title Deeds. In case there is a mortgage involved, the bank appoints the Gestoria.
Utilities: The costs for contracting the utility companies and the set up of direct debits.