SpanishPropertyWatch - Buyers Guide

We have taken care to thoroughly research our partners and agents in Spain and have worked with them to ensure we can provide a service that is second to none. If you are interested in any of the properties on our website and require additional information we can often provide additional photographs and site and location report and more detailed descriptions of the layout. We recommend that once you have decided on an area, a budget and an idea of the type of property you wish to purchase that you ask us to source more that are similar. This will save you valuable time when you visit Spain for viewings. It is not always neccesary to use a lawyer estate agents or "Inmobiliaria can often carry out all conveyancing including searches on your behalf.

Viewing

We can assist you in making arrangements for your visit to view properties. We can arrange accommodation and ensure that one of our representatives is available to accompany you to view the properties you have selected. If you have not made decisions as to the type of property you require we can set up viewings across a range of new, re-sale, renovation projects or plots in order to provide you with a comprehensive overview of the area and the types of properties to consider.

Resale property

Once you have decided on a property you wish to buy a Contract of Sale and Purchase is drawn up by your lawyer and a deposit is paid - normally 10% of the sale price. Both the Seller and the Purchaser sign the Contract. Once this Contract is signed and the deposit paid, this commits both parties to the price and the conditions of the Contract. In the case of the buyer withdrawing the deposit is lost. If the seller withdraws they must repay you twice the amount of the deposit (ensure this is inserted into Contract).

Your Spanish Lawyer should check the following on your behalf, before paying the deposit to the vendor.

1) A COPY OF THE ESCRITURA (TITLE DEEDS)
This confirms that the sellers own the property for sale and that all owners' names are on the Escritura.

2) NOTA SIMPLE
A document from the Land Registry office confirming the legally registered owner(s) of the property. It also shows if there are any mortgages or other encumbrances registered against the same. The name/s on the Nota Simple should match the name/s on the Escritura (Title Deed).

Once your Lawyer has seen these documents, is satisfied that the property belongs to the person who claims to be the owner, and has confirmed that there are no mortgages or other encumbrances, he will ask you to proceed with the Contract. However, before signing and paying the deposit he should ensure that the following are included in the Contract:

a) That the purchase price and conditions of payment are clearly written.
b) All charges on the property, community fees, electricity, water (which may be included in the community fees), telephone bills and rates, are paid. These items are the responsibility of the vendor up until the day of the signing of the Escritura (Title Deed) by the new purchaser. This is important, as many debts in Spain are on the property and not the person.
The purchaser should only be responsible for any debts on the property from the day of the signing of the Escritura (Title Deed) and the handing over of the keys. It is important that your Lawyer has proof that any outstanding debts are up-to-date before signing the Escritura (title deed) and handing over the final payment.
The Contract should contain:
c) A complete description of the property - i.e. lounge, dining room, kitchen, number of bedrooms and bathrooms, terraces, etc. and, the total square metres of the plot and of the apartment or house.
d) The full registration details of the property. This information is obtainable from either the Escritura (title deed) or the Nota Simple.
e) There should be a section in the Contract headed Cargas (Charges). This should read 'Free of Charges and Encumbrances' - if there is a mortgage on the property this should be stated here. If you do not wish to take over the mortgage but would like it paid off by the seller, this should be stated in the Conditions of Payment section of the Contract.
Mortgages in Spain are usually assumable, i.e. if there is an existing mortgage on a property and a purchaser wishes to take it over and carry on the remaining payments, then this often possible. Under normal circumstances the lender (usually a Spanish Bank) requires little or no proof of income from the new purchaser.
f) There should be a clause in the Contract concerning vacant possession on completion. This should read 'Free of Sitting Tenants'.
g) If the property is being sold furnished - which is often the case when buying a resale property in Spain - a complete inventory should be drawn up and signed by both parties. This document should be annexed to the Contract.
h) Under recent Spanish legislation, the purchaser is obliged to retain 5% of the value declared on the Escritura (title deed). Your Lawyer will pay over this sum to the Notary. It is most important that this is also mentioned in the Contract of Sale and Purchase. The 5% retention only applies if the vendor is non-resident in Spain (in other words, if the vendor does not have residential status in Spain at the time of selling).
The 5% retained by the Notary is paid over to the Spanish Hacienda (Inland Revenue), who ascertain if the vendor has any outstanding tax liabilities before returning the 5% to him - usually within 3 months.
i) The Contract will normally contain a Penalty Clause, which states that if the balance outstanding is not paid by the agreed date (specified in the Contract), the purchaser will lose the amount paid and the vendor is free to offer the property for sale again. A potential purchaser has no call against the property; therefore, before you sign the Contract and pay the deposit you must be absolutely sure that you can pay the balance on the agreed date.
j) Although it is unlikely that the vendor will back out of the sale at the last minute - after signing the Contract - this is always a possibility. Therefore, it is a good idea to have a further Penalty Clause inserted in the Contract stating that if (for any reason) the vendor does not complete on the Contract and wishes to withdraw, he must pay the purchaser an indemnity of double the amount paid as a deposit for the purchase of the property.
k) If the property you intend to buy was built within the last 5/6 years your Lawyer should ask to see proof that a Building Licence was obtained and that a certificate of the termination of the building (Certificado de Fin de Obra) and the licence of the first occupation (Licencia de Primer Ocupation) have been issued. Your Lawyer can obtain copies of these documents from the local Town Hall.

The vendor is also obliged to present the last receipt of payment of rates (Contribuciones or I.B.I.) at the Notary's Office or to your Lawyer, prior to the signing of the Escritura (title deed). It is photocopied onto official Notarial paper and included in the Escritura (title deed). Your Lawyer should also obtain a certificate from the local Rates Office (Recaudacion Provincial) stating that there are no outstanding rates to be paid.

With regard to the annual Community Fees, it is now necessary for your Lawyer to obtain a certificate from the Administrator of the Community showing that the fees are paid up-to-date on the property you are purchasing. This is for the Notary, your Lawyer should obtain this certificate for you and present it to him, along with the other documentation necessary for Notary to prepare the Escritura (title deed).

It is an obligation that your Lawyer should check on the day of signing the Escritura (title deed) that no debts or mortgages have been registered against the property since he made the first search, when the purchaser signed the Contract of Sale.

Extras to the purchase price

These will amount to approximately 10% of the total being paid for the property.

Made up as Follows:

RESALE PROPERTY - Transfer tax 6%
NEW PROPERTY - IVA (vat) at 7% + 0.5% Stamp Duty
LAND REGISTRY CHARGES
NOTARIAL FEES
GESTOR or LAWYERS FEES

There may also be a charge for Plus Valia, which is a type of Capital Gains Tax. Your Lawyer will normally ask you for the full 10% when he requests you to provide him with the amount of the purchase price.
As the Lawyer is never quite sure exactly what the total of the 'extras' will be, the 10% is an estimate and at a later date, after you have purchased the property, he will provide you with a statement of his disbursements and fees listing everything that has been paid on your behalf. Often there will be a surplus in your favour, which he will return to you.

Declared price

There are times when the declared price can be lower than the price of the house. This can be si that the sale can be split into house and fixtures and fittings. The residual benefit on this is a saving in some taxes. Take your Gestor or Lawyers advice on this prior to paying a deposit.

N.I.E.

This is the Numero de Identificacion de Extranjeros (or Foreigners Identification number). You or your Lawyer will obtain this for you prior to signing the Escritura, as it is an essential for all non-residents buying property in Spain.

Certificado de divisas

This is a certificate provided by the Bank, stating that the funds for purchase were imported from outside of Spain. If you have used your Lawyer's Clients' Account to import the money for the purchase of your new home, he will arrange the certificate from his Bank. The certificate is recorded on the Escritura (Title Deed).

Making the final payment

If you do not propose to be in Spain to attend the Notary's Office in person, then your Lawyer can take a Power of Attorney from you and act on your behalf. He will need funds transferring from your UK bank account to his Clients' Account, to make the final payment.

Your Lawyer will sign the Escritura (Title Deed) for you - you can countersign yourself the next time you are in Spain.
Once the Escritura has been signed and the purchase price paid over to the vendor, you will be able to obtain a Copia Simple (simple copy) of the Escritura of your new home from the Notary. The original Escritura is sent - by the Notary - to the Land Registry Office, so that he can register your name as the new owner. Depending on the workload of the Land Registry Office, your original Escritura can usually be collected from the Notary's Office within 2 to 3 months. Normally your Lawyer would collect this for you and advise you that he is holding it on your behalf ready for collection

NEW PROPERTY

Off-Plan

There are many new building projects in Spain and purchasers are able to buy new property off-plan enabling them to spread payments from agreed purchase to completion. Never pay for the property in full until the construction is complete and has fulfilled all the terms of the agreement. Other benefits of buying off-plan include being able to choose fixtures and fittings (which may entail additional cost) and in many cases being able to sell for an immediate profit on completion.
Alternatively you may wish to purchase a plot of land on which to construct a new villa.

Self-Build

The advice given regarding re-sale property purchase holds good for land purchase and the construction of a new villa.
We are able to introduce you to reputable Architects and Builders with whom we have worked in the past, together with an English speaking Lawyer to look after your interests.

Coastal villas

First of all you will need to select your plot. Where coastal villas are concerned, this will invariably be on an urbanisation (housing development). The home sites will have been segregated and the development should already have tarmaced service roads, street lighting, etc. Such urbanised plots will almost always have water and electricity connections already made to each individual plot.
To ensure that you will be able to build on the land you are buying, your Lawyer should obtain a document called an Informe from the local Town Hall. This document gives you - in writing - exactly what the Planning Authorities will allow you to build, the total square metres that can be built and the maximum height of the building.

Buying the plot

Once you have found your plot, agreed the price and your Lawyer has ascertained that the villa of your choice can be built on it, and then you will need to complete the purchase of the land.
Your Lawyer will draw up a Contract between yourself and the vendor of the land - more or less following the same procedures as detailed in the section concerning purchasing a re-sale property. If you are buying land and building a property, then you will need to make two Escrituras (Title Deeds). At the time of paying the balance of the land price your Lawyer will make the Escritura for the land. You will then return to the Notary's Office to declare the new building on your land - once the property is completed.

The Architect

Most will have 'drawing board' designs of standard villas. They may be able to show you ready built villas conforming to their standard designs, you can then see in advance what you are going to get. Most purchasers will want to make some changes to the existing design and layout to customise their property.
If you have specific ideas on design, you will be able to liase with the Architect and design a purpose built property
Be prepared to pay somewhere in the region of £3,000 to £5,000 in Architects' fees. When you start building your villa and the Architect presents his fees, you will only be paying 70% of the total cost at this time. The balance is due when the building is finished and the Certificate of the Termination of the Building and the Licence of First Occupation of the Property are required. Your Lawyer will need these two documents to be able to make the declaration of the new building at the Notary's Office.

The Builder

In most cases your Architect, or your Estate Agent, will recommend a builder who will be able to give you a specific quotation based on the Architect's plan and specifications.
Your Lawyer will draw up a Contract (or check out the Builder's Contract) that will give a complete specification.
The Contract will reflect the cost per square metre for tiles, the models and types of sanitary fittings, taps, doors, windows, etc. and a completion date should be fixed with a Penalty Clause for late completion.

Country villas

In this case you will almost certainly be buying rustic land, or possibly a tract of land with an existing building. There are urbanisations (housing developments) in the countryside but they are infrequent.
Most of the advice given in the previous section regarding coastal villas applies but there are a number of additional points to take into consideration.

1) Minimum plot sizes.
These can vary from as little as 1,000 m2 (approx 1/4 acre) if the plot is close to a village - up to 25,000 m2 (approx 6 acres) if the plot is deep in the countryside. If the plot is below the minimum size required you cannot legally build on it.
2) The size of the property that can be built on the plot.
In many areas a substantial piece of land is required before anything other than a run of the mill property can be built.
3) Right of way.
Most countryside plots will be accessed by country tracks (dirt roads), which may also give access to other rural homes or farms. It is obviously essential to have legally recognised access from the nearest tarmaced public road to your selected plot.
4) Water and Electricity
If the plot is isolated the cost of putting in services may be prohibitive. However many rural houses in Spain have generators and solar panels providing electricity and water reservoirs to which excellent water can be delivered cheaply
5) Existing Building
If there is already an old farmhouse, or cottage, on the land and it is your intention to refurbish it rather than build a brand new home, there will almost certainly be restrictions on can what be done.
6) Topographical
Most country plots will be sub-divided farmland and the borders may not be clearly marked. A topographical survey should clearly delineate borders and state exactly the total square metres of the plot. If the land is not already fenced, then a new purchaser may consider fencing off the plot (according to his survey) to avoid possible future disputes. The cost of a survey is likely to be between £200 and £500 for most normal home sites.
Your Lawyer will be able to ascertain all of the above before purchase. He should also be able to arrange a Topographic Survey on your behalf.

Glossary

Escritura.

This is the title deed proving property ownership and a description of the property. Once your legal representative has completed a search and money has been imported into Spain the Escritura will be signed before the Notary. Your legal Representative will arrange this.

What is a Notary?

A Notary is a Public Official who records the sale/purchase. They are not there to advise or protect your interest. When the Escritura is signed the Seller confirms the money has been handed over. Proof is then entered into the title deeds. You need not be in Spain to carry out this operation but you can grant another person Power of Attorney to attend for you.

Taxes.

Once the Notary formalities are over, your Legal representative can arrange to pay any taxes in relation to the purchase.
Land Registry. After the Escritura has been signed before the Notary, it will be arranged to be submitted to the Land Registry for the payment of fees. This may take several months, and your legal representative will notify you.

In whose name should you purchase the Property? Any of the following-

(a) Your Name -

(b) Joint - you and your wife

(d) A Limited Company - whether English, Spanish or "Off shore". This depends on you. Take legal advice.

What else should I do?

Make a Spanish will. The cost is small, and also worth considering is giving a Family Member "Enduring Power of Attorney". Also use a "fiscal representative" if you are not living in Spain all year. The "fiscal representative" must be resident in Spain, but you must choose whom to appoint. If you are unsure, take legal advice.

Make sure that you have the electricity, water and rubbish collections changed to your name. You should also inform the local Town Hall that you are a Property owner and register for local Taxes.

Open a Spanish Bank Account. Your legal representative or "Gestor" can do this for you.

What does this all Cost?

For most purchases you should allow 10% of the purchase price.

Deposits.

Once you have found the Property you want to buy, it is necessary to pay a holding deposit. There is no 'gazumping' in Spain, so once a deposit is paid the price is held.

Spanish Mortgages.

These are available from many Spanish Banks, but original documents will have to be shown and copies will be taken by the Bank.

We are able to recommend lawyers and gestors or you may wish to source your own. See our services section for more details.