Buying Property in Spain

This page is simply for your information. Do not rely on it, or your understanding of it, rather accept it as a guide to what your solicitor will do for you.

When you buying property here in Spain, you will find that it is very different to buying property elsewhere. Let's simplify it! Find a property, pay a 10% deposit, and this will fix the price, and the date of handover. Simple! Well...

In a way, it is that simple. But before you sign anything, be sure that you know what you are signing, and what the implications are. The paperwork involved in property sales is not complicated, but you need to ensure that it is in order. For this reason, you really need a Spanish lawyer. Without one, you could lose your deposit, your new house, or both.

There are those who say that the lawyer is a waste of money. If you are 100% sure about what you are doing, then you don't need a lawyer. That much is true. But if you are reading this, you probably are not 100% sure!

Some of the larger agencies will have their own in-house lawyers. Some of these agencies will even insist that you use their lawyers. Walk away. There is always a conflict of interest here, which doesn't occur in some other countries. Why? Because your deposit will go into the estate agencies bank account. Then the estate agents lawyers will start work on your papers. The deposit should have been passed on to the seller, but you won't know whether it has or not until it's too late. And now your money is in their account, and if the paperwork is not completed in time, you will lose your deposit. If you were the lawyer, would you want to work quickly?

Usually, the seller is telling the truth about his property. However, your solicitor should still check that the house actually belongs to the seller, that the house has permission to be where it is, as well as less important details, like boundaries, etc. You should use a local lawyer, who will know what is acceptable in the area that you are buying. He will know what interpretation is put on the legislation in place - and it varies widely. And, last, but by no means least, he probably has a cousin in the town hall...

So if you are buying through an agent, listen to their suggestions about who to use - but if the agent seems particularly concerned that you should use their lawyer - walk away.

Also remember that the agent should not receive any payment until you have the keys to your property, so if they suggest not using a particular lawyer, they may have good reason. At the end of the day, the choice is yours. After all, it is your money.

As soon as you have decided that you want to buy, and fixed the price, then it is normal to put down a holding deposit - this might 1000 to 6000 Euros, and is returnable. This gives you time to get the deposit (which will normally be in cash), and get the paperwork from the seller to your solicitor, and gives your solicitor time to check out the papers. The holding fee may be left with the solicitor, or may be passed to the seller, but you should confirm that it is returnable. Also, the 10% deposit will be reduced by the amount of the holding deposit. However, when you sign the document with the deposit, you are committed to a deal. So is the seller, so no gazumping can happen. The deposit is normally 10%, and at that time, the completion date is fixed. If you decide to pull out, you lose your deposit. If the seller decides to pull out, they must repay double the amount that you paid as deposit. So you can see that, since you are committed once you sign this document, you must speak to your legal advisor before you sign.

Because the essence of buying a house is so simple, it can also be fast, even when a Spanish mortgage is required. Plan to move into your house about a month from first speaking to your solicitor - but don't bank on it - this is Spain! When you start to look at properties, you must be prepared to put your money on the table, or your dream house could be gone. You can't put your money down, then go back in a months time and say 'the buyer for my house pulled out' - you are committed. By all means, look around the area first, but don't look at specific houses, because they could be gone when you are ready to buy, and it will only cause disappointment. Any good estate agent will be happy to tell you anything you want to know about an area before you buy, can explain what is planned for where, and may even take you out to see specific parts of your chosen area. Take all the time you need to decide. But once you decide to go for it, go quickly...

The paper which should be made available before you sign or pay anything, is the Escritura (deeds). In Spain, a new Escritura is made out each time the house is sold, unlike some countries where the deeds are simply added to. It would also be helpful to see the paid up IBI (city taxes, or rates) receipts. The bill is payable by whoever owns the property on January 1st, and is not split between different owners. Bear in mind that IBI is much, much lower than in the UK, especially inland. If IBI is unpaid, you may be liable for back payments, and late payment penalties, for a number of years. A good lawyer will have this in the contract that you sign. You would also need to know if the property is in a community. The community will typically consist of 10 or 20 houses in the country, or an apartment block in the town, and will share responsibility for shared assets, such as the lane, or water supply, lifts, tv aerials on the shared roof, etc. Receipts are normally issued for payments, which are usually monthly, and are typically 10 to 50 Euros per month, depending on the maintainance costs for those shared assets. Where a major refurbishment of the assets is required - perhaps the land needs resurfacing - then an extra payment may be requested. You cannot opt out of a community, and Spanish community laws are quite complex, but usually not required - just remember that if your property is in, then it stays in, and you are obliged by law to make the payments voted for. Incidentally, it is this community which can make rules - typically, that there should be no noise after midnight, no pets, or similar rules. Sometimes the community is run by committee, sometimes by all the members. A community meeting seems to be a Spanish male area! Minutes should be kept, but this doesn't always happen out in the country.

If you are buying on the coast, then land could come under the Ley de Costas, or Coastal Law. This means that the local authorities can restrict buildings, or control height and density, within 100 metres of the high water mark, and can deal with the coastal strip as far as 1 kilometre inland. For this reason, you need to ensure that your property has proper planning permission. Inn the Ayuntamiento (town hall), the Urbanismo (planning department) should have your building on the Plan Parcial (building plot plan). Your building should also be approved by the Jefatura de Costas (Coastal Department) as well, if it is on the beach.

The details of the Escritura will be entered into the Registro de la Propiedad (Property Register), and the register has the final say over who owns what. On the Escritura itself, you will see a description of the land, showing the property size, the land area, and where the boundaries are (which will be in the form of, 'bounded on the east by the parcel [of land] belonging to Juan...') , together with details of the your property, such as number of bedrooms, etc.

In some cases, the property will not be mentioned on the Escritura. This needs looking at very carefully, because it means you are buying land without property on it. The property may not have planning permission, and you may have to pay a fine, which can be some thousands of Euros, or worse still, you may have to pull your building down.

If the property is new, your lawyer will make sure that the developer or builder has made the Declaracion de Obra Nueva (New Building Declaration), and paid the tax on it, and your lawyer will also want to check that the property is registered for IBI (city taxes)

The sticky problem of under-declaring will probably raise it's head. Despite being told that it is about to stop, it still exists. This is to reduce the tax burden on the seller. Your lawyer will advise you, but remember, the authorities know that this happens, they expect many people to underdeclare, and so, if they think that most people will declare the value to be 80% of the real price paid, then the tax will have been increased by the same percentage, so that, at the end of the day, the authorities get what they wanted. If paperwork says that the house has been sold for 100,000 Euros, when in fact it was sold for 120,000, then the 20,000 difference is known as black money.

Your lawyer will also make an appointment for you to visit the Notario (notary), whose job it is to oversee the signing of various contracts, including house purchase. He will check that the papers that he sees are technically in order, and that the person who is about to sign, is indeed the person who they claim to be. He will not check that the solicitor has done his job correctly, he will only check that everyone understands what is happening, and that everything and everyone is who and what they claim to be.

The notaries office is where the money is paid over. Of course, the buyer and seller can agree to pay however they want to, but in practice, it is usually cash. You may have to collect all the money from your bank to take to the notaries office, or, if you are getting a mortgage, the bank manager may bring along cash for the mortgage, and cash from your account. The money counting is done out of sight, in a quiet room somewhere. Some people say that this is for privacy, others say that it is simply so that the notary cannot see the black money. However, you must remember that everyone knows where the notaries office is, and everyone knows that half the people going in are carrying cash, and half the people coming out are carrying cash as well, so, try to look as though you are not carrying cash - whether you are or not - especially on the coast.

The total fees usually come to something in the region of 11% of the value of the property - some websites with older information will tell you less than 10%, but that is the way it is now! The taxes and fees to be paid are:

Notaries fee, which is on an officially fixed scale, varying depending on the property.

Fee for entering the property into the Registro de la Propiedad. Usually about the same as the Notaries fee

(Plus Valia) Capital Gains Tax. This should be paid by the seller. It can be paid by the buyer, in some kind of deal, as can all the taxes and fees. However, if it isn't paid, then the amount will be charged to the buyer.

(Impuesto de Transmission Patrimoniales) Transfer Tax is charge on private sales (whether or not an estate agent was involved)

(IVA) VAT is chargeable if you purchase from a company - note, this does not apply to purchasing from a private individual via an estate agent. This is charged at 7%, plus a document fee of .5 per cent, making 7.5%.

Either your solicitor, or your estate agent, or yourself, will have to get things like electricity, phone, etc., changed to the new owner. Make life simple for yourself, ask the previous owner for a copy of any of the bills. This is because each service company could well have your property under a different address, and if you don't give them their version of your address, you could have problems. The bills show the account number and address, which will simplify things immensely. You will be expected to pay from a Spanish bank account, and your passport, NIE, or residencia number will be required.