How to Buy Property in Spain

 

Buying an overseas property is an exciting thing to do and Spain is a great place to choose. However, it is important to go about things the right way and equip yourself with as much information as possible before settling on that dream home.
One of the most valuable pieces of advice is to instruct your own independent solicitor to assist you with your purchase, just as you would when buying property in the Ireland. The estate agent will be a valuable source of information on properties, pricing and the surrounding area and will understand the buying process having been through it many times before, but they are acting for the vendor and you need an experienced solicitor – who understands the language as well – to act for you.

 

The Buying Process

 

Once you have found your property, the purchase process begins with a reservation agreement. This is a contract that freezes the purchase price and takes property off the market for, usually, 30 days on payment of a fee between €3,000 and €12,000. The deposit is usually held by your lawyer or your agent in a client or escrow account.
Within 10 days of signing the reservation agreement, the full private purchase contract (contrato de arras) is signed between the buyer and the seller. This is similar to exchanging contracts in the UK buying process. Within this time your lawyer should complete all the searches on the property - confirming that the seller own the property being sold, there are no mortgages or charges and that planning consents are in order.
Once both parties sign the main contract, it is binding. The arras contract or full private contract will usually require a 10 to 20 per cent deposit to be paid. The buyer is then committed to pay the balance of the price, and the seller (once the money has been paid) must transfer ownership to the buyer.If the seller pulls out of the transaction he must return double the amount of the deposit received by way of compensation. If the buyer pulls out he will lose the deposit paid.
The property sale is formally completed when the title deed (“Escritura de Compraventa”) is signed before a public official called a Public Notary, or Notario. This will happen at their office and be accompanied by the agreed final payment and all the relevant purchase taxes. The Escritura is then presented by the Notary to the Land Registry for registration and the property is passed to the new owner. Final registration of the title deed can take several months.
With a new-build property, obviously completion can take a lot longer, and the payments are split over stages of the build process, and the developer should provide bank guarantees against each payment. This protects your payments in the event the developer fails to complete the property or goes bust.
Finally, make sure that you have insurance for your property, ensure all service contracts are in your name (telephone, water, electrics etc.) and register your ownership of the property with your local Town Hall (Ayuntamiento) – all of which your lawyer or agent can help you do.

 

 Power of Attorney

 

Just as in the UK, you can authorise someone (normally your lawyer) to act on your behalf with regard to your legal matters in Spain.  This is often wise, as travelling to Spain to sign documents can become inconvenient or mean that you miss an essential signing date through ill-health or travel disruption. 

A Power of Attorney can be either general or limited to a specific function (for example, the signing on your behalf of the escritura (Deeds) to your intended property. 

 

NIE

 

 You cannot buy a property in Spain without a NIE number (Numero de Identificación de Extranjero), which is an identity/fiscal number for non-Spaniards.  So, apply for this as soon as you start looking for a property.
Currently, you must apply for your NIE number in person (although the rules on this tend to change from time to time; your estate agent or lawyer, who should help you).  A NIE number is obtained from the Policia Nacional, who have offices in all major towns and cities throughout Spain.

 

Taxes and Fees

 

When you're close to finalising the exchange you will need to apply for NIE (Numero de Identidad de Extranjeros) – your Spanish tax number. How this is used will be explained in the next section of our Spanish property legal guide.
The tax you pay when you buy a property in Spain will normally depend on whether you are a tax resident there or not. Tax residence is determined by a number of factors – including how long you spend in that country, if your main home is there and if your main economic interest is there. If you become a tax resident in Spain, then you would normally stop paying taxes in your home country and pay there instead. 
IVA (VAT) is payable by the purchaser when the vendor is considered a developer who pays IVA and/or this is the first time the property has been sold or transferred. The VAT rate depends on the type of property being sold: it’s 10% for residential properties and 21% for plots of land and commercial premises. Stamp duty is payable at the rate of 1.2% where VAT is payable.
If the house you’re buying is a resale (second transfer) property, then you will also need to pay Transfer Tax (Impuesto sobre las Transmisiones Patrimonilaes), which is usually between 8 to 10% depending on the values of the property and the area. This will need to be paid to the Spanish Treasury within 30 days of the date the title deed is signed. You may also need to pay Plusvalia, which is a tax based on the increase in the value of the land since the last transfer, although this is not normally a huge amount.

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