Process of purchasing a property in Spain
In Spain a property purchase is a process that can be broken down in several steps:
1) Collection of Background information
If you don’t feel confident with these procedures it is better to ask the opinion of a Spanish Property lawyer that will perform all the necessary checks for you.
The first step is to request a Nota Simple from the Land Registry (Registro de la Propiedad in Spanish). A Nota Simple is a standardised report describing the property in all its aspects, including:
- Present owners and the percentages of ownership
- Debts, liens, charges and rights on the property. For example mortgages or claims for unpaid taxes.
- Any type of rights on the property, like rights of way, sewers and underground cables.
- Boundaries of the property
- Total area of the land, and of the house if there is one, including the area on the different floors.
- Land classification: rural, urban …
- Description of the property including the house description if there is one.
In Spain, it is possible to tie debts to a property. These debts could be transferred to the next owner in the case of sale. Therefore, the land registry makes this information available to the potential buyer. It is important to check that the description in the nota simple conforms to the real condition of the property, as large differences could be the result of non-declared works or illegal buildings.
It is of paramount importance to check local-planning permission to see if there are problems related to the legality of the property. Unfortunately, foreign buyers often pay a down-payment before checking the legality of the property.
When the seller is a company, it is important to check for solvency in the Commercial Registry and identify who is the signatory for the company.
Check if the community charges (most of Spanish properties belong to a community of owners) are up to date with payments and if the local municipal taxes (IBI) are paid.
2) Private contract
Unless the property is purchased immediately, the buyer and the seller will sign a private contract to hold the property until the public sales deeds is finalized. In practice, it is a contract of intent, protecting both parties interests before the signing of the deeds. Typically, the buyer will pay the seller or his lawyer, a deposit (a percentage of the final price, usually 10%) in exchange for the right to purchase the property within a specific time. If the buyer breaches the contract, he will lose the deposit, while if the seller breaches the contract, he will have to pay double the amount of the deposit to the buyer.
3) Signing of the deeds
The property transfer and the mortgage deeds will be signed at the notary office. The notary public attests the identification and capacity of the parties, taking care to verify that all documentation is in order, the content of financial and non-financial terms of the mortgage are drafted in accordance with current regulations; report on key aspects of the sale, reporting on the consequences of not paying taxes, etc.
The notary public does not substitute a lawyer who will make sure that the correct legal verifications are done.
In case a Spanish mortgage will be signed, a representative of the bank with a valid power-of-attorney will be at the notary office at the signing of the deeds in order to sign the mortgage deeds with the buyer or the buyer’s legal representative. If the seller has a mortgage on the property, the representative of his bank will be there to cancel the previous mortgage.
The buyer will have to pay: Transfer tax if the property is resale. This can vary in different autonomous regions.
For resale properties in Andalucia:
Taxable base bracket
From 0.00€ to 400,000.00€ = 8% transfer tax
From 400,000.01€ to 700,000.00 = 9% transfer tax
From 700,000.01 and above = 10% transfer tax
For resale of properties qualified as garages
Imposable base bracket
0.00€ to 30,000.00€ = 8% transfer tax
30,000.01€ to 50,000.00 = 9% transfer tax
50,000.01 and above = 10% transfer tax
VAT of 10% if it is a newly built property.
The buyer will pay stamp duty: 1.5% of the price of the property for new properties.
In the mortgage deeds the amount of taxes to be paid in Spain varies in each region, in Andalucía it is 1.5% of on the mortgage responsibility.
The taxes have to be paid within 30 days from the date of purchase.
The seller will pay:
- The plusvalia, the local capital gains tax.
- The Central Government capital gains tax
- If the vendor is not fiscal resident in Spain, the buyer is legally obliged to retain 3% of the property price and pay this amount directly to the tax office on the vendor’s behalf within 30 days of the purchase.
5) Land Registry
Finally, the new deeds will have to be registered at the land registry. The land registry will notify the bank’s legal representative and the notary if the deeds have any defects. Normally the parties intervening at the signing of the mortgage deeds at the notary, grant a power-of-attorney to the bank’s representative to modify the mortgage deeds or clarify any issues related to the terms and conditions where necessary, based on the request provided by the land registry office.