For a property to be removed from the market, it is customary for the potential buyer to place a deposit of between 6,000 - 10,000€, (this amount varies depending on the property purchase price). This deposit can be paid to the Real Estate Agency or to your solicitor’s client account, as the buyer’s legal representative.

Once the deposit has been paid, your solicitor will request the Real Estate Agency to provide them with the contact details of the vendor lawyer to notify them of our representation and request the necessary documentation to carry out the appropriate due diligence in which all relevant legal aspects related to the property will be verified.

If you are purchasing from a developer, an off-plan, or a new property, also called first transmission:

• The legal identity of the seller of the property you intend to buy
• That the property under construction is legally registered in the corresponding Land Registry (the whole)
• That the property is free from charges (mortgages, liens, encumbrances, etc.)

It is conventional for the developer to have finance to build which may take the shape of a mortgage. Should the buyer not be interested in taking over the proportional part of said finance in the way of a mortgage on the property, then it will need to be cancelled prior to completion, with all the cancellation costs paid by the developer.

• That the property has been granted the corresponding municipal building permit and habitation licence (where applicable) by the Town Hall in question, and respects local urban planning rules
• That the construction specification or quality specifications are made available to the buyer and included in an annexe to the purchase agreement
• That there is a    Guarantee or Insurance policy in place to provide a guarantee for all funds paid to the developer during the construction process
• Confirm and check the content of the mandatory 10-year insurance guarantee (in Spanish “Seguro Decenal”) that will provide coverage for any structural defects on the property
• Revision of the purchase contract drafted by the developer to assure that its content respects the buyer’s rights and that it is fully understood by the buyer and to ensure that this document respects the buyer’s rights

If you are purchasing from an individual, or a resale property, these are the verifying points:

• The legal identity of the seller of the property you intend to buy
• That the property is legally registered in the corresponding Land Registry Office
• That the property is free from charges (mortgages, liens encumbrances, etc.)
• That the property has been granted the corresponding municipal building permit and habitation licence by the Town Hall in question, and respects local urban planning rules
• The study, preparation and signing of whatever private contracts (reservation agreement, option contract, sale contract) or public, notarial, documents (purchase/sale deed) which are deemed necessary to execute the purchase operation. The standard procedure is to first sign a private contract normally with the payment of 10% of the purchase price and after a reasonable lapse of time, to sign the public deed of sale/purchase.

If you are first time buying a property in Spain, your solicitor will also cover other important aspects:

• Obtaining your NIE number – The NIE number is a tax number in Spain for foreigners. You need this number to register your purchase in the Land Registry Office and pay your taxes. This number is also needed to arrange your contract with service suppliers such as water, electricity, telephone, and other services you will need.
• Verification of the existing debts on the property, such as Council Property Tax (IBI), horizontal property community charges, outstanding utility bills, and calculation of the local “Plusvalía Tax” which is applicable where the vendor is non-resident and in accordance with the Spanish law must be retained from the purchase price.
• Payment of the corresponding expenses and taxes arising from the public deed of sale/purchase and the registration thereof in the corresponding Land Registry Office

TAXES AND EXPENSES

When purchasing from a developer, an off-plan, or a new property:

• VAT 10% for residential properties
• VAT 21% on plots, garages, and storage rooms
• STAMP DUTY (for Andalucia) 1.2%
• NOTARY FEES are calculated according to a scale agreed by the authorities and depend on the nature of the purchase and the number of sheets contained in the deed of the purchase. Therefore, all public notaries charge the same fee for the same concept. The notary fee for the purchase of a typical residential property would vary between 500 and 1,800€.
• LAND REGISTRY FEES are calculated according to a scale agreed upon by the authorities. Normally, the land registry fee amounts to 50-70% of the notary fee.
• LEGAL FEE is 1% of the property purchase price + 21% VAT

If you are purchasing from an individual, or a resale property:

• TRANSFER TAX 7%
• NOTARY FEES are calculated according to a scale agreed by the authorities and depend on the nature of the purchase and the number of sheets contained in the deed of the purchase. Therefore, all public notaries charge the same fee for the same concept. The notary fee for the purchase of a typical residential property would vary between 600 and 2,800€.
• LAND REGISTRY FEES are calculated according to a scale agreed upon by the authorities. Normally, the land registry fee amounts to 50-70% of the notary fee.
• LEGAL FEE is 1% of the property purchase price + 21% VAT

PRIVATE CONTRACTS

Once due diligence has been completed, and providing that everything is in order, in a period of 2-3 weeks from the signing of the reservation deposit, solicitors proceed with the preparation and subsequent signing of the private purchase contract with the payment of the amount previously agreed. Upon the signing of the private purchase agreement, it is usual for the buyer to pay the owner an amount equivalent to 10% of the purchase price in the case of resale property and an amount equal to 25/30% of the purchase price in the case of off-plan properties.

The private contract is a very important step, as herein the terms and conditions of the purchase are set; therefore, all the necessary negotiations between both parties must have been closed previously.

Many of our clients choose to grant power of attorney to act on their behalf in Spain during the buying process. This will enable us to sign the relevant paperwork related to the purchase and the mortgage, if necessary. The power of attorney can be granted in Spain by a public notary, which is the easiest way, with an estimated cost of 70€, or at the Spanish Consulate in your country of residence but in this case, it should then be legal with the Apostille of the Hague Convention or through Consular Legalization for it to have legal value in Spain. In any case, we will also assist you during this process should you choose to grant power of attorney, here in Spain or abroad.

PUBLIC DEED OF PURCHASE

After the signing of the private contract, in a period of 4-6 weeks, depending on the conditions agreed with the vendors, the public deed of purchase will be signed by you with the assistance of your solicitor or by them on your behalf with the power of attorney. At that moment the balance of the purchase price must be paid to the seller, with the buyer taking immediate possession of the property if it is already built.

Your solicitor will take care of contracting and/or changing the holder of all the contracts with supply companies as well as the relevant taxes concerning the property, and if you wish, arrange the direct debits of all bills (direct payment made by your own bank in Spain).

A bank account in Spain is needed to set up the direct debit for all utilities, municipal property tax, rubbish collection tax and community fees. 

OTHER COSTS TO CONSIDER

Regardless of whether your property is rented or not, you will always have to pay income tax as per the following rules: If you do not rent out your property, the Spanish authorities will assume that you have what is called “Deemed Rental Income” which is subject to non-Resident Income Tax. This legal rent is obtained by applying the percentage of 1.1 on the cadastral value (rateable value) of the property. On this base amount, the rate of 19% is applied for the European Union Citizens and 24% for the non-European Union Citizens. This cadastral value is listed on the IBI (Council Property Tax) invoice and is usually much lower than the purchase price reflected on your title deed.

If the property is rented out, the rate applicable is based on the net rent obtained by the landlord of the property and is 19% for European Union Citizens and 24% for non-European Union Citizens. According to the new Law, citizens from the EU are allowed to deduct the expenses incurred during the period the property was rented out: electricity; water; community fees; home insurance; interests on mortgage, Council Property Tax (IBI) and Rubbish Collection Tax, maintenance, cleaning services, legal fees for dealing with the income tax returns as well as a 3% annual building depreciation. In this case, a Tax Residence Certificate, issued by the tax authority of the country where you reside, must be submitted together with the tax forms (one for each taxpayer). 

THE WEALTH TAX

This tax will affect residents on their worldwide assets and non-residents with assets in Spain over 700.000€. There is a further exception of 300.000€ for the main residential home.
Wealth tax is an annual tax, payable on the total value of your taxable assets as of the 31st of December. If you are a resident in Spain, you are liable to be taxed on your assets worldwide; if you are a non-resident, then only on your Spanish assets. The progressive tax rates range from 0.2% up to 2.5% on assets over 10,695,996€. This tax must be submitted before the end of June of the following year.

GRANTING A WILL IN SPAIN

When you have purchased a property in Spain, or you are the holder of any other assets in Spain, such as bank accounts, life insurance policies, shares or any other type of financial products, granting a last will and testament in Spain over your Spanish assets is highly recommended. A Spanish will ensure a smooth distribution of your assets in Spain and that you avoid future formalities, complications, delays, and additional costs derived from the process of succession and inheritance over those properties or assets located in Spain, as otherwise the assets will not be transferred easily to your husband or relatives.

In the last will and testament, the testator may choose the law of his/her nationality as the law that governs    succession. This choice of the applicable law allows the testator to freely dispose of his/her properties and assets in Spain always according to the limitations established by the legislation of his country of nationality but in any case, avoiding forced inheritance rules applicable under Spanish law. In that regard, the testator shall appoint his inheritors and legatees and will determine the percentages allocated to each of the heirs and the specific assets to be transferred to the legatees.

Otherwise, i.e., not having a Spanish will means expending time and incurring costs associated with the process of giving validity in Spain to a foreign last will and testament. Not having any will and testament at all means that for the distribution of the Spanish assets, it will be necessary to strictly follow what is stated in the intestacy laws of the country of the last habitual residence of the deceased.

Additionally, in the last will and testament, the testator can establish specific rules to be followed in the distribution of the assets and appoint an executor who will ensure the fulfilment of    his/her last wishes as detailed in the will, and it is also an opportunity to appoint tutors for the children when these are minor.

Your Spanish last will and testament will make the process of succession and inheritance over your Spanish assets quicker, easier, and less costly.

*Source: M-E Abogados / August 2023

PRIVÉEA has a list of excellent, highly recommendable solicitors to work with, to attend to you in every language and guide you through every step of your purchase and further ownership in Spain.