Buying Spanish Property

A few word of advice

Buying a property in Spain can be a very enriching affair, both financially and in terms of enhancing your happiness and quality of life. However this will only be the case if you get the purchase right. If you get the purchase wrong you run the risk of losing a substantial amount of money, either through capital loses or extra costs, and you could end up with a property in Spain that is nothing but a burden to you. So if you only visit this website once never to return at the very least bear in mind the following points.

• Always do your own research before you buy property in Spain. This means finding out how the conveyancing process works in Spain, and identifying the main risks. It also means researching market prices for a fair idea of property prices to guide you in your decision. Buyers who fail to research the market are likely to overpay for property and take unnecessary risks.
• The dream of owning property in Spain needs to be balanced by practical considerations, so be honest with yourself when deciding what kind of property you need. Wishful thinking alone will lead to poor decisions.
• Approach the purchase in a structured and organised way, and keep your wits about you at all times. Pursuing the dream of owning a property in Spain is no excuse for rash, risky decisions that you wouldn’t take at home.
• Always start by creating a clear, written brief of your property requirements to guide you search.
• Make hiring an independent, competent Spanish lawyer one of your first tasks. It is essential to avoid lawyers with conflicts of interest so never ask anyone involved in selling you property to recommend you a lawyer, and never use the in-house lawyer of an estate agent or developer.
• Try to deal with reputable companies. Investigate companies before dealing with them.
• Never sign a contract or pay a deposit before carrying out an appropriate due diligence and getting the all clear from your lawyer. Due diligence varies according to circumstances, but in general never buy a resale property unless it is accurately described in notarised title deeds and is free of debts and encumbrances. When buying off-plan always make sure that a building licence has been granted by the town hall, that your stage payments are guaranteed, and that the contract you sign is watertight. Never sign deeds for an off-plan property until the first occupancy licence (licencia de primera ocupación) has been granted.
• Retain a healthy sense of scepticism about the claims people make whilst trying to sell you property. This is especially true of the claims being made about off-plan investments. Never invest in off-plan property unless you have the funds to cope with a worst-case scenario.
• Never allow yourself to be pressurised into a decision.
• Always make sure your financial position is clear before paying a deposit. Failure to do so could result in you loosing your deposit.
• Make sure you understand your fiscal obligations once you have purchased property in Spain. Property taxes in Spain are low but if you fail to pay them there is a risk that your property will be confiscated and sold off to pay them. 

There are many ways to search for properties to buy in Spain: estate agents, property magazines and ''home hunters". In more popular or urban areas estate agents offer an English-speaking service.
The whole process of buying any type of property or land in Spain is strictly regulated.
This section aims to give an overview of the processes involved in buying a property, but it cannot deal with every circumstance. Therefore professional advice should be sought with regard to personal situations.







Finding the Property

There are many ways to search for properties to buy in Spain: estate agents, property magazines and ''home hunters". In more popular or urban areas estate agents offer an English-speaking service.
It's important to carefully consider the location and type of property, depending on whether it will be a  main residence, second home, holiday home to be let out on occasion or a property to be let as an investment for the future.
Make a list of the important elements - the purchase price, the overall size and number of rooms, whether a sotanos (cellar), garage, garden, terrace or balcony is essential - as it will keep the estate agent or home hunter on the right track to finding the ideal property.
The type of property and it's condition is also an important consideration. There are certain types of properties that will not be acceptable for mortgage finance. The property should be classed as "habitable" meaning structurally sound and having the basic utilities of electricity, mains water and sewerage system, all conforming to the current regulations.
All properties that are registered on Registro de la Propiedad (Land Registry) can be mortgaged.

Buy Property to Build or Let

Buying to renovate a property or build a new property demands careful pre-planning. Certain Spanish building regulations are very different from other countries and permission has to be granted from the local Ayuntamento (Town Hall). These vary within municipalities and within each there may be different zones that have different regulations regarding the minimum amount of land on which a home can be built.
Detailed applications as well as other documents which state what developments are allowed to a property and its land, must be submitted to the town hall (certificate of town planning/urban development). These permits may have been obtained by the agent or the constructor before signing; ensure these have been obtained.
The advice of an expert - an architect or surveyor - is also required for renovations and new builds. If relying on mortgage finance for renovation works, then the works will have to be completed by tradesmen who are registered in Spain. Registered tradesmen have required insurance covering their work - it is an essential guarantee for the bank or lender.

Buying property to let

Be aware when buying property to let that if it will be rented out more than once per year as holiday accommodation, it may have to be registered with the local Consejeria de Turismo de la Comunidad Autonoma (tourism board). More information specific to local requirements is available from the tourism board.

Financing a Property Purchase

The whole process of buying any type of property or land in Spain is strictly regulated.
There are three main options available to pay for a property:

1. Buy for cash - a straightforward option, but once capital has been invested in a Spanish property it can be difficult to release equity although not impossible in some circumstances.
2. Re-mortgage a main home to raise the cash - again, a straight forward option and one that doesn't involve Spanish banks. However interest rates charged by banks and building societies in other countries may be higher than interest rates in Spain.
3. Finance the property with a mortgage from a Spanish bank or mortgage provider.

The Initial Costs

Whether buying for cash or with a mortgage there are some costs to be funded directly by the buyer:

• The Deposit: agreement to the purchase. On the day of signing the opción de compra (the sales agreement contract) the buyer is required to pay the deposit, usually between five and ten percent of the purchase price for older properties. For new properties under construction the payment terms are made in stage payments as the construction is completed. These terms should be negotiated through the agent or directly with the constructor. It is advisable to pay the deposit cheque to the agent who is representing the buyer, and not to the vendor. The deposit is held by the agent until completion
• Purchase Costs: For all property and land, seven percent of the purchase price is paid as a property tax that goes to the Spanish Treasury. In addition, there are notary fees and a land/property registration fee, which varies according to the purchase price of the property
• Agency fees: Normal commission is five percent, which is included in the sale price

Mortgage Arrangements

Normally, based on their valuation on the property, Spanish banks will lend between 60 and 70 percent to non-residents and more to residents. They send a valuer to assess the value of the property; the cost of this is included in the charges made by the bank for the mortgage application, which varies according to the purchase price of the property. Banks vary in their charges and this can often be negotiated. Once the mortgage has been applied for, funds will be needed to cover the cost of bank charges.

The essential elements for qualifying for a mortgage

1. Sufficient income to service your mortgage
2. Compulsory life insurance to cover the terms of the mortgage

Working out a price range

If a mortgage is needed to buy a property, establish a price range and determine if enough cash funds for the deposit and legal fees are available and if income is sufficient to afford the monthly cost of the mortgage.
It is strongly advised to seek professional advice about the basic lending criteria and the various options and mortgage products available. There are several options:

• Go directly to the Spanish banks and mortgage providers. Banks and mortgage providers have their own lending criteria - how much they will lend, the term of the mortgage, what mortgage products they offer and how much they will charge for their arrangement fees
• Use the services of an established mortgage broker, who will provide advice about how much can feasibly be borrowed and the mortgage products which will best suit the circumstances. A mortgage broker may save some time and will know which lenders to approach on the buyer's behalf and will provide quotations from the most suitable lenders. Throughout the mortgage procedure the mortgage broker will liaise between buyer and lender, which can be very useful if the buyer's foreign language skills are not that good. Mortgage brokers who are registered in Spain receive their commission directly from the lender and generally do not charge a fee - but it's advisable to check, as this is not always the case.
• The Inmobilario (estate agent) may offer a mortgage service and usually will offer a service similar to that of a mortgage broker

Banks will ask for pay slips of employed applicants or one or two years accounts if the applicant is self-employed. Tax declarations from the buyer's country of tax residence will be required.

Purchasing a Property in Spain

Once a property is found that is suitable and the vendor has accepted the offer, a sales contract must be completed (opción de compra).

Opción de compra

The seller (vendor) or agent can draft the opción de compra, which is be written in Spanish, but will usually have an English translation. The name(s) on the mortgage (if applicable) must also be the name(s) on the opción de compra. The opción de compra is a legal contract, therefore it is highly recommended to consult a notary before signing. The notary should confirm (at a minimum) that the following information is provided:

• Details and identities of the vendor and purchaser
• A full description of the property
• The surface area of the property and land
• The purchase price, the breakdown of fees and who will pay each fee
• Details of the sales agent
• Details of any fixtures and fittings included in the sale
• Details of the mortgage, the date of when the mortgage offer should be available and the date of completion
• Any let out clauses (conditions/cláusulas crio) and the penalties that will be incurred by the purchaser or the vendor if completion doesn't take place

Let out clauses

For the purchaser, the clause crio protects the deposit given to the agent as part of the agreement to purchase the property.

• The most usual is a clause stating that the purchaser's agreement to purchase is subject to obtaining mortgage finance
• Other clauses can be included, such as the vendor having to carry out necessary repairs or that the sale is subject to the dimensions of the property corresponding to what is detailed in the opción de compra (expert legal advice is useful in the negotiation of these clauses)

On the day of signing the opción de compra the purchaser will be required to pay the deposit to the agent.

Completion Day

After the mortgage has been approved arrangements can be made for completion of the sale. It is the buyer's responsibility to instruct the notary to request the mortgage funds from the lender.
Once the completion date is determined, the buyer will need to make sure their Spanish bank account is open and funds are transferred into it in time for the completion date. Arrangements for building insurance will also need to be arranged as the buyer will need to provide details of the insurance policy.
If the buyer is unable to attend the signing of the Escritura (final deed of sale) power of attorney (a poder) may be given to a trusted person or friend, which authorises them to act on the buyer's behalf.
The Escritura is signed by the buyer, the vendor and one notary.
Once the Escritura has been signed and witnessed the buyer must pay all required taxes, land registry fees and the purchase price. A few months later they receive a certificate informing them that the title has been registered. The original title deed is returned to the notary and the deeds can be collected. The Notary may make authorised copies

The Professionals Involved with Purchase

A variety of professionals are required when purchasing property in Spain.

The Estate Agent and Property Searcher

Estate agents (agentes inmobiliarios) are usually local to an area and therefore will only have properties for sale within that area. The agent earns commission from the sale of the property and will try to obtain the best possible price for the property, but will know what price the vendor will accept. They should also be able to give the buyer an estimation of all the other fees and the property charges for which they will be responsible.
Property searchers, as their title implies, will search for a property that is within the client's price bracket and matches their requirements. Many offer a personal service, taking the potential purchaser to view the properties they have short-listed. Some charge a fee while others take a percentage commission from the Inmobilario instead.

The Notary

The notary is a public official and given the title of Notario. The notary is highly qualified in the Spanish legal system and is able to advise about the property transaction as well as family, succession and corporate laws. The state confers powers on the notary to legalise property purchase transactions that cannot be enforced by any other means. Notaries are Public Officials and provide legality to the contracts they supervise. They are liable for their professional actions. A notary is responsible for the conveyance, preparing the various documents and confirming the seller's title to the property, checking that there are no other mortgages on the property, etc. The notary is responsible for the legality of all documents that are signed before them in their personal capacity, which provides a guarantee for the client.
A buyer may choose their own notary.

Mortgage Brokers

A mortgage broker has a relationships with various Spanish banks and mortgage providers and understands how they react to certain cases and circumstances, and will act as the buyer's intermediary with the lender. Legislation ensures that mortgage brokers, or mortgage advisers, must have their own professional indemnity insurance and be registered with each bank and mortgage provider they represent.
Mortgage brokers receive their commission directly from the bank or lender with which they do business. Some of those who are registered in Spain will not charge they buyer fees for their services - it is suggested to verify this early on.

Architects and Surveyors

An architect or surveyor should be considered if purchasing an older property or one in need of renovation. They will have experience with planning and obtaining necessary permits and certificates, and be able to provide an estimate of the cost. They should also know of reputable registered builders who have their own insurance to cover their work, which is essential especially if taking out a mortgage for renovation or improvement works.

Property Taxes & Charges

There are two taxes on all residential property. These are collected by the State for the local authorities. These taxes are assessed at individual rates according to location and can vary substantially. Ask the estate agent for these details when looking at properties to buy.

Taxes IBI (Local Taxes)

Due on all property registered at the Land Registry except agricultural land. The owner of the property is liable for paying this tax. Even if a property is only used occasionally, if it is furnished and supplied with water and electricity this tax must be paid. The amount varies based on location and the value of the property.

Basura (Rubbish Collection)

Town Hall tax for the collection of rubbish.
Both the above are paid to a local government collection agency called SUMA, each town and village usually has a SUMA office.

Comunidad (Community Charges)

For those owning property such as an apartment within a complex there are maintenance and service charges to pay. Potential buyers should consider these charges before purchasing. Charges vary according to the size and quality of the complex, and the facilities such as lifts, swimming pool, gardens, tennis courts.

Spanish Succession Laws - the Law of Inheritance

Buyers are advised to draw up a Spanish will with a notary to cover assets in Spain. This becomes essential if the owner's situation is more complicated with previous marriages, particularly those involving children and step-children.

Capital Gains Tax and Wealth Tax

This is currently changing; consult a professional tax advisor.

Patrimonial Tax

The Patrimonial Tax is a yearly tax based on the rateable value of the property. It is paid once a year, in December.

angloinfo