The Spanish favourable climate and lifestyle makes the acquisition of property in Spain an excellent option whether for holidays, investment or permanent living.

Although the buying process is no more difficult than in any other European country it can be difficult for foreign buyers due to the language and the Spanish legal and tax systems.  Your success in the complex property sector demands up-to-date understanding of the law.

Why use a Spanish Lawyer?
The property you want to purchase is in Spain.  For this reason any conflicts arising to the property will be dealt with under the Spanish law.  It is important that your solicitor is competent in all aspects of the Spanish law and of course can communicate in Spanish and English.

BUYING A PROPERTY - Steps in the Conveyancing process when buying a property (resale)

Your Solicitor will guide you through the process. Their initial step would be to contact the vendor’s solicitor in order to organize and clarify all the aspects and conditions of the purchase.  At the same time,your solicitor will contact your mortgage provider and the estate agent if you decide to buy.

STARTING THE LEGAL PROCESS

Once your lawyer has contacted all parties they will be able to start the legal process - which is to prepare and sign a RESERVATION CONTRACT in order to reserve the property and take it off the market.  Once signed the property is taken off the market and is reserved in your name(s).

Frequent query:  Could the vendor pull out?  Yes, but they will have to pay the purchaser back the total amount paid plus another equal amount as indemnity.

For this reason many purchasers prefer to sign immediately after the PRIVATE PURCHASE CONTRACT (Contrado Privado de Compraventa) as a formal private contract could obligate vendor and purchaser to complete, not allowing either party to pull out.

Upon signing of the private purchase contract 10% of the purchase price is paid. A formal contract should include the following:

• Full description of the two parties

• Full description of the property

• Inscription number in the land registry

• Price of the property and stage payment details

Your Solicitor in Spain will check that all the details are correct within the contract. An Important issue would be to do a SEARCH ON THE PROPERTY. The search will consist in several actions:

• To ask for a Certificate from the Land Registry. The Land Registry will advise of the current ownership and of any kind of debts and charges affecting the property.

• To check in the town hall that the property has the correspondent building licence and first occupancy licence.

• To check that the vendor has paid the Council Tax, Electricity and Water, and community of owners. Your Solicitor in Spain will then send a report to you detailing the results of the searches.

OTHER ISSUES BEFORE COMPLETION

Once the private contract has been signed your lawyer will have to organize all the paperwork and documentation in order to sign the title deeds.

POWER OF ATTORNEY

It will be needed if the purchaser can not come to sign title deeds at the completion or can not come to apply the NIE number. (see text below) Power of attorney will enable your lawyer to complete on your behalf without you being present.

NIE NUMBER

It is a Fiscal Identification Number for non residents and it will be requires before you can make any transaction in Spain such as purchasing a property, a car, pay taxes etc. NIE can be applied personally at the police station or your lawyer can apply for it using the power of attorney.

SPANISH BANK ACCOUNT

You will need one in Spain as your lawyer will order direct debit for water, electricity, Community of owners and IBI tax (council tax).
Finally, immediately before completion your lawyer will check that there are no outstanding debts affecting the property you are buying. I refer to the Council tax, electricity and water and community of owners. Vendor will have to provide copy of the latest receipts duly paid at completion.

TITLE DEEDS

This is the magical date you have been waiting for. Please note that the completion must take place on a working day (Monday to Friday), principally because money transfer cannot take place at the weekend.

On completion the balance of the price, ownership and keys of the property are exchanged. This takes place in the Public Notary’s office. A new Certificate from the Land Registry is requested that day to secure that no charges have appeared since the initial search was done.

INSCRIPTION OFOWNERSHIP IN THE LAND REGISTRY

After signing the title deeds your lawyer will pay the Notary fee and the transfer tax and finally register it at the local land Registry.
The Land Registry maintains all the details of the property and records financial charges and other matters that may affect the title.
Registering the deed provides the highest public level of protection.

TAXES

As explained before, after the Notary fee is paid, your lawyer will take the said deed to the local tax authorities in order to pay the TRANSFER TAX.
As a resume:

 - If you are buying a resale, the Transfer tax would be a 7% of the declared purchase price.

 - If you are buying an off plan property (from a developer) you will be 8% VAT at completion and 1% Stamp

   Duty after completion to the local tax authorities.

FINAL STEPS AFTER COMPLETION

In order to complete the file, your Lawyer will order direct debit instructions for the water, electricity, community of owners and council tax / rubbish collection into to your account in Spain

OTHER ANNUAL COMPLETION

COUNCIL TAX and RUBBISH COLLECTION. This tax is annually paid to the Town Hall.
You should receive a letter in your post confirming the amount and timescale to pay it. We suggest ordering direct debit as the Town Hall charges interests if you delay paying it.

INCOME TAX

It is a tax charged by the Spanish Tax Office for all owners of properties in Spain.
Your Solicitor will advise you yearly of the exact amount to pay.

SELLING A PROPERTY

Steps in the conveyancing process when selling a property (resale)

DOCUMENTATION

The following documents should be requested by your lawyer when putting your property up for sale.

• Copy of the Escritura (Title Deeds)

• Copy of the latest IBI tax receipts (council Tax)

• Copy of your last Spanish income Tax Declaration Address and telephone number of the Community of owners.

• Copies of all utility service bills. Water, electricity, gas, telephone etc.

• Capital gains Tax. To be paid after completion

A non-resident seller is liable for payment of an 18% Capital Gains Tax on the profit of the sale of their property.

HOW DO WE CALCULATE THE PROFIT MADE?

Profit will be the difference between the total costs you had when you bought (you can also add the costs you have when you sell) and the selling price.
Costs of the purchase would be: Original purchase price, Taxes (8% VAT, Stamp duty, 7% Transfer tax) Public Notary fee, Public Registry fee, Legal fee, Real Estate commission, extensions and improvements done on the property and also fees and commissions paid on the sale etc.

“Extensions and improvements done on the property”· These should not be confused with maintenance and conservation costs, as these are not deductible. In practise, there is no clear cut distinction between one and the other.)

Debts: Before completion you are obligated to settle any outstanding debts, charges or liens which may be registered against the property.

Your lawyer will have to provide at the Notary the following documents which will be incorporated to the title deed:

• Last IBI tax receipt duly paid

• Certificate from the Community of Owners showing that there are no pending debts.

• You also have to provide at the Notary the last water, electricity, telephone, gas etc invoices all duly paid.

• Plusvalia tax.  To be paid after completion (Plusvalia tax is a Municipal Tax based on the increase of the value of the land over the years.  It is recommendable for the seller / legal representative to find out with the Town Hall the amount of tax they will demand).

• Fees. To be paid at completion.

• Estate agencies usually charge 5% of the selling price.

• Lawyer’s fees would be around 1% of the selling price.

3% Retention on the selling price.  (When you come to sell the property, the buyer’s lawyer will retain 3% of the selling price to be paid to the Tax Office. The tax office will retain this amount until Capital Gains Tax is paid.)

If your Capital Gains tax is lower than the 3% retained, your lawyer will ask the tax Office to reimburse you the difference.

NOTE: The tax office will also check if you have any other pending debt such as wealth and income tax in which case they will also discount it from the 3% retained

This article was provided to Easy Mortgages Spain by Yolanda Reque of Reque Lawyers in Marbella (Malaga).  For more information on their services please contact Yolanda Reque direct and please do not forget to mention Easy Mortgages Spain.

Yolanda Reque - Spanish Lawyer  www.reque-lawyers.com

Spanish property conveyancing

Spanish property Lawyer