Legal Advice for Buying Spanish Property
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 UK. 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 registation 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.
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.
Who Does What
You can purchase Spanish property very quickly, if you are a cash buyer and you have an NIE number. Certainly, it is not unknown for the Spanish (in particular) to see a property and be the owner (with full access) later on the following day.
However, this is not the way to proceed for any foreign buyer and you should never rush to buy – or be rushed. Rather, you must always allow your lawyer and building surveyor ample time to do their proper investigations.
Indeed, never lose sight of the fact that it is far better to miss out on an amazing bargain than buy a defective property you’ll always live to regret.
A good estate agent will help you in your search for a property but it is important to remember that just like in the UK, they represent the seller. You need your own representation in the form of an independent lawyer that you choose.
Needless to say there are many estate agents operating in Spain, of all nationalities, with British agents or agents with English language ability common in most coastal areas. So, finding an agent with whom you can communicate is rarely a problem. But finding a good one is key to your success.
Throughout many areas of Spain registration of an agent is not compulsory and, even in the areas in which it is obligatory, the industry is considered unreliable. Does the agent belong to a professional association such as the AIPP (aipp.org)? Under no circumstances should you ever sign any document from an agent without your lawyer present or having reviewed it first.
So what should you expect of your agent? They should be proactive, know the local market thoroughly and be prepared to spend extra time with you offering all sorts of general advice and assistance. Anyone who takes ages to get back to you on your first inquiry does not bode well for the search ahead.
Estate agency commissions vary widely across Spain but tend to be high as the agent does do a lot more for the overseas buyer than a typical UK agent. In some areas it is common for sellers to pay an agent 3% commission, whilst in others the sales commission can be as high as 7% or even 10%. Sometimes (normally on new-build developments) agents may earn as much as 18% on a sale.
Occasionally, you, as the buyer, may be asked to pay a fee to the agent who shows you a property and this is normally a percentage of the sale price (for example 3%) and is sometimes called a ‘buyer’s premium’. As such ‘premiums’ can be a lot of money, you should always carefully look at any contract between yourself and an estate agent (and get it specifically approved by your lawyer before signing it).
Once you have narrowed down the area within which you want to buy, you should find a lawyer who can act for you. This is a vitally important move, with the services of an excellent lawyer critical to the success of any purchase of a fully legal, sound, Spanish property, devoid of any potential liabilities.
When looking for a lawyer, make sure that you find one who is: fluent in English; a specialist in conveyancing; completely independent of the seller/developer and your estate agent; and fully insured to a public liability premium well above the value of your purchase (and always ask to see the policy).
Furthermore, always insist that all advice from your lawyer is put in writing, something that many Spanish lawyers are reluctant to do. This concentrates the mind of any lawyer and helps to ensure a higher standard of professionalism.
Finally, always get your lawyer to inspect any paperwork or contract before you sign it, whether it relates to a property or other services (i.e. banking, estate agent, building works etc.).
Taxs 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.
Getting a Property Survey
As is standard in the UK, it is recommended to obtain a survey when buying your Spanish home, as it will reduce the chance of discovering any defects or nasty surprises about the property’s condition after you’ve bought and will help you assure the safety and suitability of the property.
If through the survey there are any structural problems, this will help you to negotiate the price or insist certain works be carried out before the house is purchased.
Which types of surveys are there?
Condition Reports, Building Survey and Structural Reports. The scope of the survey the client needs mostly depends on the issues are concerned about previous to the deal.
RICS (Royal Institution of Chartered Surveyors) Condition Report
Designed for newer properties or conventional homes. It provides a clear report on the condition of the property or any urgent attention required includes:
- An inspection of the property
- A report based on the inspection
The surveyor who provides the RICS Condition Report Service alms to tell you about:
- The construction and condition of the property on the date it was inspected
- Any defects that need urgent attention or are serious
- Things that need further investigation to prevent serious damage to the fabric of the building
- Defects or issues that may be hazardous to safety and where further enquiries are needed.
RICS Building Survey
Contains all the features of the Condition Report and it also includes advice on defects that may affect the value of the property with repairs and ongoing maintenance.
- A thorough inspection of the property; and
- A detailed report based on the inspection. The surveyor who provides the RICS Building Survey Service aims to:
- Help you make a reasoned and informed decision when purchasing the property, or when planning for repairs, maintenance or upgrading the property
- Provide detailed advice on the property’s condition
- Describe the identifiable risk of potential or hidden defects;
- Where practical and agreed, provide an estimate of costs for identified repair
- Make recommendations as to any further actions or advice which need to be obtained before committing to purchase.
RICS Structural Report
The most comprehensive report includes defects, repair and maintenance options. The Structural Report is usually only necessary if the building is old or suspected of being unsound or if you are planning major works.
A Structural Report is a customised service suitable for all residential properties and gives full details of their construction and condition.
The difference between Condition Report and Building Survey
Both condition report and building survey (even structural report), do not include market valuation due to it being a technical report.
So, if we understood our need as a technical report focused on pathology expertise, you can choose between “Condition Report” and “Building Survey”.
In both cases, an expert will visit the property, will check its condition, spaces, parking lot, storages and surroundings. Both reports will tell you about the problems that may be hazardous and show potential issues and defects. And, of course, both will define things that will need further investigation to prevent serious damages to the fabric of the building.
Defined the shared characteristics of both reports, with the Building Survey you can take advantage of knowing: an estimate of costs for identified repairs and recommendations as to any further actions or advice which need to be obtained before committing to purchase.
That is why we recommended the Condition Report option if you are sure about the condition of the apartment and you only need the professional advice of an expert. This could be the logical choice if you assume as a buyer the needed repairs in the property have been discounted in the asking price. Please be careful with these aspects.
A bargain is never worth it if there is structural damage to the property or needs refurbishment. This report provides you a budget with the necessary repairs, maybe an important information to take in account previously to the deal.
What does a Structural Report include?
You will usually need this type of survey if, for example, the property is more than 50 years old, unusually built or run-down, if the property has been extended or altered, or if you are planning a major conversion or renovation this survey will be the most helpful.
The report includes detailed technical information on materials and construction, as well as details of the whole range of defects. You can often meet our surveyor on site.
A Structural Report can be concentrated on one particular defect, specified by you. For instance evidence of movement, dampness or structural failure. It will report upon the cause of the defect and any needed remedial works.
Do the surveys include valuation of the property?
No, both condition report and building survey (even structural report), do not include market valuation due to it being a technical report. The valuation and the pathology expertise are different, and imply different technicians.
How long does it take to deliver a report?
It varies depending on who delivers the report but as an average it could be said that between three and five working days since the visit of the property
What is the cost of a survey?
The cost depends. The average cost is approximately 450 €. Several companies offer surveys in English language according to RICS standards from 350 € onwards. In any case depending on the specific needs of the client the property survey cost could be higher.
Thanks to Grupo Sociedad de Tasación for this information on surveys