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Buyers Guide to Spain

When you are looking at property for sale in Marbella, Puerto Banus and throughout the Costa Del Sol, before signing anything there are some important pieces of paper we can check for you, and below is a guide to buying property in Spain.

The Escritura Publica and Nota Simple

The Escritura Publica is the registered title deed of the property. It is entered in the 'Registro de la Propiedad', the Property Registry, and is the only guarantee of title in Spain. It contains a description of the property, the details of the owner and any mortgages or legal claims that exist against the property. This document is important because it tells you if the seller is the owner of the property being sold. A Nota Simple contains further details of any mortgages or charges against the property and is also available from the Registry.

The IBI receipt

Before purchasing a resale (not new) Spanish property check out the 'lmpuesto sobre Bienes lnmuebles', or lBI, which is the municipal property tax. Ideally, you'll be able to see the IBI receipts for the last five years because that is the limit of liability for unpaid back taxes and is attached to the property, not the owner. A new property bought from a developer will not have an IBI receipt (because it has never been 'owned') so it will be your responsibility to register the property for this tax.

The Referencia Catastral

Every property sale must quote the 'Referencia Catastral' of the property in question. The Catastro is another system of property registration in Spain, which concentrates on the location, physical description and boundaries of the property. While the Property Registry focuses almost exclusively on ownership and title, the Catastro is concerned with property valuation. These two systems do not communicate with each other, and it is common to find that the catastral description of a property differs greatly from the one in the Property Registry. It is a good idea to request the actual certificate from the Catastro with a full description of the property. The certificate is in two parts, one being a description of the property and the other being either a plan or an aerial photograph.

Community Fees, Statutes and minutes of the AGM

This only applies if you are buying a property in an urbanisation or where there are some 'communal' resources, shared amongst a number of properties. These are the fees charged by the 'Comunidad de Propietarios', the Community of Property Owners, a legal body that controls all the elements held in common; the elevator, gardens and pool for example. Each owner is assigned a quota, or percentage of the expenses which, by law, must be paid.

Utility Bills

These assure you that the bills are paid and also provide an idea of what the running costs of the property will be. Other details to look at: If you are looking at property for sale in Marbella and it is in an urbanisation, make sure that it is legal and registered by asking to see the approved 'plan parcial' at the town hall. If the property is on the beach, make sure the development is also approved by the Jefatura de Costas.

For a new property, make sure that it has been declared for IBI and that the developer has made the 'declaracion de obra nueva'. Also ensure that the escritura mentions the house you are purchasing as well as the plot of land on which it stands. As an additional safeguard, it is wise to examine the town planning maps for the area around the property, called the Plan General de Ordenacion Urbana, or PGOU.

The Private Contract

It is common practice for the buyer and seller to confirm the details of the purchase in a private contract, with the buyer putting down a non-refundable deposit of between 5% and 10% of the purchase price. This reserves the property and allows the buyer sufficient time to arrange payment of the balance. If another buyer comes along and purchases the property despite the existence of the private contract, the first buyer can claim double the amount of the deposit back. If the buyer fails to complete the sale, the deposit is forfeited. Pay the deposit into an escrow or bonded client account, where it will stay until the sale is finalised. The estate agent will probably have a standard contract available which you should have your lawyer read and comment on. The contract you sign should identify the property and the seller and buyer. It should state that the property is sold free of all charges, liens and mortgages. Before signing, your lawyer should check to make sure that no back taxes are owed on the property and that its original registration is in order. Back taxes are checked with Hacienda or the Town Hall and are the only debts not listed at the Property Registry. If you are buying the property 'offplan', make sure the contract states that the payments are deposited into an escrow account. This is usually a little more expensive but it means that your funds are secure if there are problems.

Power of Attorney

If you are not likely to be in Spain to sign the contract or conclude the purchase, a general power of attorney is frequently used to appoint a legal representative in Spain. The document is in a standard format that lists the actions that can be carried out by the holder, including buying and selling property. A Notary can prepare the relevant forms and will print copies for you, retaining the original document in his offices. You will need copies authorised by the Notary to use the power of attorney at a bank or during a property sale. The only document required to establish power of attorney is a national identity document or passport of both the 'giver' and receiver'. The procedure will cost approximately 80 euros.

The Purchase Deed or Escritura de Compraventa

Assuming that the private contract is in order and that the buyer has secured the funds to complete the transaction, the sale is completed by signing the Escritura de Compraventa in the presence of the Notary. The Escritura de Compraventa does not guarantee your title to the property until it is registered at the Property Registry (making it an Escritura Pública, a public document). Once registered, the document is returned to the Notary, where it is kept on file. If you need a copy you can request one from the Notary who will produce an authorised copy. The deed should be registered within a few months and your lawyer will usually ask for a sum of money in advance to cover the estimated taxes and fees, and will either bill you for the remainder or refund you the overpayment once the deed is registered.

Do not confuse the Notario with a lawyer. The Notario is a public notary and an official of the State who ensures that contracts are legal. He does not verify or guarantee the accuracy of the statements made in the contract. You still need a lawyer representing your best interests.

Costs

When you are looking at property for sale in Marbella or throughout the Costa Del Sol you have costs to bear and on average, the cost of buying a property in Spain will be in the region of 10% to 15% of the purchase price depending on the complexity of the procedure, the area of Spain in which you are buying and the requirement of finance.

The notary

Average 1%

The notary charges a standardized fee which varies according to the amount of land, the size of the property and its declared purchase value. Please note that there will be charges for each of the deeds (mortgage, purchase etc).

The registry fee

Average 1%

The inscription of the property in your name in the official property register. Additionally there will be costs for the inscription of the mortgage.

The transfer tax

Transmisiones Patrimoniales in Spain, is 8% of the value declared in the contract. If you purchase a new property from a developer, this tax will be value added tax at 4%.

  • Any amount up to €400,000 - 8% Transfer Tax
  • Any amount between €400,000 and €700,000 - 9% Transfer Tax
  • Any amount in excess of €700,000 - 10% Transfer Tax

Actos Jurídicos Documentados OR document fee

1/2% to 1% of the declared property value

This is equivalent to stamp duty and is currently ½% (1.9% in Andalucía) of the declared property value.

The municipal tax

10% to 40% of the increase in value of the property

This municipal tax is on the increase in the value of the property since its last sale. It is called 'plusvalía' and can vary from 10% to 40% of the annual increase, depending on the length of time between sales and the town in which the property located. This can be a large fee so you would be wise find out exactly how much it will be by going to the municipal tax office and asking in advance.

Legal fees

Approximately 1% of the purchase price.

The lawyer will charge you around 1% of the value of the transaction, unless you need more services (NIE, Power of Attorney, Change in Utilities, Will, etc.)

The tax deposit

3% of the declared purchase value (vendor´s expense).

If you are buying from someone not resident in Spain, you will deposit 3% of the total purchase price at the town hall in the seller's name as a guarantee against his future tax liabilities. You pay the seller 97% of the price, and pay the other 3% directly to the town hall. This serves as a guarantee against the non-resident seller's various Spanish tax liabilities.

Deciding Who Pays Which Taxes

This list of fees pretty much covers the extent of the major expenditure when buying a property in Spain. The buyer and seller are free to agree whatever terms they choose as there is no Spanish law requiring that one of the parties must pay any particular tax. Typically, the seller pays the notary fees and the municipal tax, as he is the one making the profit on the increase in the property value, while the buyer pays the transfer tax and the registry fee, as he is the one who is interested in making sure the property is registered in his name.

Deciding the declared property value

Until recently it was common practice to declare a low value for the property in order to minimise the transfer tax. Now most lawyers advise both parties to declare a realistic market value. If the Spanish tax agency discovers that the value was under declared by more than EUR 12,000 or 20%, they can (and do) apply heavy fines. The safest way is to ask at the payment office of the nearest tax agency and they will tell you exactly what value they assign to a particular property.

If and when you resell the property, you will be liable for Spanish capital gains tax on any profit made. Although it is tempting to declare a low value now, you will be liable for tax on a much bigger profit when you later sell.

Bank Loans and Mortgages

With the introduction of the Euro and the lifting of virtually all exchange control, both residents and non-residents can now obtain loans and mortgages against a Spanish property in any currency from any bank in the world, in theory at least. With inflation and interest rates at an all time low in Spain, Spanish bank mortgages are now being offered at low rates compared to the rest of Europe. Mortgages of 20 and 30 years, and mortgages of 90% of the property value, are available in Spain. For a non-resident buyer, the mortgage is usually limited to around 60% of the property valuation. It's certainly worth to use the help of a broker as terms, penalties and interest rates do vary significantly. Typically, the building societies in Spain offer lower interest rates and lower penalty fees but Spanish banks are waking up to the potential from foreign investors.

Check list to completion after finding a property

  1. Get qualified, professional legal assistance working solely on your behalf
  2. Review the seller's title deed
  3. Review a recent nota simple
  4. Review the full catastral certification document
  5. If buying in an urbanisation, check the plan of building plots
  6. If buying a plot of land, check that building is legally possible
  7. Review the IBI receipt or the declaration of new construction
  8. Review the community charge receipt and the statutes if buying in a communally owned development
  9. Review the seller´s utilities receipts
  10. Draw up a private contract in Spanish and have it translated into your mother tongue
  11. Agree a price, method and currency of payment
  12. Sign the escritura de compraventa in the presence of a notario
  13. Pay the required fees and taxes, and the 5% tax deposit to Hacienda if you buy from a non-resident
  14. Establish how and when you will receive the escritura publica, making you the legal owner

Mortgages

Many guides about buying property in Spain assume that potential buyers actually have the money available, but if you are considering buying a house in Spain because you live and work here, or because you simply want to invest in real estate in Spain, you may want to consider taking out a mortgage with a Spanish bank. Whether you want to buy a rustic finca in inland Spain, a holiday apartment on the Costa del Sol or a new home in the Pyrenees, taking out a Spanish mortgage may be the right solution for you.

Interest rates in Spain vary, but are generally much lower than in the UK, and competition between Spanish banks is fierce. Typically the EURIBOR (European Interbanking Offered Rate) is the reference but others such as the IRPH (Índices referencia de préstamos hipotecarios or Savings Banks offered rate) may be used.

If you are interested in a property still to be built, you may find that the promoters already have an agreement with a particular Spanish bank for all mortgages and you are left with little choice. However, you can often refuse to subrogate in this mortgage when insisting enough.

You will be expected to prove ability to repay (i.e. wage slips from the last 3 months and bank statements of the last 6 months or, if you are self-employed, copies of your last 3 years accounts (with an auditor's stamp) and copies of your last 12 month's business bank statements and your last 6 months personal bank statements). Proof of payment based on your ability to pay with income received from renting the property will not be taken into account by Spanish banks. See our full list documents necessary to apply for a mortgage with a Spanish bank for residents and non-residents.

Documents

Non-resident buyers

  1. A copy of your passport
  2. Marital status, age, children etc. (married couples applying for a mortgage should provide information about both spouses)
  3. Your last three salary pay statements or pension vouchers
  4. The last tax declaration made in your home country (P60)
  5. If you are an employer or are self-employed, a copy of your tax returns and annual accounts for the last two fiscal years
  6. Information about other properties owned fully or partly
  7. Details of the property you are planning to buy
  8. A brief description of current job situation, other incomes, investments, debts and other properties whether abroad or in Spain, etc.
  9. Information about any other sources of income

Buyers with Spanish residence permit

  1. A copy of your passport
  2. Marital status, age, children etc. (married couples applying for a mortgage should provide information about both spouses)
  3. Your last three salary pay statements or pension vouchers
  4. The last tax declaration made in your home country (P60)
  5. If you are an employer or are self-employed, a copy of your tax returns and annual accounts for the last two fiscal years
  6. Information about other properties owned fully or partly
  7. Details of the property you are planning to buy
  8. A brief description of current job situation, other incomes, investments, debts and other properties whether abroad or in Spain, etc.
  9. Information about any other sources of income • Copy of the residency card
  10. Marital status, age, children etc. (married couples applying for a mortgage should provide information about both spouses)
  11. Your last three salary pay statements or pension vouchers
  12. Details of the property you are going to buy ('Nota Simple')
  13. Copy of your last tax declaration
  14. Photocopy of the last IBI bill
  15. Information about any other owned property
  16. Information about any other debts
  17. Information about any other sources of income
  18. Annual accounts for the last two fiscal years (if employer or selfemployed)

About the N.I.E. number

Recent Spanish legislation makes it compulsory for anyone selling or buying property in Spain to have a NIE Número de Identidad de Extranjeros which, translated, means 'Identity Number for Foreigners'. People applying for a NIE used to get a plastic card which fitted neatly into any wallet or purse, but the modern NIE is actually just a piece of paper with your name and number and an official stamp.