The buying guide

In all instances we advise that the Purchaser utilizes the services of an Abogado, a Spanish Lawyer, a member of the Spanish Bar Association, the Colegio de Abogados.

The Abogado will deal with all matters relative to the purchase and associated matters including the transfer of utility contracts for water, electricity, gas and telephone and will in addition deal with the purchaser´s application for the statutory Fiscal identification number and on completion the registration of the deeds at the Land Registry for the district plus the payment of statutory taxes and fees

The Abogado will also ensure that all domestic accounts, in the form of IBI charges (Rates), Basura (rubbish) plus, if applicable, Community charges are paid in full and that the current accounts for utilities are paid or alternatively a pro-rata allowance agreed, calculated to the date of completion.

Spanish Law authorises ownership by foreigners with relatively few restrictions and the transfer of property is generally less complicated than in the UK, with all properties sold with a freehold title.

a) A reservation agreement is completed, containing details of the purchaser, the vendor, the property and the purchase price, noting the agreed completion date. The purchaser proceeds to pay a small holding deposit and on receipt of same the vendor agrees to take the property off the market

b) Within two weeks a private purchase contract is drawn up by the Abogado detailing the price, the method of payment and the terms and conditions relating to the transfer of the property. This contract will contain a clause requiring the vendor to convey to the purchaser a Public Title Deed (“Escritura Publica de Compraventa”) upon receipt of the final payment.

The contract is signed by both the purchaser and vendor and the purchaser pays the residue of a 10% non- refundable deposit to the vendor via the lawyer. In some instances the reservation agreement and the private contract are drawn up as a single document

c) Normally,within about six weeks or on a convenient date agreed by the parties the completion transaction proceeds to the Public Deed which is so called because it must be prepared and signed before a Public Notary, who attests to the identity and signatures of the parties involved. The Public Deed will contain a clause stating that the property is being sold free from all debts, leins or incumbrances, also current in payment of all taxes and with vacant possession provided.

The Notary is a government appointed Spanish lawyer responsible for administrating the formal handover of properties and his duties are more fully explained in our legalities section

d) Upon signing the Deed and making the final payment for the property including payment of all fees and taxes, a simple copy (“Copia Simple”) is handed to the purchaser, with the original passed to the Land Registry of the District in which the property is situated for inscription in the name of the new purchaser´s. Once the inscription is formalized at the Land Registry the Escritua, the deed, is passed into the possesion of the purchaser.

e) New Build can be in the form of an initial plot purchase allied to a separate building contract or a package including both the plot and the building works with payments in stages as the works proceed all concluding, on completion, in the signing of the Escritura and the receipt of the Copia Simple as before described.

Expenses involved in the Transfer of Property

(a) Transfer Tax. This tax must be paid by the purchaser before the transfer of the Title Deed into the new owner’s name and on the purchase of an existing property it is calculated at 7% of the declared value of the property. For new construction an IVA (VAT) tax charge is raised at a similar rate of 7% of the declared value plus a Transfer Tax charge of 1%. If land is purchased separately from a company, the IVA rate can possibly be increased to 16% dependent on the status of the vendor plus the aforementioned 1% transfer tsx levy

The declared value is the officially stated purchase price recorded in the title deeds, the “Escritura de Compraventa”. At the time of writing this text in January 2010 there have been press reports that these taxes may be increased by 1% but as yet it is not official, nor on the statute

(b) Property Registry Fees and Notarial Fees represent the fees charged by the Notario for preparing the Public Deed and presiding over the signing, plus fees paid for registration. This is a variable charge and as an indication a purchase in the sum of 300000€ would raise charges in the region of 1500€

(c) Plus Valia tax. The comparable translation of this term into English is probably Capital Gains Tax. It is a tax on the increase in value of the actual plot of land rather than the building thereon and is in respect of the period since the previous transfer of title by Public Deed. This tax does not relate to the purchaser in that it is the vendors liability and not that of the purchaser and this will be so noted in the contract.