Frequently Asked Questions

How does the buying process work?

The below is just a brief explanation, always seek legal advice for an expert opinion.

Bear in mind you should allow for an additional 10% to cover all legal, professional & tax expenses.

Off Plan:

1. Reserve the property; pay the reservations deposit (normally around €3,000 - €6,000) this can be in any denomination.
2. Employ the services of a solicitor who will check that all licenses, bank guarantees etc are in place.
3. You will be advised by the builder when you will be required to sign a purchase contract and pay the full deposit (normally within 6 - 8 weeks of signing the reservation contract).
4. Throughout the construction period you may be required to make staged payments, this varies from developer to developer.
5. Several weeks before your property is due to be completed your builder will notify you of the completion date.
6. You should have arranged your mortgage by now (if you need one).
7. Arrange a mutually convenient dated to come out to take possession of your property, go to the notary’s office at the agreed time to sign the deed and pay with cash or banker’s draft.
8. Arrange building/contents insurance.
9. New build properties come with an independent 10 year guarantee (similar to the English NHBC Certificate).

Re-Sale Property:

1. Once you have found the property you want, the agent will usually reserve the property for you for you for a couple of days enabling you get together the reservation fee.
2. Engage the services of a lawyer they will obtain a copy of the nota simple (a copy from the Deed) which shows that the owner is the seller of the property and whether there are any outstanding debts etc. (as under Spanish law these debts will be passed to you as new property owner).
3. You will then be asked to pay a 10% deposit fee (non-refundable).
4. Arrange a mortgage (if you require one).
5. Sign a public or private contract (see below).
6. Agree a mutually convenient time to attend the notary’s office, attend the notary’s office to sign the deeds and pay the balance with either cash or banker’s draft.
7. Arrange for transfer of utilities into your name (your solicitor will do this for you).

A Private Contract (used as a pre-contract) is necessary in case the buyer needs time to obtain a mortgage or transfer funds to Spain; it sets out all the obligations of both parties including the legal description of the property, what is included in the sale, the agreed price, full identification of the buyer & seller. The buyer will pay the 10% deposit monies (known as Arras) and set a date for completion. If the buyer decides to break this contract he will loose the 10% deposit but if the seller decides not to sell he will have to pay the buyer double his deposit (always get your lawyer to check the contents before signing).

Public Contract (is signed in the presence of a Notary to obtain a legally binding contract)

What taxes are involved in the purchase?

Value Added Tax (IVA)
On all new & re-sale properties you have to pay a 7% transfer tax called 'Impuesto de Transmisiones Patrimoniales' most commonly called IVA on the value of the property written in the 'Escritura' (Deed).

Notary’s Fees
The Notary will check that all the documents are in order, that the parties to the contract are who they say they are, and who will witness the signing of the contract. He then registers the signed contract in the local Property Registry and makes the document public, the buyer appearing as the new legal owner. The fee for this will usually be under 1% (which will include the 0.5% Stamp Duty), but will be higher if there is a new mortgage to be registered at the same time. The Notary cannot give you advice; any questions you may have should be directed towards your solicitor who is there for that purpose.

Plus Valia
You will normally be expected to pay the Plus Valia. (This is a capital gains tax levied by the local town hall and will vary upon the locality and on how long ago the land was previously sold). A typical amount would be 400 euros. This tax is normally the responsibility of the seller of the property, but (quite legally) can be passed to the buyer and if not paid a charge will be placed upon the property, so your solicitor may advise you to request the property be reduced by the same amount.

Connection to Utilities
You should allow €150 each for the connection charges for the water and electricity.

Solicitors Fees
Most Spanish lawyers charge between 0.5% - 1% although this could be more if the transaction is not straight forward. Should you not wish to make a journey to Spain on the day of completion, then you can grant a Power Of Attorney so that your solicitor (or someone else acting on you behalf) can sign the necessary documents and make the necessary payments from your bank account. This will incur an extra fee.

Breakdown of Fees:
Supposing for example you buy a property for €200,000. The approximate costs will be:

Can I obtain a Spanish Mortgage?

Currently Spanish Mortgages have a lower interest rate than the rest of Europe. The bank normally requires your pay-slips, P60 (some may ask to see your bank statements) self employed accounts, copy of passport, copy of NIE and a copy of the Nota Simple (Deed) of the property you are wishing to purchase. You will usually be able to borrow up to 70% of the value of the property repayable over 10 - 30 years.

What is an NIE Number & do I need one?

It is an identification number 'numero de identificacion de extranjero' (similar to the UK National Insurance number) it is necessary to have this number when you purchase your property, it is a simple process, you need to present yourself to the nearest police station with a foreigners department, take your passport (plus copy) and fill in the appropriate form, wait a week or so then collect your new number.

What are the running costs?

Community Charges:
With most types of property you will have to pay a community charge to cover costs such as maintenance & cleaning of the community pool, garden areas etc. The amount will depend upon the number of properties and the services that the community committee agrees are required.

Rates (IBI):
Are based on the rateable value of your property (Valor Catastral) and are set by the local town hall, so vary from place to place, it is an annual tax usually payable in September each year, allow around €300 - €500.

Municipal Taxes (Basura):
Is the payment for rubbish removal again an annual tax normally paid in April every year to the Town Hall, the cost varies from place to place, allow €30 - €90.

Gas:
Not all of Spain has mains gas, bottled gas is readily available though at €11 a bottle.

Electricity:
This will depend upon your consumption (average €2 per day), your electricity bill is payable every 2 months.

Water:
This will depend upon your consumption but on average around €1 per day the bill is payable every 2 months.

Telephone:
This will depend upon consumption and which supplier you use; there is a standard charge of €15 the bill is payable every 2 months.

What Taxes are involved in the sale?

Capital Gains Tax (Impuesto sobre el Patrimonio):
Once the house is sold you will be liable to pay 18% on the net gain, this rate applies to both Resident and Non-Resident owners of Spanish property. A retention of 3% will be made by the buyer of the registered sale price and this amount will be paid to the Spanish Tax Agency (Hacienda) as a guarantee for tax payments, to avoid the non-resident seller 'forgetting' to pay the Capital Gains Tax. The capital gains tax can be reduced if you have made improvements to the property but you need to prove the expense with proper Vat receipts.

Note: As a resident there are some situations where payment of this tax can be avoided altogether these are:

1. Being over 65 and having lived in your residence for more than 3 years.
2. If you are selling your residence to buy another property in Spain of equal or greater value, but if you are buying a property with a lower value you will only get proportional relief from the tax.