Buying a property in Spain is very different from the UK. There are more potential pitfalls. People with be throwing around names like “Notario” and “Registro de propiedad” and it’s important to understand what it all means – not just a simple translation, but what these words represent concerning the buying process. Here we provide an overview of what to expect.
Pre-Approved Mortgage
If you need a mortgage, the faster you start the ball rolling, the better. It can take time in Spain to acquire. It is possible in Spain (and usually better) to get a pre-approved mortgage. This gives you a good idea of your available budget.
Initial Check on Property
So, you found your property? To ensure the property is free of debt and what you see is what you are getting (missing land and other such surprises), you need a Nota Simple. This describes the property “officially” and states the legal owner. Your estate agent should supply you with this. Before you make any deposits or sign anything, it is important to ensure everything is in order.
Contracto de Arras
This is the pre-agreement contract between the seller and buyer. A deposit is made (usually 10%), and both parties agree to the selling price and any other conditions that have been agreed upon. This stops the seller from changing the goalposts and or trying to back out of the deal. The seller must pay back double the 10% deposit if they do. The buyer loses the 10% deposit if they back out. This is the “usual” agreement. In reality, the amount of the deposit etc., is subject to the agreement of the buyer and seller.
Mortgaging
Once you have a “Contracto de Arras” (pre-agreement contract), it is time to go to the bank. This part is akin to the UK. They will send out a surveyor (tasador) who will value the house. The cost for this can be anywhere between a few hundred and five hundred Euros. The bank will base its mortgage offer on that figure. Most Spanish banks only loan between 70% & 80% of the property value.
NOTE: While surveying the property is not legally required, if you are a cash buyer, getting a full appraisal of the property from a Tasador (who is a licensed architect) is in your best interests.
Closing the Deal
Transfers of property deeds are dealt with by a Notario in Spain. They are independent parties working for the government. They read the deed of purchase first and ensure both parties understand what is agreed in the deed.
The seller and buyer then provide proof of identity (or power of attorney if represent another). The seller must then present his title as owner, and the buyer must present payment. Once all these are on the table, the seller and buyer sign the contract to change over the deeds of the property. The Notario also signs and stamps it – This is the “Firma Protocolizada”.
Transfer & Stamp Taxes
If the seller is an individual, the buyer must pay “Impuesto de transmisiones patrimoniales” – Otherwise known as the transfer tax. Stamp duty is always payable, known as “impuesto de actos jurídicos documentados”. Transfer tax rates depend on the region and whether the property is private or commercial – It can be anywhere between six and ten per cent on private property. The Stamp Tax also varies from region to region. As a general guide, expect to pay between 0.75% & 1.5%.
The Plusvalia
This is a local tax, usually paid by the seller. However, they can sometimes drop this on the buyer! The seller must hand in a copy of the deed to the Town Hall (Ayuntamiento) local taxes department and inform them how many years they owned the property. The council then calculates how much is owed based on the number of years the seller owned the property and the property’s value, and posts the bill to the seller.
Land & Property Registration
You must take your deeds to the nearest Land and Property Registry office (Registro de Propiedad). Most medium-small towns have one. The best place to ask is at the Notario. The fees for land registration are derived from the value of your property. It can be anywhere from .02% to 4%.
Utilities
Now, the utilities for your new home must be changed into your name. If any debts are owed, you will be liable to pay them off, or they will disconnect the property. However, your lawyer or estate agent will look into this before you purchase. In Spain, utility companies want to be paid and are happy to cut utilities off quickly.
Of course, this is a very brief overview of the buying process. The most important advice we can give you is to always work with a reputable agent and a lawyer. The relatively small cost can save you much money further down the line. It is much cheaper to determine if a problem exists and avoid a property than to rectify problems once you have purchased it, as it can become very costly if the correct paperwork is not in place.