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BUYING A RESALE IN SPAIN

In the process to buy a resale in Spain there are important aspects to consider.

For example:

- Legal and administrative situation of the construction: As the buyer is buying when the construction is already finished, he has to check how the property was built, and the legal and administrative conditions of the construction.

- Electric, water, gas, and other installations: Again, the buyer must check how was the installation of the utilities in the property, which the current estate of the supplying contracts, and if all the bills are paid.

- Legal possession from the vendor: Sometimes, the vendor is selling a property without all the legal conditions to do it, because the property cannot be on his own name, maybe there is a process of inheritance to complete, a mortgage, an embargo, etc.

- Negotiations and conditions with the vendor: Such as to check if the furniture is included in the price, and to prepare an inventory if the case, etc.

- Expenses, taxes, and other costs: Although, in general, the process is almost the same than to buying a new property, there are determinate costs, taxes and expenses which have a different concept and treatment.

ASPECTS TO CONSIDER WHEN YOU ARE BUYING A RE-SALE

1.- POINTS TO CHECK

Because you are buying from a particular, it is even more important to carry out the relevant pre-contract checks; in particular you need to:

1. Prove that the vendor does own the land: you need to see his escritura, and consult the land registry.

2. Check that there are no loans outstanding: you need to obtain the proper report from the land registry over the property.

3. Ensure that the property is paying the Impueso sobre Bienes Inmuebles (IBI): If unpaid, this tax is attached to the property so the new owner will become liable. You should ask to see the receipt for the last year, the period for which liability for unpaid taxes can be transferred to the new owner. If the current vendor can not produce this, you must ensure your lawyer obtains confirmation from Recaudación Provincial (the Provincial Rates Office).

4. Obtain a certificación catastral to ensure that the property is duly registered and check that the size and conditions are the same ones as described to you.

5. Check with the urbanismo, the town planning office, to ensure that the property is in an area zoned for building and that planning permission has been granted, and that there are no other developments planned nearby that could affect your new property.

6. Check that there is not any fine or limitation affecting the property due to its construction.

If every point indicated above is right, you can proceed to the contrato de compraventa, you should ensure that this contains the following provisions:

1. The total price for he building, completed and ready for occupation, including inventory for furniture and white goods if the case.

2. Arrangements for payment of any deposit and advance payments: The contract should provide the advance payments, with the exact time to make them.

3. Time of signing the deeds: The time in which the property must be handed over to you should be specified. If the vendor does not put the property at your disposal in the time agreed in the contract, it becomes null and void, and any rights or obligations provided by the contract will lapse.

4. A detailed description of the property with dimensions and specifications.

5. Checking of the installation of gas, electricity and water and sewage: The buyer should be responsible only for payments of the installation of any meters and for the actual gas cylinders, if mains gas supply is not available.

6. The cuota de participación (share of the total costs) in the comunidad de propietarios (Community of Owners): Your share will be determined by the size and facilities of your property and this will be known.

7. The vendor is responsible for the payment of all debts on the land, especially the IBI, until the escritura is signed.

8. The buyer will only be responsible for the payment of the cost of the escritura de compraventa, and not for the segregación or division horizontal and the declaración de obra nueva, or any other expenses which could be eventually needed to update the description of the property in the legal registries. .

Once you have bought the property and had the escritura (Title Deed) notarised, you need the copia simple in order to register the property at the Recaudación Provincial for the payment of the IBI, in order the to be able to register for water and electricity supplies.

Do not forget bring with you, your original passport, your original Residency Card, or your original NIE at the Notary, under no respect you will be able to sign the escritura.

2.- STEPS TO BUY A RE-SALE IN SPAIN

Buying procedure in Spain is a little different to what you are used to in your own country. It is always a good move to ensure that you are fully aware of the terms and conditions of the contract before you sign, once signed, the contract is legal, any deposit paid will be lost if you change your mind at a later stage. Always deal with a reputable agency and always use the services of a Spanish lawyer. Please remember, that when buying a property in Spain you must always use a local Spanish lawyer.

The normal procedure after finding a property you hope to purchase is to determine the full price and payment conditions, at this point terms of the contract can be agreed and the amount of deposit can be decided upon, this will depend on whether you are buying a new property directly from the developer or a resale. Normally at this stage a visit to the Lawyer is recommended, he or she will be able to vet the contract and take up contact with the seller. Once the contract is signed and the deposit paid, all terms & conditions and price are fixed.

Always be sure that you are aware of your payment schedule, when the amounts have to be paid and how they will be paid You should also make provisions for these payments allowing for the time it takes for funds to be transferred to Spain, transfers normally take 3 to 5 days.

Opening a Spanish bank account as this is necessary to first, purchase a property in Spain and secondly to maintain your home once you have purchased.

1.- DEPOSIT

Once taken the decision over the purchase, the first you will be asked for is a deposit to hold the property booked for you for a determinate time, and to ensure the price and conditions of the contract. This deposit will be an amount that you pay to have the property at your disposal per a determinate time, by signing a contract with the vendor, or with the agent who is legally intermediating in the sale.

This use to be a standard contract, which is previous to the definitive purchase/sale contract, and is on your benefit, because the aim of the deposit is to get the property out of the market, booked exclusively for you, while you are studying the legal situation of the property and other matters, like mortgages, financial status, etc.

During the time established in the deposit contract, if the vendor does not fulfil his obligation to book the property for you, he will refund you with the double of the amounts received as deposit as penalty for breaching this deposit contract. But, if the final time of the contract arrives, and you do not o

2.- THE PURCHASE CONTRACT ("Contrato de Compraventa").-

Once the deposit is paid, and you have made the searches over the property, in the majority of the cases it is established to sign the definitive purchase contract in which another partial payment is required.

This new contract is now a definitive one in which the obligations of the vendors are higher than to have simply the property out of the market. With this contract the vendor cannot sale to a third party without legal responsibilities, higher than to refund the double of the quantities received form the buyers.

In the purchase/sale contract, there is included all the terms and conditions for the purchase, and the sale of the property, fixing the price, and considering the circumstances obtained after the searches over the property. For example, it can be agreed that the vendor has to fulfil determinate obligations, like to update the size of the property in the land registry; or to pay determinate bills which were unpaid; etc.

Also, in this contract, the expenses to pay by each parts are defined, like who pays the notary and land registry fees, etc.

3.- THE PURCHASE DEEDS ( "Escritura").

The "Contrato de Compraventa" is a private contract effecting a valid sale of the property to the buyer, which is valid between the parties to it, and obliges them to fulfil the terms contained in it. However as a private contract it cannot be inscribed in the Property Register and will not be accepted by third parties as proof of ownership of the property.

To become publicly binding in Spain, it must be notarised and inscribed in the Property Register, when it becomes an "escritura publica". As well as protecting the new owner against the registration of prior charges, an inscription in the Register is advisable to prove ownership and conformity with the rules (such as payment of the transaction taxes), and for example, without a Nota Simple (an extract of the Register entry) it is not possible to obtain a mortgage.

All parties to the contract must be present to sign the escritura at the notary's office, including a representative of the bank if the purchaser is arranging a mortgage. If a person cannot be there, he must arrange a "Poder" (power of attorney) to allow someone else to represent him (usually, your Solicitor). As mentioned above, the vendors are all the people registered as owners in the Registro. If there have been any changes to the ownership, such as a recent death of one of the owners, this change must be notarised and registered first, before the property can be sold.

The "Copia Simple" is, as its name suggests, a simple copy of the escritura. It is the document the buyer needs in order to pay the plusvalía and to transfer or register for contribuciones (these are payments towards the local rates, the IBI), electricity, water, telephone or other services, change the address on his bank account etc. The notary will give you a copia simple once the escritura has been signed.

Your Solicitor, your bank, or the notary will send the primera copia (first copy) of the escritura to the Registro, together with the receipts for the taxes paid. Make sure that your lawyer insists that this is done by accelerated procedure. The Registro will then enter it immediately into the daily journal in order to prevent any other charges being registered ahead of yours. Once the primera copía has been fully registered it will be allocated its registration number, stamped and returned to the notary. The notary will retain the original, and give the owner a stamped copy. This process usually takes a couple of months.

It is most important that the notary files the new inscription at the Property Register immediately, as any unpaid debts for which a court has imposed an embargo (seizure order) can be registered against the property at any time. If the embargo is registered before your purchase is registered, the creditor will have a claim to your property which ranks ahead of yours and which will enable him to force the sale of your property to repay the debt.

4.- HOW TO MAKE THE PAYMENTS

The best way to get the money ready for the different payments is by SWIFT transfer direct to his clients account from your bank in the UK.

For this, the best option is to you to open a Spanish bank account while you are in Spain (if not, ask your Solicitor how to do it from UK), it will serves you to make any kind of payments if necessary.

Although in UK all the payments are done through the Lawyer's bank account, in Spain you van do it in this way, or directly to the vendor, if your Lawyer accepts. Bank commissions and charges in Spain are higher than in UK!.

For these purposes, you will need the details of the SWIFT code, the account number, and the exact designation / name on the account, in order to make the transfers.

It is common, and the most secure way of payment to pay final balance of the price through banker draft issued in the name of the vendor. So, make sure that you, or your Solicitor, have enough provision of funds in the Spanish bank account to attend this payment at leats one week before the time agreed in the notary.

The other expenses, like the Transfer Tax, Notary and Land Registry fees, etc., can be agreed separately with your Lawyer, or with the mortgage bank, if the case.

Remember also that if the vendor is non-resident, you have to deduct 3% from the purchase price, and deposit this with Hacienda on account of the vendor's 18% capital gains tax liability. This is done using Form 211. It will usually be arranged by the Solicitor, or the mortgage bank.

5. COSTS OF THE PURCHASE AND TRANSACTION TAXES:

You need to reckon that in total your costs of buying the property will be up to around 10% of the purchase price - this can only be a rough guide as some of the costs - such as the plusvalía (see below) - are not related to the value of the property and so could vary widely. If you are obtaining a mortgage, you can of course include these costs in the mortgage amount you request, providing this remains within the maximum percentage available against the property value and on your income. This estimate of 10% includes:

The transfer tax, Impuesto sobre Transmisiones Patrimoniales, is 7% of the value declared in the contract. In some communities, the Impuesto de Transmisiones Patrimoniales has been increased from 6% to 7%.

If it is a new property, or a resale property previously owned by a company, you will pay VAT (IVA) at 7% (instead of the ITP). In addition, where VAT is involved, there is an Impuesto sobre Actos Jurídicos Documentados (AJD - stamp duty) of 1.0%. In Murcia and the Balearic Isles this rate is still (in March 2003) 0.5%, and in Cataluña it is on a sliding scale between 0.5% and 1.0%. If you buy a garage separately from the house, subject to a separate escritura, this will be regarded as a completely commercial transaction, and will be subject to VAT at the full rate of 16%. This rate also applies if you buy a business.

Your lawyer's fees, which are likely to be around 1% of the purchase price, plus VAT, plus the fees he has had to pay out, for example, for the Nota Simple and the Certificación Catastral, and others..

The notary, registration and handling (gestoría) fees, which should together amount to up to around 0.5% of the purchase price. The notary charges according to a complex scale depending on the size of the property, its price and the number of pages in the documents. The fee for the registration will be around half of the notary's fee, and the handling fees are around EUR100. On a property valued at EUR144,928 (around £100,000) the notary's fee would be around EUR300, the registration fee around EUR150, and the handling fee around EUR100 - in this case the three together amount to 0.35% of the property value.

If you were obtaining a mortgage, there would also be notary and registry fees to pay for registering the mortgage deed, although the amounts will be less, as the mortgage will be less than the value of the property. In addition, Stamp Duty is charged on mortgage deeds of around 1.8% (this is actually a very complex calculation - the actual rate is 1.0% which is charged on the concept of "mortgage responsibility", which in simple terms is the total amount that could become due under the contract if no repayments were made at all). There would also be a valuation fee, which is usually around 0.1% of the purchase price, and there is usually a 1% application fee charged by the lender.

3.- EXPENSES FOR THE BUYER

- Notary Fees: For the formalisation of the title deeds

- Land Registry Fees: For the inscription of the deeds, making the change of owner's from the property.

- Transfer Tax: Currently, this is the 7% over the total price of the property.

- Others: Solicitor Fees, mortgage expenses, contracts of water, electric, and gas, etc.

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