Buying a resale

Our team of Spanish Lawyers experts in Spanish properties will guide you in the process to buy a Spanish property either in Alicante, Costa Blanca, Almería, Murcia, Costa del Sol, Málaga, or Catalonia.

The Spanish Legal system of purchasing a Spanihs properties is not difficult it is just different from other countries. This means that it is importat that you have a rough idea and understanding of what to expect, and that you always deposit your trust in conyenace Spanish Lawyers, who will take good care from the whole conveyance process .

Our team of Spanish solicitors have created some important aspects to consider, in the process to buy a Spanish propety resale :

1.- Legal and Administrative situation of the construction:

The future Buyers have to check that the propety is already finished and how was built. The legal and administrative conditions of the construction, future developments in the area ,to make sure that the property is legal and registered, environtment… ect.

2.- Electricity, Water, Gas and other installations:

One more time, the Buyer must check how were the installations of the utilities in the property, what is the current position of the supply with the companies. Ask also to see the latest paid-up receipts included the Communityof Property Owners.

3.- Legal possession from the Vendor:

Sometimes the Vendor is selling a Spanish property without all the legal conditions to do it, this is because the property cannot be on his own name, maybe there is a process of inheritance that has not been completed yet, a mortgage debt an embargo, etc..

4.- Negotiations and conditions with the vendor:

For instance to check if the furniture , white goods are includd in the sale price and therefore prepare an inventory list if the case, etc.

5.- Expenses, taxes, and other costs :

Although in general, the process is almost the same, there are determinate costs, taxes and expenses which have a different concept and treatment.

IF YOU ARE IN THE PROCESS OF BUYING A RE-SALE, WE RECOMMEND YOU THE FOLLOWING:

1.- POINTS TO CHECK:

Be particular alert to the terms , buying from a particular it is even more important to carry out with a 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 yearly the Impuesto sobre Bienes Inmuebles (IBI): If it is unpaid, this tax is connected 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 do not have this, then 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 on 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 states with the following provisions:

1. The total selling price of the property, completed and ready for occupation, including an inventory list for furniture and white goods in the case that you arrange.

2. Arrangement for payments of the initial deposit and following payments.The contract should provide the advance payments, with the exact time to make them.

3. Time of signing the deeds = completion date: 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, specifications, plans and so forth..

5. Checking of the installation of gas, electricity, water , tv and sewage: The buyer should be responsible only for payments of the installation of any meters and for the current gas cylinders, if main 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 = title deed, and not for the segregación or division horizontal and the declaracion de obra nueva or any additional 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.

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

The buying process in Spain is a bit different of any country. It is always a good point to ensure that you are fully aware of the terms and conditions of the contract before you sign. Once the contract is signed is legal and be aware that any deposit paid will be lost if you change your mind later on. Always deal with a reputable Property Agency working in Spain and the service-advice of a local Spanish Solicitor.

The normal procedure after finding a property you want 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 a Solicitor is highly recommended, they 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 the price would be fixed.

Always be sure that you are aware of your payment schedule, When and How the amounts have to be paid. You should also make provisions for these payments and make sure that you give plenty of time to transfer the funds as normally it takes between 4 to 5 working days.

Opening a bank account is necessary when you purchase a propety in Spain and to manteinance all the expenses related to your propety once you have purchased.

1.- DEPOSIT

Once you have taken the decision of buying your desired property, the first you will be asked for is to pay a initial deposit to hold the property booked for you for a determinate time 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. Between the seller and the buyer there has to be a contract in place until the public deed of purchase is ready.

The aim of the deposit is to take out of the market and 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 fulfill his obligation and he backs out of the contract he will refund you the double of the mounts received as a penalty for breaching of contrat but If the Buyer fails to complete the sale, he loses the amount of his deposit . If the Vendor finds another Buyer in the meantime, willing to pay more , and sells the proerty to him, the first Buyer can claim twice the amount of the deposit back.

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 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 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 so far; 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-TITLE DEEDS ( “Escritura de Compra venta”).

In Spain Title Deeds are known as “Escritura de Compraventa” and it 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 fulfill the terms contained in it. However a private contract cannot be inscribed in the Property Register and will not be accepted by third parties as proof of ownership of the property.

To become llegaly 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 involved in the contract must be present to sign the escritura at the Notary’s office, including a Bank´s representative if the purchase had arranged with a mortgage. You can make a poder (power of attorney USUALLY to your Solicitor) allowing another person to sing for you if you cannot be present.

The “Copia Simple” is, as its name suggests, is a simple copy of the escritura. It is the document that the Buyer needs in order to pay the PLUSVALIA 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.

THE VENDORS ARE ALL THE PEOPLE REGISTERED AS OWNERS IN THE REGISTRO BUT 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 TO ANYONE.

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.

To go ahead with this option is that you have 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 have to do it directly to the vendor´s account (If your Lawyer accepts) or directly to your Spanish b/account. Bank commissions and charges in Spain are higher than in UK.

For these purposes, you will need the details of the SWIFT code, IBAN account number , Beneficiary name in order to make the transfers.

It is common, and the most secure and practical way of payment to pay the final balance of the price through Bankers 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 least one week before the day agreed in the Notary.

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

Please bear in mind that if the Vendor is non-resident, you have to deduct the 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´s Bank.

5. COSTS OF THE PURCHASE AND TRANSACTION TAXES:

You need to reckon that in total your costs of buying the property will be 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 (ITP) is 7% of the purchase price.In some communities, the Impuesto de Transmisiones Patrimoniales has been increased from 6% to 7%.

If you purchase a new property from a Developer will pay VAT (IVA) at 7% (instead of the ITP) because the sale is a business operation, not a private sale between two individuals. In addition where VAT is involved, there is an Impuesto sobre Actos Jurídicos Documentados (AJD – stamp duty) of 1%. 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%. 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 premise.

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 €100. On a property valued at €144,928 (around £100,000) the notary’s fee would be around €300, the registration fee around €150, and the handling fee around €100 – 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 amount will be less, as the mortgage will be less than the value of the property. In addition to Stamp Duty is charged on mortgage deeds of around 1.8% (this is actually a very complex calculation – the current 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.

6.- EXPENSES FOR THE BUYER

• Notary Fees: For the formalization of the title deeds
• Land Registry Fees: For the inscription of the property deeds in your name in the official Registro de la Propiedad.
• Transfer Tax: (ITP) Currently, this is the 7% over the total price of the property.
• Others: Solicitor Fees, Mortgage expenses, contracts of water, electric, and gas, etc.

ORIGINAL NIE NUMBER

Please, pay attention that it is absolutely essential to obtain the Spanish NIE number for the acquisition of a property in Spain.

Also Non-residents in Spain need to apply for an NIE number. This is necessary for the payment of the taxes and the proper legal identification of buyers and parts involved in the sale.

So, on completion buyers must bring to the notary:

- THEIR ORIGINAL NIE NUMBERS.

- THEIR ORIGINAL PASSPORTS.