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Buying a resale

1.- CHECKING POINTS

The process of purchasing a property in Spain is not  too much different from other countries. Please, be kindly invited to pay attention to the following POINTS TO CHECK:

1. Check the vendor does owns legally the property: You need to be provided with a copy of the vendor’s deeds, or “escritura”. Also, you have to consult the land registry to check the formal conditions of the ownership, llimitations, charges, etc., and if there are any loans/mortgages affecting  the property.

2. Check that the property is duly registered and that pays the Council Tax or “Impuesto sobre Bienes Inmuebles (IBI)”.  Unpaid Council Tax from the previous years may be passed to the new owner.

3. 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.

4. Visit and meet the construction department of the Town Hall to be informed about points such as if the planning permission has been granted, and that there are no other developments planned nearby that could affect your new property.

5. Check that there are not any fines or limitations affecting the property due to its construction, or even orders of demolitions.

2.- STEPS OF THE PURCHASE PROCESS

The buying process in Spain is a bit different from other countries.  It is compulsory that you are informed, and that you understand all the steps of the purchase process, and that you recieve the proper legal assitance before you sign, or pay, anything. Once the contract is signed is legal and be aware that any deposit paid will be lost if you change your mind later on. So, we strongly recommend you contract a reputable Spanish Solicitor to help you and to assist you in all the steps of this process .

Once you have taken the decision to buy in Spain,  is absoltely necessary to necessary to make the following:

A) Open a bank account. All the payments to the vendor must be done from your bank account. Partial payments on account of the final price  can be done from your bank account in your country of residence. But is recommendable that the final payments of the price (the biggest) are donde from a bank account in Spain previously open on your name. So, once you are in Spain, do not forget to open a bank account.

Also, a bank account will be  necessary after completion to pay the utility bills, community charges, etc., related to your propety.

B) NIE (Numero de Identificación de Extranjeros): Please, pay attention that it is essential to obtain what we call NIE for the acquisition of a property in Spain.

All Spanish foreigners and  Non-residentsare requested to obtain an individual NIE number. This is necessary for the payment of the taxes and the proper legal identification of buyers and parts involved in the sale.

DEPOSIT and RESERVATION CONTRACT

Once you have taken the decision of buying a determinate property, the first you will be asked for is to pay a initial deposit to keep the property out of the market.  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.

Durign the validity of the deposit contract, if the Vendor does not fulfill his obligation and he breaches the contract with “bad faith” (refusing to sale or changing his mind, or selling to another buyer), then he will refund you the double of the mounts received as a penalty for breaching of contrat. In instance, if the Buyer fails to complete the sale, he loses the amount of his deposit .

THE PURCHASE CONTRACT (“Contrato de Compraventa”).

Once the deposit is paid, and you have made the searches on the property, in the majority of the cases it is established to arrange a definitive contract in which an additional partial payment is required.

This contract is now a definitive one. The main difference with this one and  the reservation or deposit contract is  regarding the obligations of the parts. Mainly, the obligations of the vendors are higher because,  with this contract, the vendor cannot pull out the sale, or sale to a third part. The intention from the vendor to sale to the buyer is now confirmed, and he, simply, cannot leave the sale.

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 fulfill 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 detailed and listed, like who pays the notary and land registry fees, etc. Is highly recommendable that this contract is made by Solicitors with experience in Conveyance.

COMPLETION OF THE SALE – TITLE DEEDS OR  ( “Escritura de Compra venta”).

In Spainish,  “Title Deeds” is “Escritura de Compraventa”, and is a “public contract”. Before completion, as explained above, buyers and sellers have arranged a “private contract”, whcih is a contract confirming a valid sale, and contains the agreement of sale bewteen two parts, but is only valid between those parties.  However a “private contract” cannot be inscribed in the Land Registry, and it will not have any effects to third parts.

A “private contract”, to become llegaly binding in Spain, must be notarised and inscribed in the Property Register, when it becomes an “escritura publica”. In other words, the “private contract” must be changed into “public contract”. And, in Spain, only the “Public notaries”, are entitled to turns into public a “private” agreement of sale.

So, “completion” will be done in Spain by notaries (not by Solicitors).

HOW TO MAKE THE PAYMENTS

As explained above, the best way to make the final payments of the sale to the vendor is directly from a bank account on your name in Spain. For this, previously you had to open a bank account on one of the Spanish banks. Before completion, you need to transfer from your country of residence, the necessary amounts to your Spanish bank account in order to cover:

– The rest of the final price to the vendor

– The expenses and taxes of the transaction (notary and land registry fees, taxes, legal fees, etc).

So, in Spain is different as other countries like UK, where all the payments are done through the Lawyer’s bank account. In Spain must be done directly to the vendor´s bank account.

The most common practice to make the final payment of the price to the vendor is by a 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, and paid to your Lawyer, or to your mortgage bank, if is the case.

Please bear in mind that if the Vendor is non-resident, you have to retain a determinate amount of the price to pay to the vendor (the 3%), and deposit it to the Spanish Tax office (called  “Hacienda”) on account of the vendor’s  capital gains tax liability. This is done using the model  211. Your Solicitor will instruct you how to proceed with this point. .

PURCHASE COSTS AND EXPENSES

You need to reckon that in total your costs of buying the property will be around 101-12 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 tax to pay for purchase of a RESALE is not VAT (IVA), whcih currenty is the 10 %,  is a different tax called Transfer Tax, or Impuesto sobre Transmisiones Patrimoniales (ITP), which is now the  is 10% (in the majority of the Spanish regions)  of the purchase price.

If you purchase a new property from a Developer you pay VAT (IVA) at 10% (instead of the 10 % ITP) because the sale is a business transaction, between a company (the builder), and a cusumer (the buyer). But, in resales, there is not a company involved, is only a private transaction between two individuals or particulars.

Your lawyer’s fees, which are likely to be around 1% of the purchase price, plus VAT. In addition to this, your Solicitor will charge you for the expenses of the searches like land registry reports, certificates, costs for changing utility contracts, and other administrative charges.

Other expenses to pay on resales are notary, registration and handling (gestoría) fees, which may be around 0.5% of the purchase price.

If you need a mortgage, there would be also notary and registry fees to pay for registering the mortgage deed, together with commissions fromand charges from your bank, and others like life or house insurance. There would also be a valuation fee, which is the suveyor contracted by your bank to evaluate the property.

EXPENSES TO BE PAID BY 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 10% over the total price of the property.
  • Others: Solicitor Fees, Mortgage expenses, contracts of water, electric, and gas, etc.

Very important. On completion DO NO FORGET to  bring with you to the notary:

THEIR ORIGINAL NIE NUMBERS.

– THEIR ORIGINAL PASSPORTS.

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