Spain: The Property Buying Process

The Spanish legal and conveyancing systems are pretty much unique and this means that anyone contemplating a Spanish property purchase should make themselves aware of the intricacies of the purchase process before they venture forth and make a commitment to buy…after all, there have been a great many reports about the disasters that have befallen those who failed to do their due diligence!

This is the Amberlamb guide to buying property in Spain, the process involved, the fees payable and the main steps involved in moving from interested party to property owner.

First things first there are two important issues to note – anyone contemplating a purchase in Spain requires what’s known as an NIE number – this is a unique taxation identification number and one that is needed before a property can be bought, before a bank account can be opened and before the potential buyer ventures much further than through an estate agent’s door.  The easiest way to get one is to give power of attorney to a trusted solicitor in Spain who will make the necessary applications while you go about the business of home hunting.  And on that salient point it is worth mentioning that one should not take recommendations for a solicitor from an estate agent, developer or anyone else involved in the property transaction – your solicitor has to have your interests at heart exclusively.

The next essential item to mention is property finance…some investors prefer to make cash purchases or to raise finance through their company or via close banking contacts – for others they will require assistance with both obtaining a mortgage to buy property in Spain and also with the currency transfer and ongoing Spanish banking arrangements.  For European buyers, large high street banking names such as Barclays have banking partners in countries like Spain and France where many Europeans buy investment property or holiday homes and so they are well versed in raising international mortgages and handling the financial side of the entire transaction.

Those requiring a mortgage or at least interested in determining whether buying with finance actually makes more sense should make initial enquiries before actively entering into the property search and due diligence processes so that they are in a position of knowledge relating to how much money they will have to work with.  Barclays Bank are in a strong position to offer mortgages in Spain, they have a local presence in Spain, local representatives who understand the intricacies of the Spanish property market and they offer potential mortgage customers a free, no obligation assessment of their requirements, click here to find out more.

With a firm budget in mind and a clear idea of the property type being sought to fulfil the investor’s objectives one can either utilise the services of a professional estate agent in Spain or utilise the power of the internet and print to locate suitable properties.  When a property has been found the first stage in the buying process is signing the reservation agreement.  Upon signing between 1 and 2% of the property’s price is paid by the purchaser, and the vendor withdraws the property from the market enabling the buyer’s solicitor to begin the land registry checks.

It is imperative that the solicitor determines that there are no mortgages or outstanding debts or claims against the property because if they fail to determine this and later it is discovered that the vendor had a debt secured on the property the claimant can continue the claim against the property even though it has changed hands.

Once the buyer’s solicitor has completed the initial land registry checks and all is seemingly in order with the vendor’s right to sell etc., the contract of sale and purchase is signed by both the vendor and the purchaser and a deposit of around 10% is paid to the vendor.  Ideally this contract should not be signed if the buyer’s solicitor cannot provide a written statement that the land registry has been thoroughly checked by him and that there are no outstanding mortgages or unpaid debts against the property for sale.

For those buying off plan property in Spain or purchasing a home during construction it is essential that the constructor supplies the investor with a copy of their bank bond or the insurance cover that protects the purchaser in the event that the builder cannot complete the property.  In the unlikely event that this happens then the buyer will be refunded their monies plus interest and the buyer must see the original and be in receipt of a copy of the bond or insurance certificate before they pay any form of deposit.  Furthermore the contract of sale and purchase must comprehensively and in as much detail as possible list and describe the specifics of the property being purchased - from describing the internal and external measurements, the quality of included fixtures and fittings, the finish in the garden, layout of the rooms etc., etc.

Finally, before we move onto the completion stages of the process to buy property in Spain it is imperative to mention that the buyer’s solicitor also has to make sure that the property that is being marketed for sale is exactly as detailed in the title deeds and that within the sale and purchase contract there is a detailed record of the boundaries of the property for sale etc.  Furthermore, if the property is new or less than ten years old then the ten year post build insurance policy that all new houses should have has to be assigned to the new buyer and this assignment should be mentioned in the contract.

Upon completion buyer, seller, both parties’ lawyers and a bank representative if the buyer is using a mortgage visit a public notary’s office.  Final contracts are signed, monies and title deeds transferred.

In terms of the additional costs associated with buying investment property in Spain they vary depending on the type of property the individual is interested in.  New properties attract 7% VAT plus 1% stamp duty, older resale properties only attract the 7% VAT and those buying land are faced with 16% VAT plus the 1% stamp duty.  On top of this there are lawyer and notary fees, land registry fees and if using a mortgage there can be a percentage payable in setup and arrangement costs.  Those buying property in Spain as opposed to land should allow for 10% in addition to their purchase price and those buying land should allow an additional 20% to be safe.

Finally, new rules relating to capital gains tax and the withholding provision paid by non-residents when buying property in Spain were approved by the Spanish Senate in 2006 and from 2007 non-residents will pay a maximum of 18% CGT on property resales and the withholding provision they pay when selling drops from 5% to 3%.

Europe:- Spain Property Reports
Complete listing of all current property reports for region: Europe:- Spain