BUYING process>>>
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THE PROCESS OF BUYING A PROPERTY IN SPAIN
The Costa del Sol has become one of Europe's most attractive places to live. In addition to the climate, the golf courses, and the infrastructure available, the mortgage rates are now lower than ever before.
Therefore, purchasing second-hand or new property in Spain at this time could be a worthwhile investment.
CONTRACTS
It is not advisable to try to deal with contracts yourself unless you have prior experience and speak Spanish. Once you find your property it is standard practice to make a formal offer and on its acceptance proceed to make a contract or at least a reservation. It is common practice for buyers to be asked to pay a reservation on the spot. This is acceptable as long as it is just that (i.e. a reserving deposit). The price is fixed once you pay your reservation. The private contract, which is the binding contract for both sides, is usually signed within a period of 30 days.
This is where one MUST have a solicitor, as there are certain documents, which are required, and should be thoroughly checked out prior to hand over of your funds. For Second Hand or Resale properties one would instruct ones solicitor and forward at least 10% of the purchase price to his client's account. He will arrange to draw up a private contract with the vendors and this will state all agreements regarding price, time for completions, etc.
Once the 10% price has been paid and the private contract is signed, there are heavy penalties for both parties if either decides not to proceed. By law the vendor is obliged to return double the amount paid unless otherwise stated, and the purchaser would lose the funds paid. If you are requested to sign an option contract be very careful, as if you exceed the date on the option you will lose you rights to purchase and the vendor will be free to market and sell the property again and keep your money, for whatever reason you failed to proceed.
Do not sign any documents which you are not happy with and you should have a version at least in your own language. Your solicitor or representative should translate for you the whole document, not just pieces, and if you request a translation you should receive the translation of your particular contract not a general version. Once the new title deeds have been signed in front of the notary you are the new owner and should have gained possession. It only remains for your legal representative to pay your transmission taxes and register the property on your behalf with the local land registry. This may take some time, as the process can be slow in some areas.
PROPERTY PURCHASE COSTS
Apart from the Actual Cost of a property, you have to include the transmission costs in the overall purchase budget. Allow approximately 11-13% of the official purchase price. Unless otherwise specified by contract, taxes and feesare split between the buyer and seller as follows:
BUYER PAYS:
Transfer tax or IVA: the transfer tax makes up the bulk of the purchasers transmission costs, at 7% on a resale property. If you purchase a new property from the developer you will have to pay IVA (VAT) and stamp duty. This must be paid within 30 days from the date of the signing of the deeds. If for some reason it is not paid, surcharges will apply. All properties are subject to a five-year period where the Spanish tax authorities can request proof of payment. However it is impossible to register the deeds without paying these taxes as proof of payment will be requested by the land registry.
Notary Charges: The buyer pays for the first and any other copies of the new deeds to the property called "escritura". The fees are set on a sliding scale, which increases with the price of the property and the complexity of the sale. If there is a mortgage this will require a separate deed to be drawn up and will incur the same type of charge, and be billed separately.
Property Registration Fees: These are charged by the local Land Registry Office to register the property into your name.
Legal Fees: 1% to 1.7% depending on your solicitor and the complexity of the transmission.
REAL, ESTATE REGULATIONS
All property in Spain should be registered in the Registro de Propiedad or Land Registry. This is public information and will show the registered owner and any liens, mortgages or debts registered against the property, the amount of land, m2 of the property and indeed if the property actually exists. Only the person or the judicial body shown on the land registry documentation may sell the property concerned unless a notarized power of attorney has been given to a third party. All transactions pertaining to the transmission of a property must be registered in the Land Registry. It is not sufficient to simply go to the notary office.
ONCE YOU HAVE BOUGHT...
ANNUAL RUNNING COSTS: At the time of purchase you should receive copies of all the paid up receipts pertaining to the property.
REAL ESTATE TAX: The IBI Impuesto sobre Bienes Inmuebles' - the local town hall's annual real estate tax. The town hall will advise you of the amount. The previous owner is obliged to give you the previous year's receipts. The IBI will show the Valor Catastral; this is the official assessed value of the property, which is used to assess other taxes. Also you will have to pay BASURA /Rubbish collection and disposal fee to the town hall/
COMMUNITY CHARGES You should also obtain a paid-up receipt for the community charges on your property. If you buy an apartment in a block, townhouse or villa in an urbanization, you will automatically become a member of the community of property owners, with the right to vote at the AGM's and the obligation to pay your fees each year. Fees depend on the services offered.
ANNUAL TAXES All property owners are liable to 2 annual taxes on their property, based on either the Valor Catastral or the value in the Escritura Publica -whichever is higher.
Non-Resident INCOME TAX
If you do not intend to stay in your holiday home long term, an excellent way to cover the cost of the property is to consider letting for either long term, or shorter holiday periods. You can make a substantial income on your investment or just cover the annual costs associated with the ownership of a property.
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