Buying property off-plan in Spain was, for a time, something to be very cautious about. You may have heard some of the horror stories from the so-called boom years in which people paid deposits for off-plan properties in Spain only to find that the property was never built, or the developer went into liquidation. These days buyers of off-plan properties in Spain benefit from legal protection, but that does not mean that you can throw caution to the wind. As with any property purchase in Spain you should instruct an independent Spanish lawyer to advise you in relation to the transaction. Here you will find description of 6 important steps of the legal process which are essential while buying property in Spain. If you want a more specific explanation, ask us for more information. We are here to help you.
1 . T h e R i g h t C h o i c e
There are many things to consider when selecting a property. Here are just a few of them:
- Proximity to local amenities/schools/hospitals
- Proximity to public transport
- Possible noise pollution – higher in the summer months when close to tourist areas/hotels
- Beach access
- Road access
- New property or resale
- Local taxes
2 . L e g a l A d v i c e
Do not attempt to make a property purchase without legal representation, unless you are a property lawyer!
The process is complex and you could miss something important, or worse, make costly mistakes. Our advise for you to go to the legal representative and check all the documents process. Lawyers should provide:
- Check legal status of the property
- Explain the process and any associated costs
- Ensure that the property is free of debts and charges
- Ensure the utilities are paid up to date
- Check the usage status of the property
- Ensure there is sufficient planning permission in place if you intend to extend or modify the property
3 . P r o p e r t y r e s e r v a t i o n , P r i v a t e C o n t r a c t
Usually, you will have to pay a reservation deposit at this point and sign an offer and deposit contract. This is to remove the property from the market and allow you or your lawyer the time to do the required checks without the risk of someone else buying it. This deposit is usually around 6,000€ and is refundable.
4 . N I E N u m b e r a n d S p a n i s h b a n k a c c o u n t
The NIE (Número de Identificación de Extranjeros) means that you are registered with the Spanish authorities. It is required for you to purchase property in Spain. Obtaining an NIE is a relatively simple process that usually requires only one visit to the Oficina de Extranjeros. With the DNI number, you will be able to open a spanish bank account in any bank here. To make it easier with bank transfer and pay for your property deal.
5 . T i t l e D e e d a n d L a n d R e g i s t r y
Signing the title deed must be done in front of a notary at the notary office. At this stage, you will also pay the balance and receive the keys to your new home. You will receive a copy of the document at this stage, known as the Copia Simple. If you have taken a mortgage on the property, then the bank will retain the original document until such time as the loan is cleared.
Once the title deed is signed your details will be registered at the Land Registry. At this point, the utility companies should be informed of the change of name.
6 . P a y L e g a l F e e s a n d T a x e s
For the buyer: transfer tax (transmisiones patrimoniales) and stamp tax (impuesto de actos jurídicos documentados). If the seller is an individual, the buyer pays a transfer tax. This tax varies between 6% and 10% of the purchase price, depending on the region of Spain. If the seller is a real estate developer and the building or land to be built on represents a first-time transfer, then the buyer pays VAT tax instead, meaning 10% for housing, 21% otherwise impuesto.
You will need to pay your legal fees at this point. These are often included in the quoted price for the property. You should be given original invoices for the notary fees, and the taxes you have paid.
It is important to make arrangements for your property taxes to be paid. How much you pay will depend on many factors, one being whether you are a Spanish resident. Both residents and non-residents are liable for IBI (council tax). However, non-residents must also pay imputed income tax in Spain. This is usually 2% of the catastral value of the property. If you intend to rent out your property you will also be liable for Impuesto de la renta de no residentes. This is a tax based on the income you receive from the rental of the property.