Below is the basic information you the buyer will need to know about purchasing a property in Spain.
Finding and Instructing a Lawyer
There are numerous aspects of the house-buying process which require a lawyer's expertise, from ensuring that the property is legitimate and free from debts or charges, to negotiating with the other side over trickier elements of the transaction, registering the title deeds and paying all relevant transfer taxes on your behalf.
You may also want to include a lawyer in the early stages of negotiating the price with the vendor, to make sure that the offer satisfies all legal requirements.
Your lawyer will also arrange for the transfer of utilities (water, electricity etc) into your name.
Finding an English Speaking Lawyer
Spanish lawyers are well practised in helping English buyers to purchase property, and will speak English.
Always obtain an estimate of costs in advance. For property conveyancing, fees will be calculated as a percentage of the sum involved.
Protecting Your Investment
If you invest in Spanish property, it is advisable to draw up a Spanish will separate from your UK will, to cover your Spanish assets only.
The Spanish laws on inheritance are strict and complicated, so you will need expert advice on the taxes involved and the other financial implications of your purchase in the future. Once again, this is a matter for a good lawyer to advise you on. They can then draw up the document and register it in Madrid.
Fees should not be more than around 200 euros to draw up a will for a straight forward estate.
With mortgage rates at an all-time low, buying in Spain has never been more attractive, whether as a permanent home or as an investment. Follow our easy five-step guide.
STEP 1: Working with Agents
Use the Costaproperty.com website to search through properties, gauge the market place, understand the buying process, and do your research before you think about handing over the money.
Based on your specific property needs, Costaproperty will team you up with the appropriate property agent. The agent will help arrange your trip to Spain to view properties.
STEP 2: Find a Lawyer
Seek the advice of a good English-speaking lawyer-costaproperty can recommend one for you. The Spanish legal system differs greatly from the British system, so it's essential that you have a reputable lawyer on your side to explain the intricacies and deal with any problems. Establish their fees at the first meeting before you commit to anything.
Have your lawyer arrange your paperwork for you. Various details and documents relating to the property will need to be checked:
1. At the Land Registry (Registro de la Propriedad, tel 902 201 200 for local branches), check that the Title Deed can be passed on to you and that there are no charges against the property. There are various land registry offices in each town. Eg. In Malaga, at Calle Cerrojo, 17. Tel. 95 207 0351
2.Check with the relevant town hall that the annual Real Estate Tax (IBI - Impuesto de Bienes Inmuebles) has been paid.
3. Check with the Community of Owners that all fees have been paid and if any future works are planned. Get a receipt showing you what you will need to pay as the new owner.
STEP 3: Research Mortgage Options
Your Lighthouse agent can also provide you with recommendations of mortgages lenders who can then advise you on a product to suit your needs. Requesting a Mortgage Go to our Home Finances Page
STEP 4: Make an Offer
There is no such thing as a verbal offer. To show your intention you will have to put down a deposit (minimum of €3,000 up to €10,000) against the offer. Once the vendor accepts the offer the sum put forward becomes non-refundable. The deposit becomes non-refundable as long as due diligences are met.
Within about two weeks of the acceptance of the offer a sale and purchase contract (contrato de compra-venta) will be drawn up detailing:
Full details of seller and property
Price, terms and method of payment
Implications regarding non payments of stage payments or late completion
The remainder of the deposit is normally payable at this stage. Read the full details on Making an Offer
STEP 5: Completion
Sign the 'Escritura pública'
Now it is time to sign the 'Escritura pública' - the official document which shows the title deeds and transfer of ownership - before a notario, an official government representative. He does not certify that the statements are true, merely that both parties have sworn to them.
At this stage you pay the remaining cost of the property and the vendor hands over the keys to your new property.
It is the buyer's responsibility to ensure all documentation is correctly registered in the land registry to avoid problems later when you come to sell. You can pay a local gestor (government official who deals with property contracts) or notary to deal with this if you prefer. This process can take up to two months.
Besides the obvious cost of the property, buying a house in Spain involves various administrative and legal costs. They break down as follows:
VAT (IVA) - 7% for both resale and new build
Stamp duty: 0.3-1% of property value
Legal fees: about 1,500-1,800 euros or 1% of property value, whichever is
Notary fees: about 500 euros
Property registration fees: 150 euros
Administration costs of mortgage lender (set-up fee could be around 1,500- 2,500 euros or up to 2% of the mortgage)
Making an offer
If buying from a non-resident or a company, 5% of the purchase amount is held back to be paid to the Spanish tax authorities to cover any capital gain liability that may exist. This is not an extra 5% but a part of the total - rather like withholding tax.
The seller must pay his capital gains tax, selling agents fees and any outstanding community costs and rates. There is also a local tax called 'plus valia', a relatively small sum which is based on an assessment of the value of your property (usually 10-40% of the property's annual increase in value). According to Spanish law, plus valia is paid by the vendor, unless otherwise agreed by both parties.
When budgeting, you should also allow sufficient funds to cover your reservation sum - the minimum is usually 6,000 euros, more for higher priced properties. This can be paid in cash or by credit card. Paying this sum secures you the property and prevents other interested parties from intervening.
You should also consider how much you need to allow for refurbishment or more substantial renovation work, or whether the property needs to be in as near perfect condition as possible.
Before you make an offer, it is wise to have visited as many similar properties as possible so you have a clear idea of the going rate.
To make an offer against a property you will need to put money against that offer - normally between 3,000 - 10,000 euros. The Agent makes this offer on your behalf and then the vendor will accept or decline this offer. The sum put forward becomes non-refundable when the offer is accepted by the vendor. If the offer is rejected by the vendor the buyer has the option of making another offer or receiving a full refund of the money.
Find out as much as possible about the vendor's reasons for selling. If they are moving for a job or have already bought another property, their urgency to sell may give you more scope for bargaining.
Equally, reveal little about your own circumstances to the vendor and their agent and don't be pressurised into agreeing a price.
What your offer should take into account
As in the UK, an offer is not considered a commitment until both sides agree on all aspects.
Make sure your offer includes the following contingencies:
That the offer is subject to mortgage availability (if a mortgage is necessary)
How much deposit you are prepared to pay
The payment terms (firstly the reservation is paid, then private purchase - 10% is most common, and the date the remaining balance is payable)
What fixtures and fittings you consider to be included in the price (you should receive an inventory list)
What other costs are involved in the transaction - costs such as lawyer fees, notary fees, taxes are on top of the quoted property price
Before you commit to putting down any money in the non-refundable holding deposit, there are various checks you need to carry out on the property and the owner.
Your offer is based on the contingency that the property passes an inspection by professionals (e.g. a structural survey by an architect, if necessary). Then you can agree on the price and put down your deposit
Requesting a Mortgage
The time is right
Money has never been "cheaper" in Spain with interest rates at an all time low, based on EURIBOR (the most common reference rate for calculating mortgages in Spain, currently at 2.3% + 1.25%), compared with rates currently available in the UK, based on the considerably higher LIBOR (4.75% + 1.25% and rising). As long as Euribor is lower than Libor, the cost of money will be cheaper in the Eurozone.
So compared with the UK, it costs relatively little to finance a property in Spain and repayment times for Spanish mortgages are usually far lower (average 10-15 years) than those in the UK.
What's more, as British property owners have experienced in recent years, their houses have risen dramatically in value. So rather than keep that equity tied up in bricks and mortar, they have unlocked the increased value of their asset by remortgaging the property and investing the difference in a second home in Spain. This is known in the UK as equity release.
A large amount of property in Spain is being funded this way, through UK equity release. Another increasingly popular option is for people in their 50s or above to divert their pension payments into property as general confidence in the stock market drops.
How to apply
To apply for a mortgage, you will need to show:
Copy of last income tax return
Copy of passport
Last three months of salary slips (if self-employed, a certified statement of accounts)
Last three bank statements
A breakdown of assets and liabilities
As you would anywhere, always shop around for the best deals and ask what the effective rate is including commissions and fees.
Spanish banks often require that you take out home insurance cover with them with the mortgage, but legally you are not obliged to and you will usually find that insurers other than banks offer better rates.
You can choose between a:
Fixed interest rate mortgage
Variable interest rate mortgage
Mixed interest rate mortgage
Fixed repayment instalment mortgage
Seek advice from a Spanish lawyer or estate agent to establish which type of mortgage best suits your interests. They can also advise you on whether to take out a mortgage in sterling or euros, as there are various factors to consider in this decision. You could lose a lot of money through fluctuating exchange rates if you are repaying your Spanish mortgage from a UK income.
Also seek advice on whose name you want to buy the property in - yours, your partner's or your company's - and the relative benefits. It is best if the property changes hands as little as possible to avoid hefty inheritance tax.
For more complete information, see David Searl's books, "You and the Law in Spain" and "FONTish Property Guide" published by Santana Books and updated every year. Available from bookstores or Santana Books at www.santanabooks.com, or:
Ediciones Santana SL
David Searl can be consulted at Ubeda-Retana y Asociados, lawyers, gestoria, and tax consultants, in Fuengirola on the Costa del Sol.
or visit their website at www.lawtaxspain.com