How to buy a property in Spain
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Purchasing a property for the first time in a Spain can be a complex issue as local laws and customs will differ from your home country.
It is essential to follow the advice from trained professionals who will guide you through the paperwork.
So let’s assume you have found a property in Spain that you really like and wish to proceed with its purchase. At this stage, you should engage either the services of a lawyer or those of a reputable estate agent in Spain, who are legally able to represent you and make all the following searches and enquiries on your behalf:
1. The private contract
The first step is to pay a reservation deposit to the estate agent selling you the property, or your lawyer or legal representative. This takes the property off the market, subject to contract. This deposit can vary between 3.000 and 6.000 Euros depending on the purchase price. The property owner will be advised of the intended purchase, and this ensures protection for the buyer whilst contracts are being prepared.
In principle, this reservation deposit is non-refundable, except in the case where there exist irregularities in any legal paperwork or documentation relevant to the ownership or registration of the property. Ensure clarity on this point when paying this deposit to the estate agent or lawyer.
Upon preparing the Purchase/Sale Contract, a suitable COMPLETION DATE will be agreed with both parties. The date will be fixed and inserted in the contract. All details relevant to the property will be included in the contract, i.e. description, price, form of payment, penalty clauses etc. Your Estate agent or Lawyer will establish whether you and/or the vendor/s wish to complete the transaction with Notarised Powers of Attorney. Contracts will be drawn up and given to both parties, or their legal advisors. On signing of contracts, a deposit, normally ten percent of the purchase price (less the initial reservation deposit), will be required. The validity of this document is normally 30 – 60 days from the date of signature, or longer if mutually agreed.
2. Searches and enquiries
During this period (of 30 – 60 days) and prior to the signing of the notarised public deed (“escritura”), it is necessary to have the contract checked out by your legal advisor or agent, who will obtain a ‘NOTA SIMPLE’ document to ensure that the vendor is the registered owner of the property, by carrying out a search at the local Land Registry, and will ensure that all taxes have been paid, establish the existence (if any) of any debts, charges or mortgages, and that clear, unencumbered title exists. In addition, all current bills for services such as electricity, water, rates and community fees etc. will be checked on the day of signing of the title deeds to ensure that the vendor has paid all due accounts.
3. Bank accounts
For foreign purchasers there are two basic types of bank accounts available:
Non-resident euro account – If you are likely to earn Euros, through letting or some other form of modest activity, you can pay Euros into this account. On-going running expenses can be paid using this type of account.
Foreign currency deposit account – These accounts are for the deposit of foreign currency in its existing state without conversion to Euros. The funds are therefore freely convertible into other foreign currency and are outside the Spanish Exchange Control regulations. Interest rates vary from one currency to another. It is recommended that an account in Spain be opened at the earliest opportunity. Accounts in Spain can effect deposits and withdrawals from abroad without limit.
If you require a mortgage against the property in Spain, your agent must be informed as soon as possible. A mortgage can be applied for in Spain or abroad. If you have not arranged a mortgage, we may be able to help you, through an offshore or Spanish bank. If you are making your own arrangements you will need to advise the agent/vendor of the date by which you expect to have the funds available in order to complete the purchase. Note that failure to secure a mortgage in time may invalidate your contract and the possible loss of your deposit. A non-resident purchaser may apply and obtain a mortgage of up to approximately 60% of the banks valuation of the property. A resident purchaser may obtain up to 70% (or more) of the valuation. Under such circumstances the property purchased in Spain would act as guarantee for the mortgage.
Calculate your mortgage repayments with our mortgage calculator.
5. Personal documentation
When buying a property in Spain, you will need a ‘Numero de Identification de Extranjeros’ (more commonly known as the NIE number). To live and work in Spain, you need to apply for what is commonly called your NIE number (Foreign Identification Number). These identification numbers are used to track an individual’s financial and official activities. This document is necessary when you are buying a home and you will be asked to provide a copy of the paperwork when you are in the process of buying a property or applying for a job in the country. Your NIE will start with the letter ‘X’ followed by seven numbers and a letter, making this sequence of numbers personal to you. It is not transferable and does not expire.
You will need your NIE number to do all of the following:
Apply for a business permit, Apply for a mortgage or loan, Buy or sell a property in Spain, Buy or sell a vehicle, Employment, Inheritance of assets in Spain, Insure Property, Pay Taxes, Sign on to the National Social Security health service.
Obtaining an NIE
Obtaining an NIE is a fairly simple process, but can be complicated if you do not understand the paperwork. The simplest way, if using a lawyer to purchase a property, is to instruct the lawyer to obtain this for you. However, it can be obtained by approaching a local police station in your area. In the case of Nerja and surrounding areas, the police station in question is located in Torre del Mar (Málaga), just 15 minutes drive away.
Within your police station there is a Foreigners Department (will be labeled ‘Departmento de Extranjeros’). When you arrive you will be asked to fill out an NIE application form and submit copies of the following paperwork. Be aware, you will require more than one copy at some police stations, so be prepared before you turn up.
- Your Passport and a photocopy (the police station will keep the photocopy).
- Your full address in Spain (You can use a friend’s address if you have not yet bought a property).
- Some police stations may ask for written justification as to why you are applying for your NIE number. A letter from the bank, a lawyer, or even a prospective employer will suffice.
When you have filled in the application form and supplied the relevant paperwork, you will be given a stamped photocopy of the application and given a date as to when to return to pick up your official documents. The general turnaround time can take between one and six weeks depending on the time of year and the number of applicants.
6. Making payment
Full payment is required before the title deed can be transferred into your name. Ensure that when transferring money to Spain the funds arrive in enough time to enable the transaction to take place on the agreed date. If you are buying a property under construction, follow the payment schedule in the contract, according to the stage reached. When buying a new property in foreign currency you must ensure that all payments are registered through your Spanish bank, in order that the funds can be repatriated upon the eventual resale.
7. Signing of deeds, costs & taxes
The next stage is to complete the purchase at the Notary’s office, where the Escritura (title deed) will be signed. A number of purchase costs and taxes now need to be paid. Although the overall costs and taxes applicable vary whether buying a new or a second-hand property, you should consider adding a total of 13% to cover all of these costs. If you come out with change to spare this will be as a result of the small diferences between a new or resale purchase.
Property registry fees Your ‘Escritura de Compraventa’ must be registered with the Spanish property registry to make it ‘Escritura Publica’ and fully install your title to the property. The fees are based on the official registered value of the property, which are now much higher than in the past but often below the actual market value. The length and complexity of the deed and other factors are also considered. These fees do not normally exceed 0.2% of the registered value.
Notarial fees These are collected by the Notary for preparing the title deed and presiding over its signing. His/her fee is on a set sliding scale according to the property value. Allow 0.6% – 0.8%.
Transfer tax on a NEW Property (VAT) – MODIFICATION: 1st SEPTEMBER 2012. You must pay this tax before the escritura can be registered into your name(s). In the case of a new property the Spanish government approved in 2011 a reduction in the current rate of IVA (VAT), down from 8% to 4% of the registered value – however this concession ran out on the 31st December 2012 – increasing to 10% on 1st January 2013. If purchasing a VPO property (Vivienda de Protección Oficial), which in English would be considered a form of council home, the tax is 4%.
In the case of a commercial property or plot of land the IVA is 21%. When buying a new property there is also an additional tax of 1.5% to cover ‘Actos Jurídicos Documentados’ (A.J.D.).
Transfer tax on a RESALE Property (ITP) - On a second and subsequent transmission of a property (resale) the buyer has to pay a transfer tax known as ITP: [Impuesto de Transmisiones Patrimoniales] or Transfer tax. This tax is paid to the autonomous region where you make your purchase and can vary anything between 6% – 10%, although the national average rate is 8%. It is therefore important to understand these variations before you decide where you wish to purchase. There are further variations depending on the price of the property (see table). These percentages are based upon the value declared in the title deed ‘Escritura’.
Note: This ITP tax is NOT VAT and is therefore unaffected by changes in the rate of VAT.
‘Plus valia’ tax This is a tax relating to the increase in the value of the land only, and is calculated and applied by the local town hall according to the increase in value between the present purchase and previous sale, the value or size of the building does not affect this tax. The vendor normally pays this tax, unless otherwise agreed by both parties.
Retention tax This is a tax relating to capital gains on the property and only applies to a ‘non-resident’ vendor (if resident, any capital gains due would be paid in the person’s declared annual tax returns). To ensure that the vendor, upon the sale of a property, pays capital gains tax, it is the purchasers responsibility to retain 3% of the declared value (previously 5%, but reduced in 2007) and pay to ‘La Hacienda’, the Spanish tax authorities. The purchaser’s legal representative would normally handle this matter. The vendor, at a later date, can claim back any tax that may be due. This tax only applies to privately owned properties registered after 1st January 1986. In the case of company owned properties, this tax would apply to those registered after 1st January 1976. Properties registered prior to these dates, respectively, are exempt.
Agents’ Fees The manner by which a sales commission is charged in Spain varies between agents and location. Most estate agents include their fee within the advertised sale price of a property. However, in some parts of Spain, some agents charge their commission separately (to the purchaser), whilst others even charge an equal amount to both the vendor and the purchaser. The amount an agent will charge also varies, from as low as 2.5% (often in cases of an exclusive property for sale by that agent), to as much as 5%. Ensure that you clarify this point before viewing properties with an agent.
Lawyers’ Fee These will depend upon the services rendered. The normal custom is for the purchaser to pay these fees and taxes. A lawyer’s fees would not normally exceed 1%. (Note: If selling a property by private means, you may also engage the services of a lawyer to handle all conveyancing on your behalf. Again, their fee will not normally exceed 1% of the sale price of the property.)
Mortgage & Gestoria fees: Only applicable if you take out a mortgage when purchasing. If so, you may have negotiated with a bank directly or by way of an agent or broker (Gestoria in Spain). Either way, a fee of between 1 – 2% will be levied.
8. Energy Performance Certificate (EPC)
The Spanish Government has passed a new law which will affect all property for sale and rent (for more than four months of any calendar year) on or after 1st June of this year (2013). A property for sale or rent must now have an Energy Performance Certificate, issued by an official installer.
As a purchaser, ensure that that the property you are purchasing has this certificate as it will be required by the notary upon final signing and transfer of the title deed into your name. The cost of this certificate will be paid for by the vendor. The certificates have a validity of ten years from the date of issue.
9. Taking possession
Handing over of the property and its keys will normally take place once the FULL PURCHASE PRICE has been paid. However, your contract may state a different arrangement especially if purchasing a new property under construction. Do be careful not to allow the seller to stay in the property after completion of purchase, even for a short time. This can create potential legal problems for the purchaser and may result in complicated eviction procedures.
It’s also a good idea to change all of the locks on the property. You don’t know how many people may have copies.
10. Transfer of services
Having completed the purchase it is necessary to engage or transfer services. Both electricity and water meters need to be transferred into your name. Where possible all regular bills should be paid by a direct debit ‘standing order’ through your bank.
- Water: By the local company that manages in your area. Water bills in Spain are due monthly, bi-monthly or quarterly, depending on the water board.
- Electricity: Electric Company that offers the service in your community. Electricity bills in Spain are due monthly or bi-monthly, depending on the electricity supplier.
- Telephone: You can choose companies for both fixed and mobile telephones and can easily obtain ADSL via modem, satellite or land line. Telephone bills are normally due monthly.
- TV: Often there exists a community service within urbanisations or apartment complexes. These can range from satellite systems to cable TV. For individual installations via satellite, there are local companies throughout Spain providing this service. The use of fibre optics is also expanding throughout the country, which allows for on-line streaming TV services such as Netflix, Hulu, Amazon, etc.
This becomes your responsibility upon POSSESSION OF THE PROPERTY. Normally, Spanish insurance companies offer a split policy, whereby the property and its contents are assessed separately. Note, that in the case of some property owner’s associations, community fees may include cover of the building and/or third party risks.
12. Rates and taxes
These are similar to the taxes in your own country, and become your responsibility upon completion.
Local rates. Known as IBI and is payable to the town hall on an annual basis. The date for payment varies widely in Spain depending on where you live. You should check with your local town hall. Payment can be arranged through a local bank account or your appointed agent.
Tax Registration Number (NIE). All property owners in Spain, whether resident or not, must obtain an NIE number from their local police station. A tax administrator (‘Gestor’, in spanish) or a lawyer can deal with this task along with payment of ‘Patrimonio’ tax. (See Personal Documentation, above).
13. Property owners association
If you purchase a property within an apartment complex or urbanisation you are obliged to join its residents association, which administers general maintenance of zones of common ownership, such as streets, gardens, hallways and swimming pools, etc. An annual budget is calculated to cover these costs, which is divided between all owners according to the size of their properties. Community fees are normally paid six-monthly or annually. Payment can be arranged through a local bank account or your appointed agent.
14. Spanish Golden Residence Visa
As of 28th September 2013, the Spanish Government approved a new law allowing Non-EU nationals to obtain a residence Visa upon fulfilling the following basic requirements:
1) Purchasing one or more properties to the minimum value of 500.000 Euros.
2) Investing Two million Euros in Spanish government Bonds.
3) Investing One million Euros in stocks or shares of Spanish companies, or bank deposits in Spanish banks.
4) Creation of a Business venture in Spain that creates employment or economic development.
If you are interested in applying and obtaining such a Visa, we can help and assist you to find the property of your choice in Spain and introduce you to lawyers who are experts in handling Visa applications, company formation and document translations. Please contact us for further details.
Please also see the following articles on this subject:
- Q&A: Spanish Golden Residence Visa.
- Spanish “Gold” residence visa now law in Spain.
- Properties over 500.000 Euros that would buy you your Spanish Golden Residence Visa.
So there you have it… Congratulations on finding your new home in Spain!
And if you’re still looking for a property in Spain… make search from the top of the page to find thousands of properties throughout mainland Spain and its islands.
Guide prepared by:
LPG (Leading Property Group)
(NOTE. This guide, although accurate, has been kept as brief as possible. Please do not hesitate to enquire further on any point. Please note also that the guide is not a substitute for proper legal advice. The contents herein are correct at the time of publication. LPG cannot be held responsible for any changes in the law or legislative practices in Spain.)
Updated 20th September 2017.