Buyer’s Guide

What costs processes are involved ?

On average, the cost of buying a property in Spain will be in the region of 12% to 15% of the purchase price depending on the purchase price, the complexity of the procedure and the area of Spain in which you are buying.

The notary – 800 euros – The notary charges a standardised fee which varies according to the amount of land, the size of the property and its declared purchase value.

The registry fee – 300 to 700 euros – The inscription of the property in your name in the official property register

The transfer tax – 10% of the declared purchase value

If you purchase a new property from a developer, this tax will be value added tax at 10%.

The document fee – 0.5% to 1% of the declared property value – This is equivalent to stamp duty and is currently 0.5% of the declared property value.

The municipal tax – In the Sax area this tends to be very low, although on the coast it can range between 10% to 40% of the increase in value of the property. This municipal tax is on the increase in the value of the property since its last sale. It is called ‘plus valia’ and can vary from 10% to 40% of the annual increase, depending on the length of time between sales and the town in which the property is located. I have not ever known this to be greater than 500 euros on a country property.

Your lawyer – approximately 1% of the property value. The lawyer will charge you around 1% of the value of the transaction, unless there are some unusual complications. You should ask for a quote.

The tax deposit on sale – 3% of the declared purchase value. If you are buying from someone not resident in Spain, you will deposit 3% of the total purchase price at the tax office in the seller’s name as a guarantee against his future tax liabilities. You pay the seller 97% of the price, and pay the other 3% directly to the tax office. This serves as a guarantee against the non-resident seller’s various Spanish tax liabilities.

Deciding who pays which taxes – This list of fees pretty much covers the extent of the major expenditure when buying a property in Spain. The buyer and seller are free to agree whatever terms they choose as there is no Spanish law requiring that one of the parties must pay any particular tax. Typically, the seller pays the municipal tax, as he is the one making the profit on the increase in the property value, while the buyer pays the transfer tax and the registry fee, and notary fee as he is the one who is interested in making sure the property is registered in his name.

Deciding the declared property value – Until recently it was common practice to declare a low value for the property in order to minimise the transfer tax. This is not a legal option and is not recommended. If and when you resell the property, you will be liable for Spanish capital gains tax on any profit made. Although it is tempting to declare a low value now, you will be liable for tax on a much bigger profit when you later sell.

Since property prices have fallen there has been a strange situation where some purchases are beneath what the tax office considers an appropriate value for a property. In this case it may be advisable to pay extra taxes to avoid future problems.

What are the steps to buying a house in spain with findafinca4u?

After you have found a house that you wish to make an offer on we will negotiate the best possible deal on your behalf. We have plenty of experience in negotiating with some of the rigid spanish owners.

Like the uk acceptance will not only be down to your monetary offer, but also your buying position. for example a cash buyer who can complete quickly and pay an immediate holding deposit has more influence than somebody requiring a high percentage mortgage.

Whilst negotiations continue we need various documents from the owners and various bodies, ie town hall, architects office, property register, catastrall register. With these documents your lawyer can confirm the legality of the property.

In many cases properties are not legal, they have been extended without licence, not registered, behind with council tax payments etc. This does not mean to say that they cannot be legalised.

At this point, consulting our own legal professionals we make a decision as to whether the sale can proceed.

We discuss with the owner any issues of legality and if they are in agreement to make all necessary payments and procedures to legalise the property then we can go ahead with your solicitors deposit contract. This will specify that all outstanding ietems must be resolved prior to purchase, whithin a defined periond of time. ie 2 months. The sale will not go ahead if these items are not resolved, and the owner is contractually obliged to return double your deposit.

If you need a mortgage then your lender will also require this paperwork, which we will provide them with. We will accompany the surveyor when they are available to visit the property, and liase with the bank on your behalf to provide all relavent paperwork. Applications to town halls will be made for required certification regarding “infractions urbanisticas” (illegal extensions)

Your lawyer will be in contact with us, and the owner to get the house into a position to sell. Once this is done and your finances are in place a date will be set to sign at the notary.

The notary will also do checks to make sure that the house is legal, however he may deal with 20 houses per day so its important that you have a good lawyer who has already completed thoroughly the property searches.

At this point the house will be signed for, money and keys change hands.

You are now a property owner in Spain and do not have a clue how to go about day to day things which you managed in the uk.

We can then set up utilities in your name and help with any problems that you have adapting to life on your new home.

What are the pitfalls of buying in spain?

• The property is not registered, most likely because it was illegally built. Many unregistered properties are being sold to foreigners, since foreigners are less likely to check the registration. If you find a bargain, chances are it’s not registered. Solution: Get a registry listing (nota simple).
• Too many brokers are involved. We have known seven brokers to be involved with a house. Besides communication difficulties, each broker will be getting their percentage. We deal directly with the owners this is shown in the reasonable prices on our properties.

We deal with only the Sax and surrounding area, so we are aware of the local regulations and laws and have contstant dealings with the local town hall, notary, and solicitors.

What are the Taxes and Fees?

Taxes

There are two taxes you generally pay as buyer:

• For an existing house, you pay a transfer tax(impuesto de transmisiones patrimoniales).
• For a new construction, you pay a VAT tax. Both are usually 10% of the price of the house.
• Stamp tax (impuesto de actos jurídicos documentados).
• Both taxes may vary depending on where the property is located.

Notary and Property Registry fees

If you are getting a mortgage, the bank may require deposits to cover maximum potential payments. Once the bank pays these fees and you receive your registered escritura, some portion of these payments may be returned.

BankFees

These fees include:

• The administration of payments (gestión) to the tax office, notary, and property registry.
• Insurance payments for the first year. (The bank requires that you get life insurance and house insurance.)

Note that the appraisal is also required by the bank.

What is”Black Money” and how does it affect me and my purchase

The Spanish property black hole

Buying a house in Spain almost always involves paying ‘black money’ to evade tax but would-be expats should be warned the government is getting tough on this type of fraud.

To buy that dream home some are prepared to pay ‘black money’.

There is an anecdote which some Spanish property lawyers tell about King Juan Carlos. They relate with apparent nonchalance how he only declared 50 percent of the cost when he sold one of his many homes – technically breaking the law by avoiding tax. However, the attitude of those who tell this story is not one of appalled concern that even the monarch has such disrespect for the law. Instead, the king is seen as a chip off the old block; the attitude appears to be “if he can get away with it, why not the rest of us?”If you buy a house in Spain, you will almost certainly be asked to break the law as a routine part of the process. Refusing usually means you face losing the house of your dreams; but if you go ahead and commit what is a crime, as so many estate agents advise – be warned. Spain’s Socialist government has launched a crackdown on tax cheats and money launderers who use the booming property market to hide their ill-gotten gains.International publicity surrounding the recent case of a EUR 250 million money-laundering fraud which centred on a law firm in Marbella helped to focus the government’s attention on the problem. Eastern European mafias were said to be channelling millions through this law firm. The scandal was even linked to the Russian oil giant Yukos, though the company strenuously denies the allegations.

Do you have any advice on mortgages?

Right mortgage choice when buying abroad

Mortgage services to buy property abroad are available from many offshore banks and building societies.

Rates vary depending on the country, but they are likely to be slightly lower by purchasing in Europe and taking out a mortgage through a well known offshore bank, then they are on a property in the UK.

Some banks will offer mortgages only in euros, although others do also offer them in sterling for people buying in Europe. Anyone who opts for a euro mortgage but is paid in another currency should remember that there is the risk of volatility in the exchange rate.

Anyone who is paid in sterling should try to borrow in sterling. Euro mortgages are really only suitable for those earning euros. David Hollingworth, of mortgage brokers London & Country Mortgages, said: “There can be additional exchange rate risk if borrowers take the mortgage in a different currency from that in which they derive their income”.

“For example, if the foreign currency strengthens against the pound then effectively the mortgage and the monthly payments increase even though there has been no change in the interest rate charged. If a foreign lender is used, the mortgage is likely to be in the foreign currency, whereas some of the offshore operations of UK lenders will be able to lend in sterling.”

Important Purchase Docs

Before signing anything there are some important pieces of paper you and your lawyer should have a look at…

The Escritura Publica and Nota Simple – The Escritura Publica is the registered title deed of the property. It is entered in the ‘Registro de la Propiedad’, the Property Registry, and is the only guarantee of title in Spain. It contains a description of the property, the details of the owner and any mortgages or legal claims that exist against the property. This document is important because it tells you if the seller is the owner of the property being sold. A nota simple contains further details of any mortgages or charges against the property and is also available from the Registry.

The IBI receipt – Before purchasing a resale (not new) Spanish property check out the ‘lmpuesto sobre Bienes lnmuebles’, or lBI, which is the municipal property tax. Ideally, you’ll be able to see the IBI receipts for the last five years because that is the limit of liablity for unpaid back taxes and is attached to the property, not the owner. A new property bought from a developer will not have an IBI receipt (because it has never been ‘owned’) so it will be your responsibility to register the property for this tax.

The Referencia Catastral – Every property sale must quote the ‘Referencia Catastral’ of the property in question. The Catastro is another system of property registration in Spain, concentrating on the location, physical description and boundaries of the property. While the Property Registry focuses almost exclusively on ownership and title, the Catastro is concerned with property valuation.

These two systems do not communicate with each other, and it is common to find that the catastral description of a property differs greatly from the one in the Property Registry. It is a good idea to request the actual certificate from the Catastro with a full description of the property. The certificate is in two parts, one being a description of the property and the other being either a plan or an aerial photograph.

Community fees, statutes and minutes of the AGM – This only applies if you are buying a property in an urbanisation or where there are some ‘communal’ resources, shared amongst a number of properties. These are the fees charged by the ‘Comunidad de Propietarios’, the Community of Property Owners, a legal body that controls all the elements held in common; the lift, gardens and pool for example. Each owner is assigned a quota, or percentage of the expenses which, by law, must be paid.

Utility bills – These assure you that the bills are paid and also provide an idea of what the running costs of the property will be.

Misc – If you are buying a property in an urbanisation, make sure that it is legal and registered by asking to see the approved ‘plan parcial’ at the town hall. If the property is on the beach, make sure the development is also approved by the Jefatura de Costas. For a new property, make sure that it has been declared for IBI and that the developer has made the ‘declaracion de obra nueva’. Also ensure that the escritura mentions the house you are purchasing as well as the plot of land on which it stands. As an additional safeguard, it is wise to examine the town planning maps for the area around the property, called the Plan General de Ordenacion Urbana, or PGOU.

Information courtesy of Strong Abogados (Lawyer in Spain)