For BUYING: Here are a few tips....
(The information on this page is for general advice. For your exact costs ask your lawyer of your particular case.)
Your first consideration should be What's the best place for me to buy? The questions that must be asked to identify the specific location are as follows:
- Availability of facilities (beaches, mountains, night life, shopping, etc)
- Social environment ( schools ,golf clubs, riding schools, tennis/padel, etc)
- Travel accessibility (airports, railway stations, )
For example if you were looking for luxurious private lifestyle, sports and calm beach living we would recommend Sotogrande. On the other hand should you be looking for more night and beach club party life then perhaps Marbella would be more suitable.
Once the general location is identified, which specific area within this general location suits my needs? Am I for a long term investment and therefore do not mind buying in an undeveloped area that may give me better returns in the future, or do I want something fully developed to provide me with immediate comfort?
Having established these initial guidelines, an agent will then be able to focus his attention on showing you properties that meet your criteria. It is helpful if you pass your opinions on to your agent after each view so that the search can become better focused to your specific requirements.Remember, a good agent is there to help you find the right choice for you.
Having visited all the properties that picked your interest, when the time comes to negotiate the purchase, you will feel assured that the appropriate price is being paid.
Choose a lawyer!
The lawyer you choose must speak your language and make you feel comfortable. It will be your lawyer that will ultimately ensure your buying process is safe. They will be incharge of checking the following
- If there are any mortgages on the property (and if there are that they will be discharged on completion);
- If the property is burdened with rights of occupation (Rented on a long term base);
- If there are any town planning requirements or impositions.
This is all done at the property registry.
He will search at the Town Hall to ascertain:
- That the property described at the Town Hall is the same as the one at the property registry.
- That the annual local property tax (IBI) is up to date.
- That public fees and rates are also up to date.
Don't worry, this is a standard procedure and will not take long!
He will ensure from the seller and from any Residents’ Association that:
- The correct persons will be signing the sale deed;
- The property has adequate planning;
- That the property has a Residents Association with community statues. This is important to ensure the ongoing repair and maintenance of the property;
- The service charges are up to date;
The lawyer will negotiate the details of the transaction including responsibility for payment of costs of the transaction.
The lawyer will also carry out the following checks:
- Public Works department to check whether the property is subject to or affected by within any compulsory purchase plans for possible construction of roads, bridges and other public works (This does not occur in Sotogrande.)
- To check for any public rights of way affect the property such as drover’s routes;
- At the Water Authority to check whether the property has any obligations for rights in respect of aqueducts;
- Check that there is a valuation on the property so that a mortgage can be obtained.
Thereafter the lawyer will prepare purchase deed and any mortgage deed if necessary and will organize for completion including the discharge of any existing mortgage.
Arrangements for payment of taxes at the Notary, :
- For new properties (houses, apartments, townhouses) 10% VAT
- For plots from Developer or Company owned land- 21% VAT
- For re-sale properties (houses, apartments, townhouses, plots) for under 400,000€ the transmission tax is 8%
- For re-sale properties (houses, apartments, townhouses, plots) for 400,000 up to 700,000€ the transmission tax is 9%.
- For re-sale properties (houses, apartments, townhouses, plots) for over 700,000 € the transmission tax is 10%.
- Tax on capital gains on the property
- Property tax
(These tax rates are correct when the website was published, and can vary. Please check with your lawyer for current rates for the particular property you may be interested in buying)
He will pay for the registration of the purchase at the land registry and notary fees.
Taxes payable as a result of property ownership are:
- Property Tax - this is 35% of 2% of the value of the property;
- IBI (municipal local tax).
Cost of Purchase:
Transfer tax: (I.T.P.) of 8% (up to 400.000 €), 9% (for any amount over 400.000 € up to 700.000 €) and 10% (for any amount over 700.000 euros)This tax is paid by the buyer as stated in by the law. It is a tax applied for the purchase of a property. The tax is calculated on the higher amount of the following, the purchase price, the “Fiscal value” of the property, (the rate-able value multiplied by a multiple set by the Town Hall) or the “Bank Valuation” of the property if the property is being purchased with a mortgage and the valuation is included in the mortgage deed.
I.V.A (VAT) is applied to the sales price of properties owned and being sold by developers instead of I.T.P. Usually when this is the first time the property in its current state is being sold. I.V.A on constructed properties is 10% of the purchase price plus 1.5% Stamp duty (Actos Jurídicos Documentados). Check that the entity that is selling the property can apply I.V.A to the sale before you pay the I.V.A, if they are not entitled to charge I.V.A on the transaction you could still also be liable for the I.T.P.
Note - For plots of land, commercial premises or commercial garage spaces owned by a developer, promoter or juridical entity, the tax to be paid is V.A.T. (21%), plus Stamp Duty of (1.5%) (Actos Jurídicos Documentados).
Notary Fees - By law, the first copy of the title deed is payable by vendor. The cost (no more than 0.5%) increases according to the number of pages and complexity of the title deed and the value of the property.
Registry Fees - By law, this is payable by the buyer. These are calculated on the same basis as the notary fees explained above and are at most 0.5%.
Further Points to Note
The Private Contract
There are different types of private contracts:
- Deposit contract,
- Contract of purchase and sale,
- Option contract, etc, whereby the purchaser pay a deposit, normally 10% and the vendors agree to sell the property.
The completion of the transaction is fixed within a particular time scale, when the balance of the purchase consideration is paid and the Title Deeds of the Property is executed and signed by the parties in the presence of a Public Notary.
The choice of the type of contract is something to be assessed by your lawyer taking into account the circumstances of his client and the terms of the negotiations with seller.
Both parties will not default on the private contract as there are serious consequences.
- The seller may pull out of the transaction paying compensation, usually double of the deposit paid to the Purchaser. This may be avoided if properly negotiated by your lawyer.
- If the Purchaser fails to complete the contract on the agreed completion date, the deposit or option price paid shall be forfeited.
Foreign Company Registration
There has been a tendency to use Foreign Companies as a vehicle to register property being purchased by non-resident buyers in order to avoid the payment of Transfer Tax and Death Duty. These taxes are avoided when shares are exchanged abroad and the Spanish authorities would not know when the property had changing ownership. We strongly recommend you get legal advice before you engage in this practice. The Spanish Tax Authorities reacted and passed a law whereby Non Resident Companies owning Real Estate in Spain must pay annually a tax consisting of 3% on the Value of the Property for Rates Purposes (Valor Catastral).
For those who purchase property in Spain it is strongly advisable to execute a Spanish Will confined to their Spanish Assets as this will avoid blockage to their heirs upon their death. It will allow the heirs to simultaneous wind up the foreign and the Spanish Estates left by the deceased.
Disclaimer: The content of this document is provided for guidance only, and while every effort has been made by Landcaster Real Estate to ensure the accuracy of the information and translations contained, no liability can be accepted for any errors omissions and inaccuracies, or for the opinions expressed herein.