Property in Spain
Purchase a property in Spain - Buy a property in Spain - The costs of buying a property in Spain
The buying or purchase of a home or a property in Spain needs some important advice and consideration: To keep in mind are the costs of buying or purchasing a home or a property in Spain, besides the proper price of the Spanish house or apartment. Buying and purchasing a home or property in Spain often needs appointing a legal representative and sometimes naming a power of attorney.
Buying and purchasing a holiday home or a holiday property in Spain
First of all you need a N.I.E number to buy a property in Spain. That is a personal identification number that you get from the local police stations or the Spanish Embassy in your country registering your passport. Residents already have that number. If you are resident in Spain the rules are fairly simple for private property owners: Benefits, loss of income through rents and deductions for mortgages has to be declared in spring, when it is time to do the usual declaration to the Spanish tax authorities. If you own a Spanish property and are officially resident in some other country, more complicated rules applies. As a non Spanish resident but property owner in Spain, you are obliged to declare and pay property taxes before the end of December each year. The authorities do not send out any forms or notices about this: It's something you just have to know and do yourself in order to avoid fines and problems. A municipal property tax is paid at the beginning of the summer: IBI. It applies to all properties: Both those belonging to residents and those living abroad, including garages, etc.. The municipalities sends out notice when it is time to pay.
Deciding to buy a property in Spain. The private purchase contract. Mortgage due diligence. The title deed and registration. Property values
There are several taxes and costs related to the purchase of Spanish property which will add approximately 10% to the purchase price if a mortgage is involved. If not the costs are a little bit lower.
The various charges are: Transfer tax, Plusvalia, Notary Fees and The Land Registry Fees.
The transfer tax of a Spanish property (Impuesto de Transmisiones Patrimoniales) is 7% of the purchase price or 8% for all property purchase prices over 400,000 Euros.
The other tax to be paid upon a property purchase in Spain is the plusvalia, which is the municipal tax charged on the increase in the value of the land since its last sale, using the official value of the land as the taxable base. The plusvalia tax always tends to be lower than the market value. The value of the land is officially valuated for this purpose. The “plusvalia” tax may be paid by either the vendor or the buyer of the Spanish property, as agreed between the parties. But important to know is that the Spanish tax called plusvalia can be charged directly against the property. Should the vendor be liable to pay the tax forget to do so the liability for payment will pass to the new buyer, the legal owner of the property.
The notary fees in Spain are fixed by an official scale and the notary fee varies that applies when buying a property in Spain are calculated according to the size of the land, the size of the property and its value.
The Land Registry Fees are similar to the amount paid for the notary fees, and is the fee paid to entry the change of ownership registration of the Spanish property in the land registry (Registro de la Propiedad).
It is always recommended to appoint a legal representative when purchasing a property in Spain. A lawyer will explain to you the legalities involved in the purchase and also carry out the due diligences on the property, including advising You of any debts provide you with an estimate of the annual running costs of the property and prepare all the documentation required to complete the transaction.
If you are not able to be present to sign all the necessary documentation related to the property purchase, then you may grant power of attorney to your legal representative or to someone else of your choice. The power of attorney would list all the duties that can be carried out by the third party, which may include buying and selling property, opening and administering bank accounts, applying for and accepting a mortgage, representing you with respect to utility companies and the tax authorities etc. The power of attorney would be signed in a notary public in Spain.
When you decide to buy a property or a home in Spain
Once you have decided to buy a property and you have found the home of your dreams in Spain you will almost always need to pay over an initial deposit or reservation fee to ensure that the property will not be sold to anyone else before you legalize the purchase and to ensure that the property is taken off the real estate market.
The deposit fee is placed with the real estate agency or with your lawyer. An offer and reservation document should be signed on making the payment. The document should indicate the basic terms of the property purchase. For example the price, details of the vendor and of the buyer, details of the property and of course the date when the official purchase contract should be signed.
The private purchase contract when you buy a property in Spain
A private purchase contract is almost always signed approximately 20-30 days after payment of the initial deposit or reservation fee, after that due diligences have been carried out on the property.
Normally the deposit is a 10% of the total price of the property. The private purchase contract should stipulate all terms and conditions of the sale / purchase, including the date when the title deeds are to be signed be signed and the final payment is supposed to be made.
If the buyer fails to complete the payment by the final date, the buyer would lose the deposit. On the other hand, if the seller decides to pull out of the sale, or if the seller finds another buyer who offers to pay more, the original buyer has the right to claim back twice the amount of the deposit.
Mortgage when buying a property in Spain
For a non-resident property buyer, the mortgage is usually limited to around 70% of the property value. Once the mortgage is approved, the bank will issue a binding offer which can be compared with other bank’s offers.
When going through the purchase process, you will come across different values which are attached to the property: Catastral value, Fiscal value and Declared value
The Catastral value
The catastro office is another form of property registration, and deals with the location, physical description and boundaries of the property. The property registry handles ownership and title. The catastro office is also the source of the valor catastral, that is the assessed value of the property used to calculate local rates and taxes. The valor catastral is normally considerably lower than the market value. If you are purchasing a new property this will not have been
assigned a valor catastral, it therefore becomes the buyer’s responsibility to register the property at the catastro office for this tax. An existing property should already have its own valor catastral. The annual property tax IBI, charged by the municipality, is calculated based on the valor catastral.
The fiscal value is the value assessed by the tax authorities, and it is the minimum value that should be declared on the title deed when a property is sold.
This is the value assessed by a bank for mortgage approval purposes.
This is the amount that appears on the title deed, which should coincide with the actual sales price.
Apart from checking the legalities of the property, you or your lawyer will also have to check that all running costs and local tax payments are up to date. This will also inform you about the approximate annual running cost of the property. These checks will include Utility Bills, Community Fees, IBI (property tax) and Basura (refuse collection)
Utility bills usually refer to electricity, water, gas and telephone. If you as a buyer are faced with unpaid utility bills from the previous owner, you should be aware that these are in fact personal bills issued by private companies. They are not attached to the property so that only the person who signed the contract with the utility company is liable for them. If left unpaid, the company will cut off the services. However, on payment of a reasonable fee, the utility company will conclude a new contract with you for these services. This fee is exactly the same as the charge for changing the electricity contract into your own name.
These fees are charged by the community of property owners which is the legal body that controls all the elements of the property held in common. This includes elevators, gardens, swimming pools, parking spaces, etc. Each property owner is assigned a quota or percentage of the expenses equal to the size of the property in percentage of the whole community.
IBI (local property tax) and Basura (refuse collection)
The IBI or I.B.I is the municipal property tax and Basura is the local refuse collection tax. When purchasing the property, you or your legal representative must check the IBI receipts and Basura for the last 5 years, since you can be liable for five years of back tax. The IBI tax can be as low as 120 euros or as much as 2,000 euros per annum. It is recommended to have these local taxes paid automatically from a bank account each year, in order to avoid unnecessary surcharges, and also to benefit from discounts for early payment, which can be as much as 10%.
The property title deed and registration
The Title Deed (Escritura Publica) is the final document of the purchase and is signed between the buyer and vendor when the final balance due on the property is paid. The signing takes place in the presence of a notary public, which makes the document official and legally binding. The notary public is an official of the state, and his duty is to certify that the contract has been signed, monies paid over, and that the buyer and vendor have been advised of their tax obligations. The document then has to be registered in the property registry where you have to pay the transfer tax.