Costa Luz Lawyers & DEIM SPAIN
Buying Property in Spain Guide 1 2 3 4
Mea Culpa What does Spain offer vs. other destinations What to ask yourself to be able to find your property Reports on the condition of the property 5 Legal steps to buying property in Spain
Buying Property in Spain Guide
“Buying Property in Spain Guide” ______________________ This document has been created by: Sections 1 – 3 Gerardo Caballero Antonio Muñoz Sections 4 & 5 María Luisa de Castro Translated by: Sections 1 – 3 Gary García Sections 4 & 5 María Luisa de Castro
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Buying Property in Spain Guide
1. MEA CULPA
It would be totally unprofessional and greatly disrespectful to deny that there have been MANY people adversely affected by the different negative circumstances that have affected the Spanish real estate sector over the last few years. The objective is not to point the finger to blame anybody, but simply acknowledge that there have been MANY people that have been frustrated, disappointed and even conned whilst purchasing their property in Spain. The reasons are many and diverse. Lack of sensible urban planning, improvisation, hasty decisions and actions, greed and why not admit it at times even bad faith and wild property speculation has led this once vital and relevant sector of the Spanish economy to almost total stagnation. Furthermore and even worse, more harmful and difficult to recuperate is the complete lack of credibility and TRUST. There are many to whom the blame can be attributed, practically everybody involved in all the stages of this sector can be said to be more or less responsible in the demise. The developers, constructors, lawyers, local, regional and national authorities, surveyors, estate agents, banks and to some lesser extent the buyers are all to be considered. Supply still considerably outweighs demand. The developers cannot sell their stock as they are competing at great disadvantage with the financial institutions that are themselves accumulating thousands of properties of their own on a daily basis and therefore control the financial key to purchasing property. To further complicate matters, many owners who cannot sustain the mortgage on their property are being forced to sell at prices CONSIDERABLY below the original purchase price. Even worse, they stop mortgage payments, forcing the bank to reposess and therefore feeding the ever increasing vicious circle in order to get out of financial difficulties. Although still not having found the final solution to this situation or still not having repaired much of the damage caused to many buyers who bought in good faith, we are beginning to see positive and optimistic results, that little by little will help us get out of this negative situation. There has been a clear and definite reaction noticeably, the control mechanisms assuring the security and guaranteeing safe purchasing have been much improved and continue to evolve favorably, a ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide better and stricter legal control, the real estate sector has become more professional, better and more quality control, availability and transparency of information and the common interest of all the professionals of the sector to make the property purchasing process in Spain to be clear, easy and above all safe. Despite everything that has happened, and taking into account this new scenario, Spain still remains one of the favorite destination for Europeans to buy a home, both as an investment and personal use.
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Buying Property in Spain Guide
2. What does Spain offer vs other destinations
What made them choose Spain? There are other countries nearby that can offer a foreign buyer many of the characteristics that make us an attractive option such as: good weather, good food, good communications and great sport and leisure options. However this being so and despite the current state of the real estate market in Spain there is a considerable number of people who still decide to choose Spain as their preferred destination to purchase a property, whether it be a second home or as a location to move on a permanent basis. This has made us realize that although other destinations may offer similar attractions and despite of the current adverse economic conditions, Spain is still being chosen above other countries. The reasons for this cannot therefore be attributed to the previously mentioned factors. Some of the reasons could be: Being a member state of the European Union, offering political stability, particularly after the recent General Election. The excellent countrywide road network including the motorways and toll roads. One of the most modern high speed rail network in Europe. Modern international airports with connections to all major European cities. Existence of an excellent education system, with many schools, be they private or public. An increasing number of foreign students finding a vast selection of private foreign bilingual schools. A modern and functioning health system, capable of offering care to all citizens that require it, whether they are resident or foreigners. Hospital facilities that are linked with all major national and international insurance providers. Public safety where all citizens are treated equally nationals and foreigners. An established Hotel sector that is reliable, trustworthy and capable of catering for all levels or tourism all year round. Added to this an existing tourism infrastructure, excellent sporting, leisure and cultural attractions that make it difficult to be compared to other destinations. ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide However, this would not be enough for those who choose Spain as a destination for the purchase of their home if it were backed up by a series of minimum guarantees such as: A mature and reliable legal system that is particularly concerned and aware of all aspects of law relating to property purchase. Maximum protection for the buyers and end users, by means of updated and renewed mechanisms designed to reduce the risk to buyers to the bare minimum. A much improved and efficient system for dealing with complaints, offering a faster solution to any adversely affected parties. Availability of full, transparent and more reliable information. This leads the buyer to be able to obtain all information necessary for their property purchase, removing all doubts and worries from this process. Increased financial control that without affecting the efficiency of the buying process guarantees the financial legality of any investment benefiting both buyers and sellers. The obvious conclusion from all of the above mentioned can be summarized with two words: TRUST and CONFIDENCE. The Spanish real estate sector has never been as safe, reliable and efficient as it is right now.
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Buying Property in Spain Guide
3. What to ask yourself to be able to find your property
a) FINANCE: Can I afford to buy a property? The first question to ask is whether my financial resources allow me to purchase a residence in Spain. For the purchase of a home not to be a financial burden for many years you must be well informed of all costs implicated in the purchase. There are additional costs that have to be added to the purchase price, such as VAT or transfer tax, financial and legal fees (see section nยบ 5). You must also take into consideration ongoing fees such as local and regional taxes, community fees, mortgage repayments, water, electricity, house insurance and any other services that the property may incur.
b) USE OF PROPERTY: What do I want this property for? When choosing a property, as a buyer you must ask yourself why you want the property, as the use will determine what type of property to purchase. The use for the property can be defined in the following categories: Investment. There are many buyers that have bought their property with a clear intention of making it means to financial gain, whether it be in the short term, via letting or long term by reselling when the market conditions make it attractive to do so. In fact, there are complexes designed for this specific purpose. Personal use. There are many who have bought as an investment in improving their quality of life. Since there is such a wide variety of property on offer you have to choose the use for to ascertain the type of property. The main uses are: o Second home, a residence that is used for holidays at different times of the year no matter the length of the stay. o Permanent residence, for those who have decide to move to Spain and have their main home here, be it for work purposes or as a retirement destination.
c) AREA: Which area best fits my requirements and who or what do I know there? Once you have decided what use to make of the property, the next logical step is to determine which area is best for that designated use. It is advisable to gather information on specific areas either personally or through from existing buyers or their friends. ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide Inland. These areas appeal to people who appreciate nature, peace and tranquility, low density building, a less invasive tourism and the possibility to integrate closely with the culture of the local population. This counteracts a less gentle climate, the lack of certain services and an inferior communication network. Coast. Without doubt, the most attractive point of the coast is the weather. To this we can add an excellent infrastructure, and communications together with a highly respected tourism sector. These factors make the investment involved to be greater but more secure.
d) SOURCE: Who am I going to buy from? There are different advantages or disadvantages depending on who you buy your property from. Developer. However, each day there are less of these and financing for their product is less attractive. Their product is as follows: o Off-plan, in various stages of construction. The advantages here could be a comfortable payment plan, although these may be offset by the doubts of whether all promises will be met as to completion dates and qualities of construction and building permissions to name but a few. o Completed property, which means moving into a finished dwelling immediately after completing the purchase at notary. This way the buyer is completely sure of exactly what has been bought. Financial institution. Normally these are fully completed development in different stages of preservation. Although there may be some excellently priced property to be found, not everything offered from a bank is cheap. The main advantage of buying from a bank is excellent financing on offer, at times up to 100% of the purchase price. Existing owner. For many different reasons it is in this market sector that the best prices can be found. It is a totally finished product, but as a second hand property then it is advisable to thoroughly check the property for any defects. However, the main disadvantage is that the financing available for this type of property is much less than the bank owned stock.
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Buying Property in Spain Guide
e) ADVICE: Who can advice us correctly? Once all above mentioned decisions have been made personally you will need to receive professional advice and representation in the following two areas: Legal advice & representation. (See section nยบ 5). Property consultant. Choosing a professional team in this field could be of great help in making the purchase easier and assist in avoiding future problems. Things to bear in mind when choosing representation: o Excellent knowledge of the area and the property available. o Quick and positive reaction to any questions or information request. Providing the information and allowing to study without any pressure. o Above all the ability to listen and understand the real needs of the buyer.
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Buying Property in Spain Guide
4. Reports on the condition of the property
Whether the property be brand new or second hand, BEFORE completing the purchase it is HIGHLY RECOMMENDED to have the property inspected by a SURVEYOR that will be able to check that all is in order, working correctly, locate problems, finding the causes and offering the relevant solutions if necessary. This report will give you full picture of all aspects of the building to be able to reclaim any defects or instigate legal action if so required.
BUILDING DEFECTS: According to the LOE (General Building Act) building companies guarantees for ten years all damages caused by faults or defects in construction which directly affect the resistance of the building. The developer is the policyholder and is obliged by law to sign a ten years insurance plan. The developer is also the assured party, and following the sale of the home (first or subsequent transmissions), buyers become the beneficiaries of the insurance. Individuals and companies involved in the construction process are accountable to the owners of the material damage caused to the building, provided they claim timely. Deadlines for filing a claim vary depending on the importance of the fault. 10 years, to claim for material damages caused in the building due to defects or vices that affect the foundations, supports, beams, floor structure, charging wall or another structural elements, that directly compromise the mechanic resistance and the stability of the building. 3 years, to claim for material damages caused in the building by defects or vices of the building elements or the installations that produce the breach of the habitability requirements. 1 year, of the material damages by vices or execution defects that affect the elements of finishing of the works. The deficiencies that may appear within these timeframes need to be fixed by the appropriate operators at no cost to the user. It is very important to have written record of how the damage had occurred within the time set. The initial communication to the developer should be done through certified letter or burofax so that ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide the sender can have acknowledgment of reception and date of reception of writing by the addressee. Liability is individual for every different building agent (developer, builder, architect‌), however, when it is not possible to tell who was the responsible, accountability is asked in a jointly way. Actions to ask for these liabilities have a deadline of two years from the time such damages occur. a) DAMAGES COVERED: Material damages that endanger the stability of the building (foundations, floor supports, beams, design errors). Material damages to secondary works, installations and equipment of the building (resulting from a major damage in the main building). Costs of repairs to eliminate the threat of subsidence. Cost of demolition and removal of debris (as a result of damages covered by the policy). b) OPTIONAL COVERAGE: Secondary work. Waterproofing of decks. Waterproofing of facades. Waterproofing and sealing of basements. Waiver of appeal against the builder. Waiver of appeal against the contractor and / or subcontractor. Waiver of appeal against the technical direction. Damage to pre-existing goods. Revaluation of insured sum and franchises. c) NOT COVERED DAMAGES: Body injuries or economic damage other than those protected by the General Building Act. ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide Damages caused to properties contiguous or adjacent to the building. Damages caused to movables goods which are located within the building. Damages produced by works performed after the receipt of the building, except those made to fix construction defects. Damages caused by misuse or lack of proper maintenance of the building. Those that have their origin in a fire or explosion, except those caused by defects in the facilities themselves. Habitability conditions are, according to Law: Higiene, health and environmental protection, so as to achieve acceptable conditions of safety and tightness in the indoor environment of the building, which do not deteriorate the immediate environment, ensuring a proper management of all types of waste. Protection against noise, so that the perceived noise does not endanger the health of people and enables them to satisfactorily carry out their activities. Energy save and thermal insulation, so as to achieve a rational use of energy necessary for the proper use of the building. Other functional aspects of the construction elements facilities to allow a satisfactory use of the building.
or
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Buying Property in Spain Guide
5. Legal steps to buying property in Spain Table of Contents a) Pre-Purchase Stage: Preliminary Actions and requirements 1) Appointing a Solicitor 2) Power of Attorney. 3) NIE – Foreigner’s Spanish ID Number 4) Non Resident Certificate 5) Opening of a Spanish Bank Account Property Legality Purchasing an Off- Plan or a New Property 1) First Occupation License 2) IRS (Hacienda) Property Registration – Declaración de Obra Nueva and IBI 3) Escritura 4) Snagging Report. Purchasing a Property from an owner different to the developer (2 nd transfer purchase or resale) 1) 2) 3) 4) 5) 6) 7) 8) 9)
Title Deeds (Escritura Pública): Nota Simple From The Property Registry Ibi Receipt Catastral Certificate License of Property Use Community Of Owners Fees, Statutes And General Meetings Utilities Services – Bills And Ownership Snagging Report. Purchase Deposit Agreement
b) Purchase Stage 1) Closing the Terms and Conditions of the Purchase. 2) Transfer Costs. 3) Purchase Contract or Escritura de Compra Venta. The Purchase Contract is the final 4) Completing the Purchase-Sale – Signing the Purchase Contract before the Notary Public
c) Post Purchase Stage Other related Issues related to owning a Property in Spain ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide
Buying Property in Spain It is always advisable to count on the knowledge, support and experience of an independent lawyer, to look after your interests when buying a property anywhere in the world. For the few last years, you or perhaps some people you know about, have come across with property related problems when decided to buy a property in Spain without the necessary, and most of the times, trustworthy and ethical legal support. Lack of Building or First Occupation licenses, hidden defects, lack of features included in advertising, community of owners issues, tax debts, and unsettled condominium fees, are just few of the problems that normally arise when purchasing a property without the above legal support. Those experiences have led us to develop a three stage check list to advice and support people who are planning to buy a property in Spain. This guide intends to provide you with the necessary tips to avoid problems before a property is bought and to prevent those that may appear along time. Nevertheless the assistance of an independent lawyer of your choice is strongly recommended. Our 3 stage check list to purchase or when purchasing a property in Spain can be outlined as follows: a) Pre-Purchase Stage b) Purchase Stage and, c) Post Purchase Stage
A) Pre-Purchase Stage: This stage is of extreme importance to assure a safe purchase as it implies the necessary research and check up of the owner’s and property’s legality and documentation. Depending on whether you are buying the property from the developer (First Transfer) or a second proprietor (second transfer) some documents will require examination or not. During this stage you or your solicitor should also make sure that all the running costs and tax payments are up to date.
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Buying Property in Spain Guide Preliminary Actions and requirements 1) Appointing a Solicitor TIPS WHEN HIRING A SOLICITOR
It is strongly recommended to appoint a legal representative to carry out all the necessary diligences that assure a safe property purchase. By appointing a solicitor, you will be explained of all the legal details involved in purchasing a property and your solicitor will make sure that you are buying a legal property that has all the required licenses and permits in place, it is free of all charges and liens and that you sign a balanced and fair agreement and/or Purchase Contract that will protect your best interests.
1)
Make sure that you are hiring an independent solicitor that will protect your best interests and not those of the vendor.
2)
Hire a different solicitor to that working with or representing the vendor or developer
3)
Check about the solicitor’s backgrounds and credentials before you hire him/her (Internet Forums, personal references and Blogs might help you in doing so)
4)
If buying on a Off-Plan development, verify if the solicitor you have chosen has represented other purchasers in the same or other developments. Make sure IT IS NOT a solicitor recommended by the developer or the agent
2) Power of Attorney. When appointing a solicitor to represent you during the purchase of a property process, you will need to grant a Power of Attorney (PoA) in his/her favour so that he/she can act on your behalf when carrying out all the necessary diligences involved in the purchase. The PoA will include a list of all the actions that can be carried out by the holder such as: a) b) c) d) e) f)
Signing deposit and private purchase contract Paying related taxes and fees Connecting utilities Obtaining NIE number Registering your ownership in Land registry and Cadastre. Make payments, operate Bank accounts‌
The PoA contains a clause declaring that all these actions will be conducted on the granter’s benefit. The most important aspect though is to freely choose a lawyer you can completely rely on. ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide
3) NIE – Number
Foreigner’s
Spanish
ID
As owner of a Property in Spain, you are obliged to file for two different taxes for which you will need to have at your disposal a NIE as a Tax identification Number. If you appoint a solicitor he/she can obtain it for you. You can also request your NIE yourself before the local police authorities.
4) Non Resident Certificate If you are not a resident in Spain, It is important to obtain a Non-Resident certificate in order to register your name as a Non-Resident Tax Payer and also to open a bank account that may help to speed up the property purchase payment procedures. 5) Opening of a Spanish Bank Account Although not strictly necessary, opening a Spanish bank account may help to speed up the property purchase as it will help the buyer to overcome different hurdles as: a) Get certificates that demonstrate the money legitimacy b) Cash Cheques issued by Non Residents
Property Legality It is important to gather and verify the existence and authenticity of different documents that prove the ownership and legality of the property. The kind of documents that you will need to peruse varies depending on the kind of property you are purchasing, i.e. whether it is an OFF-PLAN and/or New Property (First Transfer or sale) or a Second Transfer purchase or Resale. Purchasing an Off- Plan or a New Property Purchasing an Off-Plan Property implies one or several payments in advance for a property that has not yet been built. ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide
Spanish Law requires that the Off-Plan purchase contracts contain: a) Completion and delivery date of the property b) A specific Bank Account Number (Escrow Bank Account) on which your payments are to be transferred or deposited. c) Construction specifications: Materials to be used, Property Features, Facilities and communal areas. d) Reference to the guarantee for the refund of advanced payment to cover delays Law also establishes that both the Bank is liable in ensuring that you are provided with a Bank Guarantee/ Insurance Policy with you as the beneficiary to safeguard the deposits and advanced payments made to the developers. This Bank Guarantee will only expire when a First Occupation (Habitation) License is granted by the Town Council and the property can thus be finally delivered. Before signing the reservation or purchase contract always check the following documents, among other ones, are in place: a) Documents that identify the builder, the planner, the project manager, the developer and any other intermediary or broker involved in the sale. b) The contract states, construction specifications, material to be used, start and completion of works c) There is a building license in place in accordance to the urban plans
When asked to complete make sure that: 1) First Occupation License There is a First Occupation License in place. Never complete an Off-Plan purchase if there is no First Occupation License in place. 2) IRS (Hacienda) Property Registration – Declaración de Obra Nueva and IBI Make sure before completion that the new property has been registered in Hacienda for the IBI (Property Tax).To register the property in Hacienda the developer must make the “Declaración de ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide Obra Nueva” a declaration of new building and pay a small tax associated with this. A new property bought from a developer will not have an IBI (Real Estate or Property Tax) receipt yet and it will be your responsibility to register the property for this tax. 3) Escritura Before completion, make sure that that the Title Deeds describes correctly the property you have bought and exact amount of mortgage debt. If you are buying with mortgage, two different Notary deeds will be signed at that moment. Revise that the conditions of the mortgage you agreed with the Bank are what are finally included in the Notary mortgage deeds. 4) Snagging Report. Sometimes it could be advisable to hire an expert to check the property for possible building defects, Property Measurement, etc. Purchasing a Property from an owner different to the developer (2 nd transfer purchase or resale) Before signing anything, even a small reservation agreement by either or both a Contrato de Arras o Contrato de Depósito (Purchase deposit agreement), you should see: 1) Title Deeds (Escritura Pública): The Escritura Pública is the registered Title Deed of the property. It is the only document which can be inscribed in the Property Registry (Registro de la Propiedad). The Escritura Publica should include: a) A full description of the property b) Details of the owner c) Mortgages, seizure orders, encumbrances, easements which exist against the property The property’s owner(s) should be able to produce and hand you over a copy the Property’s titles deeds (Copia Simple). It is advisable ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide to check if it has been properly registered at the Registry by asking for a Nota Simple at this Registry.
Property
2) Nota Simple From The Property Registry Land Registry in Spain has the role of guaranteeing the safety of property transactions. It is the most relevant authority on status of ownership rights. The Nota Simple (see image) is a document that contains information contained in the Land Registry on a specific plot. Plots are identified by a 5 digits numbers as a general rule. All information/details contained in the Nota Simple binds you; on the 1. Property Registry that Issues the Nota Simple 2. Local Property Registry number 3. IDUFIR: Exclusive Spanish Property Registry Number 4. Property Description. 5. Ownership – Current Owner(s) 6. Authorised by: Notary Public who certified the property’s origin and date in which this certification was registered 7. Charges and liens. 8. Date of issuing of the Property registry and indication that there are no documents pending to be processed.
contrary, existent rights not registered will not bind you or any good faith third party. This point is essential for understanding conveyancing processes in Spain.
3) IBI Receipt The IBI (Impuesto sobre bienes Inmuebles or Porperty Tax) is the municipal real estate tax. When purchasing from a second or third owner, it is convenient to ask for the last 5 years paidup receipts of the IBI to confirm you will not be liable for back taxes and penalties (IBI is paid twice a year).A new property bought from a developer will not have an IBI receipt yet and it will be your responsibility to register the property for this tax.The IBI receipt will show the property’s Catastral ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide reference number and the Catastral Value, which is the official assessed value of the property 4) Catastral Certificate Every property sale must include a mention to the Referencia Catastral. As mentioned above this reference number appears on the IBI receipts. The Catastro concentrating boundaries of the ownership
is a second system of property registration, in the exact location, physical description and the property while the Escritura concentrates on and title.
5) License of Property Use Make sure that the property’s license of use matches with the purposes of use for which you are purchasing the property. There could be 3 different kinds of licenses: 1) Residential Purposes 2) Commercial Purposes 3) Tourism Purposes You will not be allowed to use a property for residential purposes if it has a license for commercial use or viceversa.
6) Community Of Owners Fees, Statutes And General Meetings If you are purchasing a flat, a townhouse or a Villa on an urbanization ask for the latest paid-up receipts for Community of Owners fees. This community could be understood as the Condominium and it is in fact the legal body that controls all the elements held in common by the owners, i.e. lifts, gardens, pools, roads, etc. Each owner is assigned a quota as a percentage of the expenses which he/she must pay by law. The receipts for community fees assure the purchaser that the fees have been paid and also give him/her an idea of the possible future charges. ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide Read the statutes, the regulations of the community as they are binding on the purchaser once the purchase contract is signed. If you have pets, make sure that the statutes do not prohibit keeping pets in the building or estate. Asking for and reading the Annual general Meeting Minutes Book can give you an idea on the latest issues or problems discussed in the meetings, and how it could affect you. 7) Utilities Services – Bills And Ownership It is advisable to check the paid-up receipts of the utilities services such as: a) b) c) d)
Electricity Water Telephone Rubbish Collection
Make also sure to change the ownership (Titularidad) of the utilities services from the former owner to that of the new purchaser(s). If there are unpaid utilities bills by the previous owners, and he/she is reluctant to pay them, let the companies cut off the services if the signing of a new contract has a lower fee than the amounts owed to the company. This fee is normally the same one charged for changing the contracts into the new purchaser name. 8) Snagging Report. Sometimes it could be advisable to hire an expert to check the property for possible building defects, Property Measurement, etc. 9) Purchase Deposit Agreement Once your lawyers or advisers are satisfied with all the checks into the situation of the property, and you and the seller have arrived at a price, you can ask your solicitors to make the necessary assessments of the amounts of taxes and fees that will be paid on the transaction and negotiate with the vendor who will cover for these fees and expenses so that you can proceed to draft the Purchase Deposit Agreement and/or the Purchase Contract. ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide It is usual for the buyer and the seller to make both a deposit and a private purchase contract before the final Notary deeds are signed The Deposit contract is an agreement by means of which the buyer reserves the property while he gets the money or obtains a mortgage or the seller finishes the construction of the property (Off-Plan or New Development) This kind of contract protects the buyer if by any event the vendor decides to sell the property to another buyer willing to pay more. This would give the first buyer the right to claim twice the amount of the deposit back. If the buyer fails to complete the sale, he/she loses his/her deposit. It is advisable not to pay the deposit directly to the seller. It is better to deposit the amounts into an escrow account (Bonded Client Account), from which the money will not be released until the sale is final. In Off-Plan or new development properties the vendor is compelled to provide you with a Bank Guarantee for any advanced payments. Private Purchase contracts includes another details of the agreement, such as payment terms, completion dates and who pays for what share of the expenses although it is not the final document for the sale. It is always strongly recommended to ask your solicitor to draft your own contract or revise the vendor’s one, so that a balanced and “fair� contract is signed by both parties, i.e., a contract that is equally favourable to both the purchaser and the seller in terms of panlties, cancellations, expenses... Although most property sales between individuals follow this system of deposit and private purchase contract , followed by a closing through a Notary deed and final payment, it is not obligatory under Law and same purchase an be performed just with the Notary deed.
B) Purchase Stage At this stage, you will be able to complete the purchase by signing the deeds before the Notary Public. 1) Closing the Terms and Conditions of the Purchase. If no Private Contract was signed prior to the purchase of the property, It is very important to settle with the vendor or his/her attorney the terms and conditions on who is going to be liable to ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
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Buying Property in Spain Guide cover for expenses, penalties, and what furniture or appliances (if any) will be included with the property.
2) Transfer Costs. Every property transfer involves at least 2 taxes and 2 fees to pay. a. Notary: The Notario will charge a fee fixed by an official scale. Notary fees vary in accordance with the property size of the land, the size of the dwelling and the purchase Value. If you do not speak Spanish, make sure that a translator is available for date of signature. The Notario duty is to certify that the contract has been signed, the money paid and that the seller and the purchaser have been advised regarding their tax obligation. The Notario does not certify or assured that all the statements in the contract are true; this is another reason why it is strongly recommended to hire a solicitor that protects your best interests. b. Property registry: The property registry accounts for the inscription of the property in your name in the official Registro de la Propiedad. These fees are similar to those of the notary. c. Transfer Tax: Transfer Tax o Impuesto de Transmisiones Patrimoniales varies among the Spanish Communities but generally it is between 6 and 8% of the value declared in the contract. d. Plus Valía: Officially named in Spanish “Arbitrio sobre el incremento de valor de los terrenos” is the municipal tax charged on the increased value of the land since its last sale.This tax is assessed upon the official value of the land, which is always lower than the market value. Always check that this tax is paid for as this tax can be charged against the property itself 3) Notary deeds or Escritura de Compra Venta. The Notary deeds is the final document for the sale and it must be signed by you or your representative and the seller in presence of a Spanish Notario in order to make it legally binding. For your representative being able to sign this contract on your behalf he/she must have at his/her disposal a Power of Attorney as explained in the above section a) Pre-Purchase Stage – Appointing a Solicitor and Power of Attorney. ______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
www.deim-spain.com CIF: B92177260
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Buying Property in Spain Guide The contract must describe the property accurately and Identify Buyer and Seller.
4) Completing the Purchase-Sale – Signing the Purchase Contract before the Notary Public To sign the Purchase contract before the Notary please make sure to bring a translator with you, so that you are fully informed of what you are going to sign. If you have appointed a Lawyer this should be no problem. If you decide to be present during the singing of the contract, make sure to bring your passport. Your attendance will not be required if you have appointed a solicitor and provided him with a Power of Attorney.
C) Post Purchase Stage During this stage make sure to 1) 2) 3) 4)
Pick up the signed and notarized documents from the Notary Pay the Property Transfer Tax Register your ownership in the corresponding Land Registry Change of ownership/liability of the Local Property Tax (IBI) before the Town Council 5) Change of ownership of utilities and services
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Though there are many “Buyers Guide” in the market, in our point of view none of them include the preliminary steps as have been explained in this one, nor a legal section been so clearly illustrated and complete. Our main aim is to provide both the new buyer and the existing owner with a useful document that can be consulted during the whole process, i.e. before, during and after the purchase. Despite of the complicated economic climate a home in Spain is still a good investment, either for quality of life improvement or financial benefit. Marbella, December 2011
______________________________________________________________________________________________ www.costaluzlawyers.es CIF: B72122575
www.deim-spain.com CIF: B92177260
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