Buying or selling a property in Spain

Keys to buying or selling a property in Spain

In this article we summarise the main points to bear in mind for a successful real estate transaction. Whether you are a Spanish resident or a foreigner, our keys to buying or selling a property in Spain will help you navigate a process that can be complex.

As always, we recommend that you rely on the advice of an expert legal team such as ours, who can advise and guide you, taking care of the paperwork and negotiations.

1. Who can buy a property in Spain?

There are no specific requirements for Spanish citizens (except that they must be of legal age and have full legal capacity). In the case of foreigners, it is compulsory to have a NIE. The NIE (foreigner’s identity number) is a personal, unique and exclusive sequential number, essential to carry out any type of economic transaction in Spain.

You can apply for the NIE by going to a Foreigners’ Office or police station and from outside Spain through the embassy or consulate, we can help you to process it and with the same NIE you can get a digital certificate to be sure that you receive all notifications.

Due to money laundering regulations there are severe restrictions on cash purchases so having a national bank account is a useful measure during the purchase process and afterwards when making payments and collecting taxes and expenses.

2. Purchase and sale process 

The earnest money contract

The figure of the earnest money contract offers a guarantee to buyers and sellers of great value. This document, which does not exist in other markets, allows the peace of mind of having the property reserved while other documents or steps such as financing are being formalised.

The earnest money contract is a private contract that secures the transaction between buyer and seller in exchange for the delivery of a deposit (by bank cheque or transfer). The earnest money contract reflects the sale price, the maximum date for the final formalisation of the transaction before a notary (generally after one or two months) and other agreed conditions. The earnest money contract contains a penalty if one of the two parties backs out or includes a clause that makes the transaction conditional on obtaining financing under certain conditions.

The purchase contract is similar to the earnest money contract but is formalised in a deed signed before a Notary Public who will verify that all the formal conditions are met and includes necessary documents such as the land registry note.

Once the Public Deed has been signed before the Notary and the rest of the money of the sale price has been paid, the buyer acquires the ownership of the property. It will be the Notary who electronically registers the Public Deed of Sale in the Land Registry.

From that moment on, both the buyer and the seller will have 30 working days to pay the corresponding taxes, which we will deal with in the following point.

Notification to the Cadastre

The land registry must be notified of the change of ownership of the property within a maximum period of two months from the time of signing. This communication is the responsibility of the buyer, but a legal office such as ours can carry it out.

Afterwards, other necessary steps follow, such as changing the ownership of the utilities and taxes such as IBI, which are dealt with in the following point.

3. Taxes when buying a property in Spain

3.1. Taxes at time of purchase 

On new homes the purchase is subject to VAT or equivalent tax. The current rate of tax is 10% on the value of the sale and purchase of the property which appears in the Public Deed (except for social housing where it will be 4%).

It will also be subject to the Autonomous Community tax on legal acts which is generated when signing in a Notary’s office and registering the sale and purchase in the Land Registry. The amount varies according to each community and ranges between 0.5% -1.5%.

In the case of used properties, the tax that is levied on the transaction is the transfer tax, which is paid by the buyer. This tax is between 6% and 10% of the deeded value of the property, depending on the Autonomous Community where the property is located. The deadline for payment of the tax is one month from the date of execution of the public deed.

In the event that the seller is not a resident, some municipalities transfer the obligation to pay the municipal capital gains tax to the buyer.

3.2. Taxes from purchase onwards

IBI (Impuesto sobre los Bienes Inmuebles) is assigned to the local councils and the amount and method of payment varies according to each municipality. The amount is determined on the basis of the cadastral value of the property. It is generally possible to pay the bill by direct debit and if the taxpayer has a digital certificate (as we always recommend), arrangements can be made to check that they are up to date with payment without having to travel.

Another charge that should be taken into account is the rubbish tax, also managed by the local councils and which covers the costs of the locality for the collection and treatment of waste and rubbish.

If you buy a house with your own parking space, you will also have to pay for a parking permit.

Whether as a resident through IRPF and Patrimonio or as a non-resident through IRNR, owning a property, either for your own use or as a landlord, will affect your personal taxation. It is important to check with a tax advisor that we are declaring our property and income, if any, including all deductible expenses within the limits so as not to overpay.

4. Costs when buying a property in Spain

4.1. Costs at the time of sale

Notary fees are fixed by law and are determined according to the value of the property. The higher the value of the property, the higher the amount to be paid.

The land registry fees for registering the purchase are also fixed by law and their amount depends on the price of the property.

If the operation is carried out with external financing such as a mortgage, this will be linked to expenses and commissions and will always require an official valuation. From the appraisal company’s website, you can simulate the cost of the appraisal. It is important to remember that an appraisal is valid for a period of time, normally 6 months.

The conditions of each mortgage vary depending on the bank, your conditions as an applicant (age, employment situation, savings, etc.) and the % to be financed.

In transactions where a third party such as a real estate agent or API has been involved, this will be charged with a % to the agent or a fixed amount. Generally the commission is included in the sale price but this can be agreed otherwise.

4.2. Expenditure on purchase.

Depending on the type and use of the property we will find recurring expenses such as:

• Utilities: water, electricity, gas, etc.
  
• Community: if the property is part of a block of flats with common expenses or a neighborhood with shared expenses, this is a recurrent expense that must be taken into account.
• Insurance: it is essential to have an insurance contract from the moment of purchase. If it is a property destined for rent, we, as collegiate property administrators, recommend that you demand by contract that the tenant has an insurance contract for the contents and that you have the building covered.

5. Selection of the property

There are several factors to take into account when selecting a property

1. The objective: Are we looking for a first or second residence for ourselves or is it an investment? If it is an investment, it is also important to differentiate between buying and selling and renting.
2. Budget and financing that we can or want to access.
3. Type of property: closely linked to point 1, depending on the objective and the timeline we are looking at, we may be looking for a finished property, a plot of land, a finished building or one that is not under construction etc. Each operation involves different procedures.
4. Type of seller and buyer.

We will have different negotiating power if the counterparty is a private individual, a property developer or a bank. Having advice during the negotiation process can be a great competitive advantage, especially in complex transactions such as swaps or the purchase of assets with debts or financial charges.

5.1. Checks, documentation

Our legal team takes care of due diligence to ensure that there are no surprises in the end.

As a minimum we recommend checking the legal situation with a nota simple issued by the land registry, which summarises who the owner is, if there are any associated charges or encumbrances and any limitations of use that the property may have. For more security, a certificate of ownership and encumbrances can be requested, which will guarantee the legal security of the property.

It is important to request the last IBI receipt of the property in order to know the cadastral reference of the property and to verify that there is no non-payment of previous receipts. If there is, this amount can be used when negotiating the price. The same applies to the community fees if it is a property in a community of owners.

It should be verified that the property, if it is a home, has a valid certificate of occupancy, as there are autonomous communities that require it in order to register the purchase in the Land Registry.

Energy certification

Mandatory in Spain since 1st June 2013, the energy certificate is a prerequisite for renting or selling a property or premises. It provides information on the energy consumption and CO2 emissions of the property. It is the seller’s responsibility to request it from a certifying technician and it is valid for 10 years.

Count on us

A sale is a delicate process that can be complex, we offer you a tailor-made solution with which you can guarantee success. A service pack that includes:

1. Drawing up an Earnest Money Contract.
2. Organisation of signing at the notary’s office (without assistance).
3. Obtaining the certificate of current payment with the community prop.
4. Review of documentation and tax advice
5. Preparation of a report with information on: 
   • Community
   • IBI
   • Urbanism 
   • Architect’s remarks:
     • General situation of the farm, existence of visible risks relevant to the operation. 
     • Possibility of aluminosis.
     • Existence of urbanistic affectations (ie: “to demolish because it is in the middle of the AVE route”). 
     • Critical or relevant recommendations. 

Legal fee from 300 euros +VAT
Architect fee from 200 euros + VAT

Optional services to be quoted separately: 

• Extra travel
• Legal assistance at the notary’s office
• Plans, projects
• Property surveys
• Extensive review of the flat and town planning
• Obtaining the efficiency certificate 
• Obtaining the certificate of occupancy, if you do not have one or if it has expired.
• Arrangement of financing (fee: 0.5% of the total capital to be financed).

Contact us for more information.

 

Photo by Tierra Mallorca on Unsplash

Offer valid in the province of Barcelona, ask for amounts for other cities.