Useful information concerning to purchase a property in Spain

What you should know about buying a property in Spain

With the following overview we would like to point out to you a few facts you should be aware of when buying a property in Spain. At first glance the buying process may appear to be complicated, but when you buy a property through us, we will guide you step by step from start to finish.

1. The purchase of real estate by non-Spanish citizens

Citizens from member states of the European Union have basically the same rights as Spanish citizens when it comes to buying real estate and are not subject to any restrictions. With the entry of the property in the land register, the owner obtains legal protection regarding his ownership.

2. The buying process

Private contract

According to Spanish law, even oral purchase agreements are allowed and valid without any further formal requirements. In general, the parties first sign a private contract (contrato privado), in which they stipulate the most important aspects regarding the sale including the date for the signing of the title deed at a notary.When the private contract is signed, the buyer usually pays a deposit of 10 % of the purchase price to the seller.

Public deed

The private contract itself does not justify the transfer of the title in the land register. To do this, there has to be a public title deed. This so-called Escritura pública de compraventa is signed by both parties in front of a notary. This is the prerequisite to gain the full ownership and have the property registered in your name at the land registry (registro de la propiedad).

Financing

The buyer should be clear about how he wishes to finance the purchase ideally before the private contract is signed and certainly before the public deed issigned and should speak about this in due time to his main bank or to a Spanish financial institute.

Preliminary steps

Before the deed is signed, a number of facts need to be checked, i.e. whether the property is unencumbered and whether the right of first refusal has been granted to another party.

Furthermore it has to be ensured that the buyer (as the legal successor) will not have to be liable for any debts of the former owner. To this effect, the latter has to provide evidence of payment of the property tax (IBI) and communal fees for the previous year.

Notary and land register

Three days before the public deed is signed the notary will order an extract from the land register. This will automatically block the property for a total of 5 days during which no other party can dispose of it. Therefore, should another notary demand such an extract, this would be rejected by the registry office.

At the notary, both the seller and the buyer will be asked to prove their identity and provide a tax identification number (NIE). The seller has to be identical with the person registered in the land register. The notary will read out the deed to the parties and will determine whether the purchase price has already been paid (partially or in total) or will be paid when signing the deed.

On the same day the notary will send a notification of the deed to the land register. A copy of the Escritura will then be sent to the land register for registration of the new owner.

3. Acquisition and subsequent costs

As a rule, the buyer pays the costs associated with the purchase, even though the law stipulate that both parties have to come to an agreement on this issue.

Capital gains tax (Plusvalía)

According to the law, the capital gains tax is to be paid by the seller. However, it is recommended to stipulate this clearly prior to the signing of the deed, since it is the property itself which is liable for the payment of this tax even if the owner has already changed.

Other taxes

Apart from the above mentioned Plusvalía,a transfer tax (Impuesto de Transmisiones patrimoniales) of 8 % of the purchase price is applied when the buyer is a private person.

If you buy from a developer (new construction), then V.A.T. (Impuesto valor añadido; IVA) is applied, which is also 10 % of the purchase price.