Buying a Spanish resale

Buying a SPANISH RESALE

When buying a resale, there are aspects to consider, so, pay attention to the following ones:

1.- CHECKING POINTS

The process of purchasing a property in Spain is not  too much different from other countries. Please, be kindly invited to pay attention to the following POINTS TO CHECK:

1. To check the vendor  owns legally the property: You need to be provided with a copy of the vendor’s title deeds, or “escritura”. Also, it is essential to obtain the proper information from the land registry in order to check the legal conditions of the property of the ownership, as eventual limitations, charges, etc., and  also, if there are any loans/mortgages affecting  the property.

2. Check that the property is duly registered and that pays the Council Tax or “Impuesto sobre Bienes Inmuebles (IBI)”.  Unpaid Council Tax from the previous years may be passed to the new owner.

3. Obtain a «certificación catastral » (cadastral report) to ensure  which are the exact boundaries, and that the property is duly registered in the cadastral records. Also, this information will help to confirm the official size and surface of the plot, and its exact placement.

4. Visit and meet the construction department from the Town Hall to be informed about points such as if the planning permission for the existing constructions on the property has been granted, and that there are no other developments planned nearby that could affect your new property.

5. Check that there are not any other fines or limitations affecting the property due to its construction, or even orders of demolitions

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2.- STEPS OF THE PURCHASE PROCESS

Buying process in Spain is a bit different from other countries.  It is compulsory that you are informed, and that you understand all the steps of the purchase process, and that you receive the proper legal assistance before you sign, or to pay, any documents/payments in Spain.

Sometimes we find that our clients contact our company once they have already signed reservation contracts or documents with agents/vendors. Please, note that once a reservtion/purchase contract is signed is legally binding, so, you might be in a difficult situation if conditions agreed in the contract are not the best ones to protect your position as buyer.

So, our recommendation is: DO NOT SIGN/PAY ANYTHING IN SPAIN WITHOUT YOUR LAWYER’S PREVIOUS AUTHORIZATION.

Thus, we strongly recommend you contract a reputable Spanish Solicitor to help you and to assist you in all the steps of this process , at the very early step of the purchase process.

Once you have taken the decision to buy in Spain,  is absolutely necessary you contact your lawyer to gude in the purchase process.

Together with the election of your lawyer, there are other points to consider when buying a house in Spain:

OPEN A BANK ACCOUNT

All the payments to the vendor must be done from your bank account. Partial payments on account of the final price  can be done from your bank account in your country of residence. But it is recommendable that the final payments of the price are donde from a bank account on your name in Spain  So, once you are in Spain, do not forget to open a bank account.

Also, a bank account will be  necessary after completion to pay the utility bills, community charges, etc., related to your property.

Your lawyer will help you with the opening of your bank account in Spain at one of the local banks in the area.

Click here to know more about why to open a bank account in Spain

MORTGAGE

Are you going to buy the property with a mortgage in Spain? This is a very important point. Indeed, there is a new regulation. New law says that the client signs before NOTARY with the bank the acceptance of the mortgage conditions with a sufficient period of time before completion of the purchase process (more or less 10 days).

Therefore, we kindly invite you to read this article:

New regulations affecting mortgages in Spain

NIE (Numero de Identificación de Extranjeros)

Please, pay attention that it is essential to obtain what we call «NIE number» (» Numero de identificacion de Extranjeros«) for the acquisition of a property in Spain.

All Spanish foreigners and  Non-residents are requested to obtain an individual NIE number. This is necessary for the payment of the taxes and the proper legal identification of buyers and parties involved in the sale process.

DEPOSIT and RESERVATION CONTRACT

Once you have taken the decision of buying a determinate property in Spain, the first you will be asked for is to pay a initial deposit to keep the property out of the market. The aim of the deposit is to take the property out of the market, and to book it exclusively for you while you are studying the legal situation of the property and other matters, like mortgages, financial status, etc. So, this contract will leave you a determinate time to complete the searches on the property, and, in case they are positive, then, to sign a «definitive purchase contract» with the vendor.

During the validity of the deposit contract, if the Vendor does not fulfill his obligation and he breaches the contract with “bad faith” (refusing to sale, changing his mind, or selling to another buyer), then he will refund you the double of the amounts received as a penalty for breaching the contract. In instance, if the Buyer fails to complete the sale, he loses the amount of his deposit .

THE PURCHASE CONTRACT (“Contrato de Compraventa”).

After the the formalization of the reservation contract, and once the deposit is paid, and your lawyer has completed the necessary searches on the property, it is commonly agreed to arrange a «definitive contract» in which an additional partial payment is required.

This contract is now a «definitive» one. The main difference with this one and  the «reservation» or «deposit contract» is  regarding the obligations from each one of the parties.

Mainly,  obligations assumed by vendors at the «definitive» contract are higher than the ones assumed with the reservation one. With this contract, the vendor cannot abandon the sale. In other words: Once the definitive contract is signed, the vendor cannot «change his mind» or to sell to another buyer, The decision from the vendor to sale to the buyer is now confirmed, and he, simply, cannot leave the sale.

In this definitive purchase/sale contract is included all the legal terms and conditions which will regulate the purchase, and the sale,  of the property, fixing the final price, and considering the circumstances obtained after the necessary searches made on the property.

For example, it can be agreed that the vendor has to fulfill determinate obligations, as to pay determinate expenses, or to update the size of the property at the land registry, or to update cadastre records  or to pay determinate bills which were unpaid so far; etc.

Also, in this contract the expenses to pay by each parties are detailed and listed (for example, who pays the notary and land registry fees, etc).

Due to its importance, it is highly recommendable that this contract is made by Solicitors with experience in Conveyance. But, it is also highly recommendable that this contract contains the necessary conditions to protect the construction elements and documents on the property, so, your lawyer must be not only expert in «conveyance», but also in «construction». We kindly remind you that not all lawyers experts in «conveyance» are experts also in «construction law».

COMPLETION OF THE SALE – TITLE DEEDS ( “Escritura de Compra venta”).

The “Contrato de Compraventa” is a private contract confirming a valid sale of  property to the buyer. This contract is perfectly valid between both parties with the rights and obligations contained on it. But, in order to make that agreement valid to third parties, it must be «officially formalized». The formal «change of ownership» passing the agreement of purchase from a “private” contract into a “public” one is done with the signature of the  “Escritura de pública de compraventa” or “Public Tittle deeds”.

As difference with other systems where sales and conveyance process is done by Solicitors, in Spain, formalization of “public tittle deeds” are done by Public Notaries. So, in Spain, to change a contract from “private” into “public”,  it must be notarized (prepared by a Notary), and inscribed at the Property Register/Land Registry («Registro de la Propiedad»).  At this moment, the whole price agreed is paid to the vendor, and this is the moment in which the vendor gives the possession and the ownership of the property to the buyer.

The way to formalize the signature of  the «escritura» is in a «personal meeting»  the Spanish notary’s office. Both parties (vendors and buyers), attend in person ( or by legal representatives using Power of Attorney), and must be present at the notary office at the day of completion agreed in the private contract. If  buyer requires a mortgage to buy the property, mortgage bank’s representative must also attend the meeting in order to complete the mortgage loan to the buyer.

As mentioned, if buyer or vendor cannot attend this meeting, they can arrange a “Poder de representación” (power of attorney) to allow someone else to represent him and sign the document in the name of the client (usually,  Solicitors).

As explained here, at the the notary’s meeting, buyer pays the rest of the price agreed to the vendor (usually by banker’s draft), and the vendor gives official access of the property to the vendor, together with the full ownership. In this act, then, the vendor, literally, gives the “keys” of the property to the buyer. In that moment, both parts sign the tittle deeds, and the sale is complete.

After that signature, and in the same moment, vendors and buyers are provided with an official copy from the original deeds called “Copia Simple”.  This document, is a  simple copy of the deeds. With this document, the buyer can prove the ownership of the property, and it is commonly used to proceed with the  changes of the electric, and water contracts, and others like to contract property insurance, etc.

Originals of the tittle deeds are then presented to the land registry office to complete the change of the names in this registry. Your Solicitor, your bank (or the same notary)  will send the original set of deeds to the Land Registry, together with the receipts of the taxes already paid.  This process usually takes a 3-6 months.

HOW TO MAKE THE PAYMENTS

As explained above, the best way to make the final payments of the sale to the vendor is directly from a bank account on your name in Spain. For this, previously you had to open a bank account on one of the Spanish banks.

Before completion, you need to transfer from your country of residence, the necessary amounts to your Spanish bank account in order to cover:

– The rest of the final price

– The expenses and taxes of the transaction (notary and land registry fees, taxes, legal fees, etc).

So, in Spain is different as other countries ,  where all the payments are done through the Lawyer’s bank account. In Spain must be done directly to the vendor´s bank account.

The most common practice to make the final payment of the price to the vendor is by a Bankers Draft issued from your Spanish bank in the name of the vendor. So, make sure that you, or your Solicitor, have prepared with your Spanish bank to have enough provision of funds into your Spanish bank account to attend the last payments of the sale, at least one or two weeks before the day agreed in the Notary.

Other expenses, such as the Transfer Tax, Notary and Land Registry fees, etc., can be agreed to be transferred separately to your Lawyer, or to your mortgage bank, etc.

Please bear in mind that if the Vendor is non-resident, you have to retain a determinate amount of the price to pay to the vendor (usually, the 3% of the price), and deposit it to the Spanish Tax office (also called  “Hacienda”) on account of the vendor’s  capital gains tax liability.  Your Solicitor will instruct you how to proceed with this point.

PURCHASE COSTS AND EXPENSES – TRANSFER TAX

The tax to pay for purchase of a RESALE  is the TRANSFER TAX (VAT-IVA is not applicable on resales), or «Impuesto sobre Transmisiones Patrimoniales» (ITP). This tax is a regional one, and varies from each Region. For example, in Murcia and Andalucia is the 8 %, in Madrid the 6 %, and in Catalonia, Balearic Islands, and Valencia region is the 10 %. 

Please, note that in case you purchase a new property  you pay VAT (IVA) at 10% (instead of ITP) because the sale of «new» properties is considered as a business transaction, between a company (the builder), and a consumer (the buyer). But, in resales, there is not any company involved, as it is only a private transaction between two individuals or particulars, so, the tax will be the Transfer Tax.

Lawyer’s fees, it is commonly accepted in the Spanish market that Lawyer’s fees use to be around 1% from the purchase price, plus VAT. In addition to this, your Solicitor may also charge you for the cost of of the searches done to obtain the legal information of the property (as land registry reports, certificates, etc.),  and other costs for changing utility contracts, and other administrative charges.

Other expenses to pay on resales are notary, registration and handling (gestoría) fees, which may be around 1 % of the purchase price.

Buying in the Valencia Region, and including taxes, notary fees, land registry fees, etc, costs of acqusition could be around 12-13% of the purchase price.

If case you needed a mortgage loan, then,  there may be additional expenses  and  commissions from your bank,  and other charges like life or house insurance, etc.  There may be  also valuation fees, which is the fees from the suveyor contracted by your bank to evaluate the property.

RESUME OF THE EXPENSES TO BE PAID BY THE BUYER

  • Notary Fees: For the formalization of the title deeds
  • Land Registry Fees: For the inscription of the property deeds
  • Transfer Tax: (ITP) Currently, 6-10 %
  • Others: Solicitor Fees, Mortgage expenses, contracts of water, electric, and gas, etc.

OTHER IMPORTANT ASPECTS TO CONSIDER WHEN BUYING A RESALE PROPERTY IN SPAIN

In case you have decided to buy or to sell a property in Spain,  please pay attention to the following information:

1.- CHECK THE PROPERTY DESCRIPTION THE PROPERTY DOCUMENTS

HOW IS THE PROPERTY REGISTERED AND DESCRIBED ON TITLE DEEDS: Check in the property deeds that the property is properly described and registered. Property deeds  must detail a perfect description of the size, borders, and the rest of construction elements existing on the property.

It is quite to common to find that properties which have been owned by different owners for many years, have been modified/extended in their sizes and/or dependences (new rooms, closing the porch or terrace, garage, pools, etc.).

If the current surface of the existing constructions  do not make coincide with the description in the deeds, then, we need to know the reason of this discrepancy! . In many occassions there are processes that can be taken in order to correct those discrepancies, and ways to sort them out. But, in other cases, those differences shows a legal problem affecting the property that you need to know in order to be confirmed from the earliest steps of the purchase/sale process.


   An example: A house with  a 120 m2 with a 50 m2 pool and a garage converted into a «guest house». In the deeds the house only appears as 120 m2, but not the pool, and the garage is a “garage” not a «guest house».

   Consequence: Deeds must be updated and the buyer must be informed that the «guest house» is legally considered as a «garage».

  NOTE: Here, we are not considering about the «internal description»  of the house (number of rooms, toilette, etc),  what we are considering is the “built size” (in Spanish, “superficie construída”). Deeds do not necessary need to show the exact description or distribution of each internal dependences inside the house, just «extensions» or «new constructions» built on the property.

In case you have modified the interior of the property by changing inside walls, then it will not be necessary to update the deeds, it is enough just to «declare» the new internal distribution upon completion of the sale.

i.e: Deeds shows that there are «4» bedrooms and you converted them into «2». In this case it is not necessary to update the deeds. As  owner, you are free to modify/reform internal dependences inside the property (always obtaining the proper Reform License).


PROPERTY IN CATASTRO (also known as “SUMA” or “IBI”, or “COUNCIL TAX”): In the same way as in the deeds, the property must be registered in “Catastro” with the exact and current size and surface of the plot and each one of the construction elements.

Every year Catastro  bills  – «Council Tax» («IBI- Impuesto sobre Bienes Inmuebles«) show the  size of the property using Catastro records. The «size» of the constructions considered in this bill is very important, as it is used to make the calculation of the yearly «IBI» or «Council Tax». So, it is essential to check if the Catastro records show the proper and updted size of the existing construction on the property, including whatever modifications or extensions which have been done.

So, please, note that «Catastro office» calculates the Council Tax in relation to the size of the constructions, taking into account  every construction components like the house, pool, garage, etc.

So, in case the property has been modified with extensions, these extensions must be registered at the Catastro office, otherwise the Council Tax bill cannot be calculated properly. So, this must be considered and verified as an essential part of the property transaction process.


   An example: When property was acquired existing constructions made a total of  120 m2, for a house. This is what was also shown in the deeds and in the Catastro bill (IBI) . For this reason the Catastro  bills (IBI) was 300 EUR.

Some years later, the owner built  a 50 m2 pool and a 40 m2 garage. In case the owner did not declare these new construction elements to Catastro,  Catastro bills -IBI are underpaid.

The reason of this is, as explained in this section, Catastro bills are calculated considering the size of the constructions (in terms of «bigger built size» = «higher tax»). So, probably, if the owner had declared these elements, the IBI bill would be  higher than 300 EUR. So, in case the buyer does not attend to this point, and sort while the purchase process, he could be responsible  to Catastro of this undeclared constructions in case of Catastro inspections.


2.- OTHER DOCUMENTS TO CONFIRM THE LEGALITY OF THE PROPERTY:

Usually, in order to confirm the legal situation of a property, it is necessary to obtain the following documents:

  • Title deeds of the property: To confirm how the property has been bought, legal borders, and legal charges/debts which might affect the propertty
  • Catastro (IBI-Council Tax bill)
  • Utility bills: Water, electric, gas
  • Energy Performance Certificate: To confirm the level of energy consumption from the building
  • Community of owners certificate: To proof that current owners are up to date on community charges, and that there is not any kind of extraordinary reform works approved at the community out of the «normal» ones (for example, that a structural reform of the façade has been approved by the owners to be executed the following year, or that there are strcutural problems on the building whcih needs of expensive reforms, etc..).
  • etc,

The study of the above documents is standarized in Spain by agents and lawyers.

But, as especisalized in construction  our company makes special emphasys in the study and consideration of other documents, which are not always taken into consideration by other proffessionals not so specialized in construction as TLA.

  • Certificate of Habitation/License of Occupation/Occupation License (CH/LO): This document is obtained from the Town Hall when construction works are finished, in order to confirm that the property fulfills with the legal conditions of habitation. This document is also needed to connect water and electricity to the property and to make the changes of the water and electric contracts into your name.

To obtain  this Certificate is «obligatory» when selling/buying properties in Spain?:

ANSWER: It depends on the type of the property

In «New» properties, the builder has the obligation to supply this document to the buyer on completion of the selling process.

But, please, note that in «Resales», there is no law which forces the vendor to supply this document on completion of the sale. Spanish laws say that, it is the «buyer» who must obtain this document on his name after completion, in order to proceed with the changes of the water and electric names.

At this point we have to say that the administration might refuse to give the CH to the buyer after completion in case the property has been suffered unathorized works, etc from the previous owner. So, if the property is not in perfect legal conditions, there could be a risk to not to get the approval of this document after completion. And this could leave the buyer in a very complicated situation, as he could have then problems to get the utility contracts on his name.

A very important point here is that the existence or validity of the CH and the rest of information about the CH it is not shown in the deeds, but at the local Town Hall of the area!.

So, your lawyer must inspect this matter carefully using his expertise, and experience to confirm a so important document as this one.  

From as conclusion , this certificate is ESSENTIAL to the sale the property, and its confirmation must be inspected from the very beginning of the purchase/sale process.

  • Non Infraction Certificate (CNUI): This is a certificate issued by the Town Hall confirming that there are not any fines for construction, neither other infractions nor orders of demolitions affecting the property.This certificate confirms if the property is subjected to any kind of construction penalties like orders of demolitions, etc. If the property was built, or extended, without the proper building license, the Spanish administration may have rights to act against that building. But these rights of the administration have a limit in time. To obtain this document is specially recommandable when buying «villas», or «semi-detached» properties, or when buying properties in rustic land.
  • Cedula Urbanistica: This is a document obtained from the Town Hall which confirms different aspects from the property, as:
    • The «urbanistic» consideration of the plot and the area. For example, if the plot is considered as «rustic», or «urbanizable», or «protected», or affected by public domain, etc.
    • If the urbanisation of the area has been completed, or if there are some other areas or urbanisation infrastructure to complete
    • The exact «building rights» of the plot (maximum building/construction allowed in the plot) etc..
Very important. On completion DO NO FORGET to bring with you to the notary:
  • ORIGINAL NIE NUMBERS.
  • ORIGINAL PASSPORTS.

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