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Buying - A Legal Guide

The Steps

Got it! You have found your property. It is now essential to take it off market. By and large, all properties on the Costa del Sol are listed with several agents, and we are not fully in control of visits made to the property. Placing a reservation deposit is therefore important.

Reservation contract:

Placing a deposit ensures that the property is taken off the market and is followed by the Reservation contract signed by both buyer and seller. When signed, all further viewings stop. The minimum deposit amount is normally 3,000 € and can be higher, depending on the purchase price. The reservation period is typically 2 weeks, to allow your lawyer sufficient time to make the due diligence on the property, local planning, master planning, etc. The deposit is not refundable, except in cases where your lawyer advises against the purchase for legal reason.

Private Purchase Contract

The Private Purchase Contract replaces the Reservation contract and is followed by making an additional deposit of 10% of the purchase price (including the already paid deposit). The Private Purchase Contract outlines all the specifics of the purchase, including the final completion date.

Completion

Completion and payment of the balance, takes place at the Public Notary. Any outstanding debts on the property, including mortgage obligations and any due taxes, must be cleared by the seller before completion takes place. Before leaving the Notary the new owner is handed over a copy of the new title deed, the Copia Simple. The original is sent for the final registration of the property at the Land Registry. This normally takes a month. At completion, the new owner will receive the keys of the property and from completion date will have to assume all rights and obligations to the property.

Buying Legal Guide

Equity Release

With the many unfamiliar aspects that purchasing in a foreign country has for the majority of people, we do recommend our clients to employ the services of a local solicitor 'Abogado' to benefit from qualified and impartial legal advice and therefore make certain that their purchase is completely safe.

Purchasing property in Spain is rather a straightforward procedure. All property in Spain must be registered in the Land Registry 'Registro de Propiedad'. The basic document called 'Nota Simple' (land registry extract) show name of the owner, if there are any liens, encumbrances, mortgages or debts registered against the property. The Nota Simple will also show details and the size of the property.

The Signature of the Public Deed of ownership 'Escritura Pública' takes place in front of a Public Notary 'Notaria', and due to money laundering regulations the process must be completely transparent. The full purchase price must be declared and all of it accounted for in front of the notary. Banks have to provide certificates of funds passing via their accounts.

The notary checks the entire process is correct and notifies the land registry the same day that the transaction has taken place.

New properties which are unfinished obviously are paid for over the construction period, and all payments on account before finishing must be guaranteed, according to the BUILDING ORDENANCE LAW (LOE), LAW 38/1999, by a bank or insurance company: if the property is not finished by a certain date, a purchaser has the right to reclaim the amounts paid, plus legal interests. Additionally, this law obliges the property developer to arrange a TEN YEAR insurance policy with respect to any basic building defects with the purchasers as beneficiaries.

Buying Costs (11 - 13% on top of the purchase price):

For a resale property the following costs on top of the purchase price are added:

Property transfer tax (ITP) increases with the purchase price: 8% (up to 400,000 €), 9% (400,000 – 700,000 €), 10% thereafter

  • Legal fees, normally 1% of the purchase price + 21% VAT
  • Notary fees 500 – 1,500 €, depending on the value of the property
  • Land registry fees 300 - 1,000 € depending on the value of the property.

For a new property bought directly from the developer: 10% in purchase tax VAT (IVA). In addition you have these additional costs;

  • 1.50% Stamp duty tax (AJD)
  • Legal fees, normally 1% on the purchase price + 21% VAT
  • Notary fees 500 – 1,500 €, pending on the value of the property
  • Land registry fees 300 - 1,000 € depending on the value of the property.

For a plot of land you pay 21% VAT that comes on top of the purchase price. Legal-, notary-, land registry fees as above.

What is Needed to Purchase a Propert in Spain?

  • You need funds in place to buy the property.
  • You need a foreigner’s tax registration number, called N.I.E. (your lawyer will assist you).
  • A Spanish bank account, where you should place sufficient funds to pay your regular running costs on the property.

Running Costs

Owning a property on the Costa del Sol you have following regular running costs:

  • Council tax (IBI), paid yearly
  • Rubbish collection (Basura), normally paid twice per year
  • Community fees, normally paid monthly or per quarter
  • Electricity
  • Water
  • Home insurance
  • Non-resident income tax
  • If you need a mortgage, monthly mortgage repayments

We would advise to pay the above by bank direct debit in order to avoid late fee.

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