Investment Property Guide Spain
Buying
a property in Spain - although Spain is part of the European Community, it
would be wrong to assume that the process of buying a house is the same as here
in the United Kingdom. Before you you settle on a property , there are two
things you should do. Try renting a property in an
area to see if you feel you could really settle there. Obtain some quality Legal
Advice....
Legal Advice - obtaining
quality legal advise about buying a home in Spain is of paramount importance,
and obtaining an independent solicitor is the best bet. You may find that a
local estate agent says they will find a solicitor for you or that you do not
even need one as the notary will do all the work but this is not the case.
The Spanish make use of a Notario, for dealing with the sale
of property, the notario is a public appointed person whose main function is to
draught up the documents and to make sure that both parties to the agreement
comply with all the regulations, to inform about their tax liabilities and to
make sure that the monies are actually paid over. The notary will not carry out
any pre-contract enquires that you would expect from a solicitor acting on your
behalf for the purchase of a property in the United Kingdom, that is why, good
quality Legal Advice can not be underestimated. It is also important that
the solicitor you appoint is independent and have knowledge of both Spanish & UK
taxation & inheritance laws. You may pay a bit extra for a specialist but it
will pay dividends in the long run, expect to pay about 1% of the purchase price
for a good quality service.
Your Lawyers Duties - your
lawyer should perform a number of functions for you, these include
Establish the vendors legal entitlement to sell the property.
Make
sure that the vendor has sole entitlement to sell you the property, this can
be done by paying a small charge an obtaining a certificate from the property
register.( although another check will be carried out just prior to completion
Obtain
information to any debts that are registered against the property, there are
many debts in Spanish law that can be assigned to a property and you ,may be
liable to pay them.
Inspect
the Certificacion Catastral for the purpose of calculating local taxes that
you will be liable for. The description of the property on this register
should be the most accurate.
Carry
out an inspection of the Plan Parcial. This is a plan of all plots of land
that has been drawn up for each urbanismo when when it is registered with the
local planning authorities your lawyer will want to make sure that everything
is order.
Carry
out a search to alert you to any new planning developments proposed for your
area.
If
appropriate check with the Ley de Costa which place restrictions on property
that has been constructed closer than 100 metres of a beach.
In the
case of properties less than ten years old or since 1988 in coastal
areas,check that a building license was obtained.
If you
property is in an urbanization, your lawyer will want to see proof that the
local community charge has been paid. This charge is made for managing the
common parts of buildings. He will also see if any extra charges or major
expenditures are planned.
The
lawyer will check if you are may keep a pet ( this particularly applies if you
are buying an apartment).
Inspect
receipts to make sure that all utility bills are up to date.
Ascertain the catastral value of the property to make sure that the correct
taxes are to be paid*
If the
owner is an offshore company, inspect receipts showing that the 3% annual tax
has been paid.
If the
property is less than 10 years old, obtain a copy of the builders guarantee
The Ownership - the
solicitor will also be able to advise you on the different types of property
ownership and it is important that you decide what is right for you, each has
different financial consequences and tax liabilities. You can own a property on
your own, joint ownership or via an offshore company.
Offshore company purchase has an advantage as you simply sell the shares in the
company to a new owner who will thus find your sale to be appealing as he could
save a substantial amount on the purchase costs. However, the Spanish have an
annual tax charged on property held by offshore companies. Some property
is now being sold on a leaseback basis and this may be appropriate if you only
want limited occupation for a number of years until you retire. Under this
scheme, you can obtain the property at a discounted price, it is leased back to
the vendor and eventually after a period of time you will have the rights of
ownership as per normal. When drawing up the purchase of your Property,
the notary will want know details of your matrimonial status, under Spanish law,
when married you are free to choose how your financial affairs are settled
either separately ( as in The Uk ) or jointly. Your solicitor will advise you on
this matter.
Find your Property and Agreeing
the Price - don't worry, there is plenty of property in Spain to choose
from, it is a large country with a low population. In recent years, the
indigenous population has tended to move towards the bigger cities and this
combined with a glut of new developments means there is a lot of Spanish
Property to choose from. In general property prices
are lower than in the United Kingdom although in recent years there has been
some spectacular growth, areas of the Costa del Sol, seem to produce figures all
on there own and many vendors just “ name their price” Be prepared to negotiate
and remember that as in France, vendors often set prices at a level that a local
person would not contemplate paying in the hope that a foreign buyer will juts
turn up and buy it. You can locate property from either:-
Local
estate agents
English
property companies
Local
knowledge
If using an Estate Agent, their
commission will usually be included within the sale prices, often this can be
quite an amount and many are prepared to lower their commission to obtain a
sale. You may also approach any number of UK based companies that sell Spanish
properties but these tend to be restricted to new builds. One of the advantages
of renting a property is that often local property is not advertised, you just
get to hear about it, this is particularly prevalent in rural areas
When considering
your purchase, pretty much the same rules apply as in the United Kingdom,
location is very important as is whether the property would appeal to a Spanish
purchaser, if and when you decide to sell.
Of paramount
importance is that you should not consider any advise given to you by the vendor
or their estate agent to be truthful, the market is quite unregulated in Spain
and whilst not everyone is dishonest, it pays to have your solicitor involved in
all negotiations.
When you have
agreed your price, it is common for the vendor to present you with a pre
contract agreement and request you sign it and provide a deposit ( several
thousand euros). If you sign this contract, the vendor is bound to sell you the
property, however you may find that your solicitor needs some time to carry out
his pre sale checks and it is never advisable to sign anything without legal
advice. Remember, if someone wants you to sign a document quickly, there may be
a reason for it.
At this stage
you solicitor should be able to help you negotiate the price and an agreement
should not be meet until it can be ascertained the amount of taxes payable and
who will be responsible for them
One of the
practices in Spain which is common and also illegal is declaring the property
value at a lower amount than that will be stated in the documents drawn up by
the notary. You may be asked to do this and then pay the balance “under the
table”. This will reduce the amount of tax you have to pay on the property and
the tax liability of the vendor on sale but it has serious implications for you.
The main problem is that when you come to sell the property, you own tax
position ( unless you can repeat the procedure) will be calculated on the lower
amount you paid for the property. Secondly, if the authorities discover what you
have done, you will may be fined, will have to pay the tax + interest or maybe
even worse.
The Contract and Sale - once
all parties are happy with the contract of sale, it can be passed to the notary
and you will be ready for the completion. All the owners of the property and all
of the purchasers must attend the execution of the escritura, if you have a
mortgage, the lender will be requited to send a representative. Once this
document has been executed, the notary will proceed to register it on the
property register, the ownership will now be public. Some people choose not to
register the sale thus avoiding the transfer tax ( 6%) and stamp duty 0.5-1%).
Your lawyer will explain why you should register your property. It takes about 3
months to have a property registered, the notary will keep the original but you
will be sent a copy.
How much does it all cost -
the cost of purchasing a property may vary, it is probably best to say around15%
of it s sale price. The following are approximate.
Lenders
fees 1%
Valuation Fees 1%
Surveyors fees up to 2500 euros
Transfer
tax or IVA tax if from a developer 7%
Registration fee 500 euros
Stamp
duty up to 1%
notary
Fees up to 700 euros
Solicitors fees 1%
To the
above you will have to add the cost for the plus valia tax if it is decided
that you will be responsible for it.
Copyright Assetsure Limited 2007
