This is a brief summary intended to give a broad outline to a first-time buyer of residential property in Spain.
Once you have chosen the property you wish to acquire, the next step is to enquire about features of the property; plans, terms of payment and extras if any. At this stage you might require the assistance of a qualified lawyer who will aid you and clarify any points and costs involved.
Most developments require the purchaser to make payments during the building process with a final payment upon completion and handing over of keys and Title to it. These payments in advance range from 30% to 50% of the price depending on the development chosen and are payable throughout the construction with the final balance on completion.
If the property is fully built, it will be common for the developer to require payment of approx. 10% of the price paid upon signing the private contract and the balance completion within one month.
Before an exchange of a private contract, your lawyer will have completed searches and investigations on the property being sold and will secure it is sold free of charges and encumbrances and up to date in its tax obligations. The private contract will set out the legal description of the property, price, terms of payment and the obligations of both parties. Specifications and plans of the property will form part of the contract and be attached to it.
Security of your investment
If the property is sold under construction the developer is obliged to provide the purchasing party with an insurance policy or bank guarantee. This will secure that any amount handed over by the purchaser (plus legal interest), will be returned should the property not be completed when agreed.
This is not the case if the property is finished.
The Building Law establishes that all developers who have applied for a licence will also have to provide the purchaser with a ten-year guarantee duly bonded against major defects of the construction.
These two elements make the purchase of new property very safe in Spain.
Final completion and formalization in public document
When the building has been completed or the agreed date of completion comes, the sale will be formally completed before a Public Notary. A Public Title Deed will then be granted by the vendor in favour of the purchaser against final payment and handing over of keys.
The Title Deed is faxed to the Registrar, who will register the purchase at the Land Registry. We will also pay, on your behalf, taxes and all relevant fees due to the notary and will handle the formalities of registration of your Title Deed. Similarly, we may contract relevant supplies of utility services such as water and electricity and organize their payment through a local bank by standing orders.
Costs of acquiring new property
- The buyer will have to pay 10% VAT on the purchase price. Please note that this tax accrues with each stage payment meaning every payment you make will be subject to an additional 7%.
- 5% Stamp Duty on the purchase price, which is paid in a one-off payment at completion.
- Plus, Valia is a one-off local tax on the increase in value of the land on which the property is built, since the last recorded transfer of ownership. It is based on the ratable value of the land. The vendor is the subject of this tax.
- Legal fees.
- Notary and Land Registry fees. These are set by law and the scale for the notary will range from €500 to €2,500. Land Registry fees are also set by law and are approximately 50% of those of the notary.
- Provision should also be made for bank charges when transferring monies abroad.
So, in summary, the buyer has to allow for an additional 13% of the purchase price to meet the transfer costs involved in the transaction.