Legal & Financial Advice Spain
Choosing a reliable lawyer
Any lawyer practising in Spain should be registered with the local bar association (Colegio de Abogados). They will have a registration number that you can ask for and then verify with the bar association. Naturally, registration does not guarantee honesty or competence, but it is a good minimum standard to insist on. You can find a list of all the bar associations at the national website for Spanish lawyers, Abogacía Española.
SpainForSale.Properties work with an established network of Notaries throughout Spain for dealing with our clients’ Spanish Real Estate. We also have facilities in place with Consular offices and Notaries in many other countries, so that whenever possible, our clients can sign documentation without having to be in Spain in person. So, wherever you are situated, we can accept instructions from you in respect of your Spanish assets, wherever your Spanish assets are situated. Providing a variety of legal services, carried out by qualified and certified lawyers, that includes:
• Free preliminary legal consultations.
• Company registration.
• Preparation of the documentation necessary for the purchase or sale of a property in Spain.
• Verification the ownership of the property.
• Checking for encumbrances.
• Tax advice.
• Drawing up agreements and preparing notary deeds.
• Checking all documents related to the deal including those drawn up by third persons (for example the documents for presenting the deal before a notary public), so that we are sure your interests are protected
• Representation for purchase or sale of a property if and when necessary.
• many other legal services upon request.
The N.I.E number (Número de Identificación de Extranjero) is the Identification Number for Foreigners. It is imperative that all foreigners who purchase a property in Spain have one as this is needed in all fiscal and legal matters. You can obtain a N.I.E. number from the Police Station or if you prefer you can obtain a legalised photocopy of your passport and sign a Power of Attorney so that your solicitor can act on your behalf and obtain one for you. You will need to have your N.I.E. number before completing the purchase of your property. In fact the N.I.E. number is also required for buying a vehicle, employment, inheritance of assets in Spain, insuring property, paying taxes and even for signing onto the national social security health scheme.
Opening a Bank Account in Spain
Owners of properties in Spain need a bank account in a Spanish Bank in their name for the purpose of meeting ongoing costs, utilities (such as electricity and water), mortgages, local taxes and duties. The Bank or Savings Bank will draw up a contract to open the account and ancillary documentation, and will require from the client the necessary information to complete that documentation (passport). On the “Costa del Sol”, most of the Bank offices have at their customers’ disposal English versions of the above mentioned documentation, as well as employees fluent in various languages.
One important point: Remember to ask the Bank about their charges and commissions for keeping the account operative, for cheque clearing, international transfers, etc.
Normally the purchase is initiated with a reservation contract called “Contrato de señal o arras”, the deposit that will be paid on signing the reservation contract is approximately 6,000e, which is normally kept by the Real Estate company. The main purpose of the reservation is for the purchaser to be assured that the property has been taken off the market (usually for a limited period of time) and for the vendor to know that the purchaser is really interested in proceeding. The reservation contract implies that the “purchase agreement” (contrato de compraventa) will be signed within a specific time period and if for any reason this does not take place, the property will be again placed on the market. The deposit is usually non-refundable. The reservation contract must be dated and signed by both parties and should include the personal details of the parties and the identification of the property. It should also define the amount to be paid upon signing the contract, the total price, payment conditions and the period of time in which the Title Deed will be signed. The amount paid on reservation is deducted from the total price to be paid by the purchaser. The contract should also establish the consequences if a) the purchase agreement is not signed or b) if either of the parties withdraw from the transaction. If the potential buyer does not go ahead, he would lose the deposit unless this is due to irregularities found on the Title Deeds of the property. If the seller refuses to go ahead the buyer is entitled to claim a compensation of double the amount of the deposit. Once the reservation document has been signed the Lawyer will begin to check the property to make sure that everything is in order including the proper ownership, if there are any charges on the property and that all Licences have been obtained.
Private Purchase Contract
According to Spanish law, the Private Purchase Contract is used to reflect the agreement reached between two parties in the transaction of the sale of a property, for both new build and resale property. In order for the Private Purchase contract to be valid and of use to both parties it must include a series of compulsory requirements. Apart from these requirements, both parties can freely agree all the terms they consider should be reflected in the private purchase contract. However there are three different types of Private Contract: These are known as the Purchase Deposit Contract, the Option Contract, and the actual Private Purchase Contract. All three have the same requirements mentioned above, but each binds the parties legally in a different way to the agreement reached.
The registered title deeds of the property are always signed at a Spanish Notary. This is the official document that certifies that the property has been sold and it includes the details of the buyer and the seller, description of the property that has been sold and its price. Once the title deeds are signed they must be registered at the Property Registry.
Tips: Before signing the property title deeds the Lawyer will make sure that the seller has no debts with the Town Hall with unpaid IBI (Property tax) and garbage fees as well as no debt with the neighbours’ community, mortgages and that the property has a valid habitation permit.
The Property Registry
The Property Registry/ Registro de la Propiedad, is the authority where all properties and their title deeds are registered. This is an extremely important office for the purchaser of a property in Spain, because this is where you will be able to find all the information about the property with a true description of it detailing area and owner and more importantly if there are any charges, liens or mortgages against the property. You can check all of this with the nota simple who will supply a report provided by the Property Registry.
Loan mortgages are most useful for financing the purchase of your Spanish property. For a non-resident buyer, a mortgage is usually limited to around 70% of the valuation of the property. Our advice is to go for a variable- rate mortgage, The lender’s rate will be a margin over Euribor (March 2009, Base lending rate by Central Bank of Europe @ 1,99 %), generally Euribor +1.25 %, but certain lenders may fluctuate on this. Fixed rate mortgages are available at slightly higher interest rates. Note that re-mortgages are not common practice in Spain.
Buying a Property
There are many different types of properties (apartments, villas, garages, storerooms, building plots, rustic “fincas”, etc), but below we refer in detail to the purchase of apartments or villas including garages or a storeroom.
New property, with garage and storeroom: VA T 7%, Stamp Duty 1%. Total 8% Re-sale properties: Transmission Tax: 7%. No Vat.
Notary and Property Register
There isn’t a fixed percentage or fee for these two costs. Between 600e and 800e should be set aside for the Notary’s costs and 500e for Land Registry.
A percentage of around 1% should be envisaged or a fixed rate (eg. 2,000e).
Many small expenses must be borne in mind such as bank charges or commissions for transferring money, Power of Attorney to your lawyer, etc. The amount you should expect to pay is in the region of between 300e and 400e. In addition to the above mentioned, you must allow approximately 10% on top of the property price to cover the conveyancing expenses. Loans and / or mortgages have not been considered.
Taxes and Expenses on Mortgage
The purchase of a property in Spain can sometimes involve the setting up of a mortgage. It is important to establish the costs and expenses involved in setting up a mortgage, in order to avoid any possible misunderstandings or difficulties.
Mortgage Title Deed
The fee is calculated depending on the amount of mortgage liability, copies, pages of the original document and the application of the notary fees in force at the time of completion. Stamp Duty: 1% of the mortgage liability.
Land Registry Costs
The amount of the registration cost is also calculated on the mortgage liability, copies of the land search note, authorised copies and the application of the notary fees in force at the time of registration.
Bank arrangement fee
Bank expenses for handling documents. Base the total expenses of the mortgage at around 2,5% of the amount of the mortgage.
Taxes on Holding Property
Council Tax is currently calculated on a percentage of the rateable value. For example, a 200.000e property with a rateable value of say 100.000e may attract around 450e in tax. Non-residents property Income Tax: The base rate is 2% of the rateable value and the applicable tax is 25%.
Taxes and Expenses SELLING a Property / Legal costs
A percentage of around 1% is to be expected or a fixed rate (eg 2,000e).
Capital gains tax
This is based on the difference between the purchase and selling price. Purchase price is not only the net property price but also the taxes, fees or any other costs incurred on the purchase. On the selling price any selling costs (commissions, fees, etc) can be added. The difference, once indexed according to inflation rates, is taxed at a flat rate of 18%. If the vendor is a NON RESIDEN T, the buyer must withhold 3% of the price to be deposited at the Revenue as part of the final 18% of the Benefit / Plusvalía
This small Council tax is usually paid by the vendor although it could be agreed that the buyer pays it.
Puerto Banus (29660).