Purchasing a Property in Spain.
Buying a property may often seem complex and lengthy, but it doesn’t have to be that way! At LuxuryForSale.Properties, we have compiled a straightforward guide outlining the essential individuals you’ll require when acquiring a property on the Costa del Sol.
Being a foreign investor doing business in another country necessarily implies seeking the peace of mind of leaving your affairs in professional hands, which can provide exquisite and efficient service, and also the safety of the transaction.
Throughout the purchase process, it must be ensured that the Spanish legal requirements are complied with. It is advisable to use a Spanish local based Lawyer who will check the legal status of the property that you are intending to purchase, and will consult the information about the property available at the official sources of information, making sure it will be free of charges, encumbrances, liens or debts, and that all payments of local contributions, taxes, fees and charges are up to date.
What are the necessities for purchasing a property in Spain?
To start, what are the essential prerequisites for purchasing a property on the Costa del Sol? As a non-resident, you will only need an NIE (Foreigner identity number), a unique identifier for official documentation regarding the property. Additionally, it is advisable to consider opening a Spanish bank account, although it is not mandatory, as it facilitates a smoother purchasing experience.
Real Estate Agent
When purchasing a property, the real estate agent is your essential companion. They assist you throughout the buying journey, offering invaluable guidance, expertise, and support. With their specialized knowledge, they navigate the purchasing process, negotiate on your behalf, and ensure a smooth transaction until the sale is finalized. To embark on a successful home purchase, finding a real estate agent who aligns with your requirements and possesses local market knowledge is crucial. This holds even greater significance for foreigners seeking to buy property in Spain, as an agent can guide you through obtaining your NIE and provide valuable advice during the process.
Although not a standard requirement, their services are typically sought when the buyer intends to undertake additional work on the property, such as renovations or seeking a second opinion. If you have plans for such modifications, it is essential to communicate this to the architect when engaging their services.
When purchasing a property on the Costa del Sol, it is essential to consult a lawyer to ensure the client’s needs are met and avoid any potential issues. A lawyer assumes three primary responsibilities when assisting a client in acquiring a property. Firstly, they thoroughly examine the legal status of the property, assessing any potential risks or complications. Secondly, they draft and negotiate all the necessary legal documents involved in the transaction. Lastly, they safeguard their clients’ interests, striving to secure the most favorable terms and addressing any legal concerns that may arise during the process. When searching for a lawyer, selecting one specializing in real estate law is essential to ensure they possess the expertise to identify and swiftly resolve any emerging legal issues.
When considering the purchase of a property on the Costa del Sol, you will inevitably need the services of a mortgagee, commonly known as a mortgage lender, typically a bank. If you intend to finance your property acquisition through a mortgage, obtaining pre-approval from the bank before commencing your home search is advantageous. This way, you can confidently explore properties, knowing you have the means to make a purchase.
The purchase process begins with a reservation agreement, upon a deposit payment which will block the property and will take it off the market, fixing the purchase price. This reservation deposit normally amounts 10% of the property price, and the best way to pay it is by credit card or a bank transfer. It is not advisable to pay by means of a bank draft, especially if it is from a foreign bank as it can take up to ten days to clear in the beneficiary’s account in Spain, and this could mean a delay that may put the property at risk.
Power of Attorney and NIE document
It is convenient to grant a Power of Attorney to your Lawyer in order to act on your behalf with regards to every step in the purchase. The Power of Attorney can be granted in Spain before the Notary. It can also be signed in a foreign country, but in that case it must be translated into Spanish and legalized in order to be enforced before the Spanish Authorities. To complete the power of attorney, it is very important to attach a Notary verified copy of your passport or any other ID document.
The NIE is a Spanish document granted by the Homeland Authorities. It will be requested by banks (when opening a bank account), by the Notary upon signing the public title deed, and by the Tax Office when settling and paying the taxes from the purchase. This document has to be applied for at the National Police Station, and the application form must be submitted along with the following other documents:
- The reservation agreement (to prove legitimate interest in obtaining the NIE)
- Copy of the return plane tickets
- Copy of the NIE application public fees payment
Exchange of the private purchase contract
Approximately twenty to thirty days after the signing of the deposit reservation agreement, the private purchase contract is to be signed by the purchaser and the seller, or by their respective authorized representatives. During this time, your Lawyer must have been able to perform and complete the legal researches at the official sources of information on the property like the Land Registry and the Town Planning Department at the Council.
At this stage, the usual amount to pay at the signing of the private purchase contract may vary between 10% and 30% of the purchase price. The funds for this payment can be transferred into your own bank account in Spain.
Completion & Notary
During the property purchase process, the involvement of a notary signing agent is imperative. The notary signing agent is responsible for collecting various documents from the seller to establish their ownership of the property, verify the existence of a valid sales agreement, and ensure there are no unresolved inheritance or tax matters tied to the property. This meticulous examination is paramount as it is a crucial safeguard against potential future complications or challenges.
The purchase process is formally finished upon the signing of the public title deed of purchase authorized by and before a Public Notary. The remaining balance of the price is paid at this time, and the ownership and possession of the property is transferred to the new owner.
Conveyance Solicitor (Gestoria)
When buying a property on the Costa del Sol, engaging the services of a conveyance solicitor is highly recommended, although not obligatory. In any property transaction, a substantial amount of paperwork is involved, and the conveyance solicitor, as their name suggests, manages all the administrative aspects of this process. While their fees may be considerable (up to 15% of the purchase price), the time and confusion, they save make it a worthwhile investment. They ensure that all payments, including taxes, fees for the notary agent, and property registry, are made in your name. Once the conveyance solicitor has completed their tasks, they return all the documents to you and any remaining funds after covering all the expenses.
Costs and expenses
Purchasing a property in Spain involves certain costs that have to be paid to the correspondent authorities (taxes) and services provider (fees) that operate throughout the transaction. Two types of costs must be clearly distinguished: 1) upfront expenses, and 2) completion expenses.
Upfront expenses. They are essential to start working on the file as they will allow your representative to have a clear knowledge of the legal status of the property. The upfront expenses are:
Land Registry Report (nota simple) and Certificates: these documents show the legal status of the property, the owner’s identity, its charges, encumbrances and any other limitations on the title that might affect the free use and enjoy of the property. Estimated budget: 100 Euros.
Town Planning Certificate: this is a document produced by the Urban Authorities at the Council, and it certifies the status of the property according to the local Town Planning regulation, making sure it is not in breach of any law, as certain urban charges do not appear in the information from the Land Registry. Estimated budget: 400 Euros.
Power of attorney. Estimated budget: 100 Euros
Property valuation: in cases where, according to the Town Planning Certificate, the property shows a charge or encumbrance, it is advisable to evaluate the matter. Estimated budget: 300 Euros.
NIE. Estimated budget of 25 Euros per applicant
Legal fees: 1,25% of the property purchase price, plus VAT
These documents provide very important information about the property and its legal status. Therefore it is strongly recommended that they are paid as a deposit together with the legal fees.
Completion expenses. They are paid at completion stage, and it can be done by bank transfer to the client’s own bank account in Spain. The completion expenses are:
The taxes to be paid depend on who you purchase the property from:
When buying from a developer or a company trading in the real estate market (considered first sale) the following taxes apply:
- VAT 10% of the purchase price
- Stamp Duty 1,5% of the purchase price
When buying from an individual (considered a resale), the following tax apply: Transfer Tax. The rate is established according to a progressive scale:
- Up to 400,000 € 8% of the purchase price
- From 400,000 up to 700,000 € 9% of the purchase price
- From 7000,000 € 10% of the purchase price
When VAT is applicable, it is paid simultaneously upon every payment made to the seller. And when Transfer Tax applies, this must be paid within one month after the signing before the Notary.
The services rendered by the Notary and the Land Registry are covered according to a fee scale based on the purchase price. In order to be on the safe side, it is advisable to budget 0,8% of the purchase price, split as follows:
- Notary fees: 0,4%
- Land Registry fees: 0,4%
Other costs. After the signing of the public title deed of purchase, other services have to be considered and set up in order to complete the purchase process:
- Change of the utility contract for electricity, water and gas services. These are established by the supply companies. Estimated budget: 500 Euros.
- Community of Owners representation and arranging Community quotes payment as direct debits to the client’s Spanish own account.
- Plusvalia tax settlement at the local tax office. This is a tax established by the local authorities and it is determined according to several criteria like the cadastral value, size of the property (m2), the price that the seller paid, etc. This tax is paid by the vendor, but it is normal practice that this amount is withheld by the purchaser from the price on completion and paid by him/her on the seller’s behalf within one month after the signing.
To finalize the sale of a property, three essential documents are required: the authorized public deed of sale, evidence of payment for the property transfer, and proof of submitting the documents for capital gain payment. These documents must be personally presented by the notary, conveyance solicitor, or buyer. Once these documents are accepted, the property register thoroughly reviews the paperwork to ensure its accuracy and compliance with all necessary requirements. This process typically takes approximately 15 working days to complete.
Once the public title deed of purchase has been granted before the Notary, and the taxes and fees have been paid, the title deed is registered in the Land Registry Office.
This is a public bureau where all plots of land and its ownerships/titles are published. This process can take up to one month.
Annual Property Costs
Once the purchase process is completed, other annual costs have to be considered:
Community fees: these quotes are aimed to cover the expenses for the public services within the community and its maintenance and upkeep: gardening, watering, security, painting, refurbishing, etc. They are discussed and agreed at the Annual General Meeting held every year in every community.
Utility services: these are provided by the electricity, water and gas companies, and the bills are based on the individual use and consumption.
Insurance: it is mandatory by the law that every property has an insurance policy in place. This is to be signed by each owner with the insurance company of his/her choice. The Community of Owners, as an entity, must have one too, and it is advisable, and usual, to get recommendations.
Local Property Tax (IBI): this is paid to the local tax authorities. The amount to pay is determined according to several criteria like the cadastral value, the size of the property (m2), and it cannot be stated beforehand. It is paid once a year and the payment may be split in two instalments.
Non Resident Income Tax (IRNR)*: this is paid to the national tax authorities. It is paid once a year and the amount to pay is obtained through several percentages on the Cadastral Value of the property.
*All quotes and percentages regarding taxes, administrative fees and public figures are subject to change according to Government Laws.
LuxuryForSale.Properties Real Estate.
If you are embarking on a new chapter of life on the Costa del Sol and feel unsure where to begin, reach out to us at LuxuryForSale.Properties without hesitation. We are dedicated to assisting you in finding the right professionals you require, whether it’s a specialized real estate lawyer, an efficient conveyance solicitor, or a competent notary. Whatever key person you need, we are here to connect you with them. With our team of experienced professionals and years of expertise in the area, we are fully prepared to guide you through the initial stages of realizing your dream of owning a home on the beautiful Costa del Sol.
For nearly two decades, LuxuryForSale.Properties Marbella has been the go-to choice for those looking to purchase luxury properties in one of the most sought-after locations on the planet. Our company has established itself as a market leader in the exclusive high-end and ultra-high-end luxury real estate sector, catering to a discerning clientele of international buyers.
At LuxuryForSale.Properties Marbella, we acknowledge the gravity of real estate purchases in our clients’ lives and believe that such a crucial decision should not be taken lightly. We understand that the final choice is often a complex blend of different factors and elements that must align for a satisfactory outcome. Our website offers valuable insights and information if you are a resident or considering purchasing a property in this premier destination.