Buying property in Spain: What you need to know
Are you a non-resident in Spain and wishing to buy a property there as a second residence, or an investment? It is a wonderful project, but unfortunately fraught with pitfalls. The list of administrative, contractual and legal procedures is long and tedious.
Please find below the main steps that the legal department of PenthouseCostadelSol will carry out to ensure that you purchase your property in complete safety.
NIE (Número de Identidad de Extranjero)
Obtaining the NIE is essential.
The NIE is a necessary identification number for foreigners wishing to work, study or reside in Spain.
No real estate purchase can be made in Spain without this document. The request for a NIE can be made to the Spanish National Police, or to the Spanish Consulate.
Opening a bank account
The opening of a bank account in Spain is necessary for the confirmation of the means of payment of the buyer for the purchase of a property, as well as for payment of charges and taxes inherent in the acquisition. Although this condition is not legally required, it is strongly recommended to have a local bank account given that all taxes (property tax, declaration of non-resident income) and local charges (water, gas, electricity... ) must be paid in Spain. You cannot open a local bank account remotely. You will have to do it in Spain.
Real estate checks
In Spain, notaries do not have the same role as the notaries in other countries who may carry out various legal and town planning checks on the property before the sale. Here all of these verifications must be carried out upstream by the buyer or a designated lawyer specialised in the real estate sector.
Those essential checks are as follows:
- • Cadastre: Verification of the constructed square metres of the property, its location and its use.
- • Land register: acquire the title deed (NOTA SIMPLE). This document indicates, among other things, who is the owner of the property and whether there are debts on the property: Mortgage, seizures, etc.
- • Certificate of habitability: Acquire this certificate from the owner in order to know the useful surface, and especially, if it is indeed a property licensed for residential use. In Spain, some offices are advertised as apartment.
- • Urbanistic situation: If you have doubts about the urbanistic situation of the property, you can go to the corresponding town hall and check urbanistic plans.
- • Syndicate of co-ownership: Ask the owner or the syndicate of co-owners if the property is up to date with payments, what work has been carried out on the property and what is planned.
- • Property tax: Make sure you know the annual property tax (IBI) and if the owner is up to date with payments.
- • Technical building inspection (ITE): Ensure that the property does not suffer from any structural deficiency, such as aluminosis.
- • Energy certificate: Acquire this certificate from the owner in order to know the energy qualification of the property.
Price offer (RESERVA)
Before signing the promise to sell, the majority of real estate agencies will ask you to sign a price offer (called "RESERVA" in Spain). The purpose of this document is to reach an agreement on the purchase price and to block (RESERVE) the property until the signing of the promise of sale. The agency will ask you to pay approximately 1% of the purchase price upon signing this document.
Be careful. If it is not well drafted and you later decide not to sign the promise of sale, you will not be able to recover the amount paid.
The promise of sale (ARRAS)
Once all the checks on the property have been carried out, it will be necessary to formalise the conditions of sale by drafting a promise of sale. This is the most important document in the purchase of real estate in Spain. This preliminary agreement constitutes a real contract, which entails important obligations for both parties. It allows them to specify the conditions of the future sale and confirms their agreement.
The promise of sale is only very rarely signed before a notary in Spain. However, this contract does have legal value and it will be very difficult (unless the seller agrees) to go back on its clauses after the fact when the sale is registered before the notary. It is therefore extremely important that one be vigilant in the negotiation and drafting of any conditions agreed (obtaining a loan, purging of easements or charges encumbering the property, etc.) At the time of the signing of the promise of sale agreement.
There is no law concerning the amount to be paid when signing the promise of sale, but it usually amounts to 10% of the purchase price of the property. The most common is to make the payment by bank transfer to the current account of the owner, real estate agency or the lawyer's office.
Notarized deed of sale (ESCRITURA)
The notarized deed of sale is the official document that concludes the transaction. Its signing takes place in the presence of a notary on the date and time agreed. Both parties must be present, or represented. In Spain, the notary has a limited function in the purchase of real estate and only intervenes at the time of the final deed of sale. His primary responsibilities are to verify the identities and legal status of the parties involved and the validity of the relevant documents received before signing (title deed, register of mortgages and charges, property taxes, certificate of habitation, energy certificate, etc.).
Once the deed is signed, the keys are handed over and the outstanding balance is paid by means of a check issued by the purchaser’s Spanish bank.
The new notarized deed of sale is then registered at the Land Registry, which can take between 2 and 4 months. In Spain, the purchase costs are always borne by the purchaser. On the Costa del Sol, you can estimate acquisition costs (taxes, notary and registration fees) at around 11.5% of the purchase price of the property.
New property owner changes
Before you can peacefully enjoy your new residence, you will need to notify the change in ownership to the following organizations:
- • Water, gas, electricity companies, etc.
- • Town hall for property tax
- • Syndicate of co-owners
It is also recommended to take out home insurance.
Costs of real esate acquisitions in spain
The costs of acquiring real estate in Spain depend on the type of property and the amount of the purchase price. Depending on the case, they can vary between 10 and 13% of the total acquisition price.
- • For a new property, a VAT (IVA) of 10% is payable on the total amount declared.
- • If it is a second-hand property, a tax on the transmission of assets is payable (ITP – Impuesto sobre transmisiones patrimoniales). This tax is 7%.
- • Notary fees: Notary fees depend on the declared value of the purchased property. They are generally between 500€ and 1500€.
- • Registration fees: The amount of registration fees with the Property Registry will depend on the declared value of the purchased property and fluctuates between 300€ and 1.000€
- • Stamp duty: 1.5% corresponding to the tax relating to the drafting of legal acts (IAJD – impuesto de actos jurídicos documentados). Applicable only to new property purchases.
- • Lawyer fees: 1% of the purchase price (minimum €1,500) plus 21% VAT.