Domus Vivendi will help you throughout the process including finding a suitable lawyer.

1. Making an offer

We start the buying process by making an initial offer on your behalf. Once an offer is accepted these are the additional steps and costs of completing the purchase.

Normally, before the purchase of a property is made official, there is a prior agreement drawn up between the buyer and seller. This document will identify the two parties and set out the terms of purchase. You must seek legal advice before signing this and you must be sure that this is the property you want to buy. You can lose any deposit you have paid if you pull out of the purchase and there is a penalty clause in the contract. In the case of the seller defaulting then he has to pay twice the amount. When it comes to signing the contract, this has to be before a notary, in the form of a public deed. This ensures that the details are entered onto the public records.

2. Nota simple informativa

Ensure, before paying over any monies, you receive this document, Nota simple informativa, from the Property Registry (Registro de la Propiedad) confirming:

• The property is free of debt.
• The legal ownership of the property.
• The description of the property matches what the buyer has been told (to avoid surprises about missing square meters).

3. The pre-agreement

A contract needs to be in place between the seller and the buyer until the public deed of purchase is ready. It's usually a simple document in which the seller expresses their intent to transfer the property to the buyer and the buyer expresses their intent to buy at the price and conditions agreed upon. At this stage the buyer also gives the seller a percentage of the agreed-upon price. The typical agreement in Spain (called arras) is if the buyer backs out of the contract, they lose the deposit; if the seller backs out, they have to repay double the deposit. Of course, the buyer and seller may choose another type of agreement if they prefer.

Purchasing Costs

On top of the property cost the buyer is liable for:

• Transfer tax (IVA), 6% on resold property; 7% for new plus 0.5% stamp duty.
• The property registration office charges approx €300 to change the new deeds into your name.
• Notary charges for copies of the 'escritura publica'. The charge is on a scale depending on the contract price.
• Allow 10% of the purchase price for costs.
• It is often the case that the buyer also pays the sellers fees. Check this at the point of enquiry and it is often possible to negotiate.
• Banks may also charge an opening commission for mortgage loans.

Annual Costs

• The local town hall charge IBI - an annual real estate tax. The previous owner is obliged to give you copies of previous bills.
• Community charges [service charges] apply when you buy a property on a community development. These cover maintenance on common parts, swimming pools, gardens etc.
• You will also be liable for a wealth tax, payable annually and based on the value of the property.
• A property owners income tax based on your income from the property. Clarify these in detail before agreeing the purchase.

Legal Matters

The seller of a resold home should provide the following documents:

• The title deeds of the property.
• A receipt for payment of the real estate tax for the last year.
• A receipt of payment of the tax on the increased value of Urban Land.
• A certificate that any community charges (if applicable) have been paid up to date.
• Latest copies of domestic bills to enable you to take over the services such as electricity and water.

The seller or developer of a new property should provide you with:

• Deed of declaration of new construction
• Occupancy permit
• Certificate of rateable value of the property

 

Insurances

Fire insurance is compulsory by law when taking out a mortgage.

Comprehensive household insurance is available to protect your home and contents.

Life insurance can be taken out to guarantee payment of the loan in the case of death.

 

Tax advantages for property owners

If you spend more than six months a year in Spain, you are obliged by law to apply for a residents permit. This law is currently being abolished. There are however, several tax advantages for residents of Spain that do not apply to non-residents.

Inputted income tax is an annual tax on an imaginary income resulting by virtue of ownership of a property and is charged as 0.5% of the catastral value. If you are a resident you will not be charged this on your principal home.

 

Wealth tax is a tax on all assets in Spain and is charged at 0.2% of the catastral value of any house owned. For residents the first €108,000 is exempt and for a joint ownership this would apply to each partner. These two taxes are paid annually as long as you own the property. Non-residents do not receive any relief so therefore have to pay 0.7% of the catastral value every year.

When you come to sell the property, capital gains tax will be charged on any profit you have made. This is 35% for non-residents but only 20% for residents. A further concession for residents is that if you are over the age of 65 and have lived in your property for at least three years, you are totally exempt from capital gains tax. Finally, if you are 60 years of age or more and have lived in your property for at least three years, you can bequeath your property to your spouse or children and avoid paying inheritance tax on 95% of the valuation. The inheritor must also be a resident of Spain and agree not to sell the property for at least ten years.