Faqs - Legal Advice

Introduction

For most people, the purchase of a Spanish property is the realisation of a dream. Whether it is for that second home in the sun or a permanent emigration, the attraction of Spain is obvious and unique in terms of the climate, affordability and the easy access from the UK.

Additionally, for investment purposes, the Spanish property market has seen significant capital growth over the past 3-5 years, which has encouraged serious investors to utilise funds in the alternative property market and accomplish excellent returns on capital employment.

The process for buying property is relatively easy, but it is essential to fully consider the legal aspects of the purchase. Buying a property abroad will be subject not only to legal distinctions from that of the UK, but also cultural differences. Consequently, instructing your own independent lawyer to assist in your purchase is essential for both peace of mind and qualified advice. Without instructing a lawyer, some purchases will risk legal difficulties in the future without being able to hold individual or company to account.

The purpose of this article is to merely outline some of the fundamental processes in a Spanish property purchase; it is not intended to be legal advice in the strict sense as every individual transaction has it's own distinct characteristics.

The First steps

You have found your ideal property and are ready to commit to purchase. It is likely that the seller will wish you to pay a reservation fee of between 3,000 and 6,000 euros. The advantage of payment is two-fold: firstly, the property is immediately taken off the market and secondly, the price is fixed.

It is essential that the reservation fee is refundable subject to legal checks being satisfactory otherwise it will be very difficult on occasions to recover the payment in the event your lawyer advises that the purchase should not proceed. The best course would always be to have a lawyer already instructed and as soon as a suitable property is located, have him/her undertake the following checks:-

• The boundaries and the legal description of the property

• Determination of the current legal owner of the property or land involved

• Planning permission has already been obtained as has building licences

• Bank guarantees are in place

• The land has been properly re-zoned for development purposes

• All utility services will be available to the property

However, it must be emphasised that without the reservation fee being paid, the seller is not committed to selling the property to you. Therefore, ultimately it is the purchaser to assume the risk of making any payments before involvement of the lawyer.

Contrato Privado - Private purchase sale contract

Once all the above is undertaken, the purchase contract will be drafted and then presented to the parties for signature. This will contain all the relevant terms and conditions of the purchase including payment terms, completion dates, etc. At this juncture, a deposit will be paid to the seller and both parties are then bound by the contract to paying the balance of the purchase price and transferring ownership of the property.

In the event that the property is "off plan", it is likely that the seller will require stage payments throughout the development period; your lawyer should keep you informed as and when such monies are due.

Signing of the public deed (escritura)

As distinct from buying a property in the UK, all property transactions are concluded before a Notary who is a legal official of the state. The Notary will witness the signatures of the parties indicating transfer of title and check the legal documents presented.

The Notary will also seek to ensure that any relevant taxes and community charges have been paid.

The Escritura is only signed once the property is completed and the handing over of keys takes place. Thereafter, the title deeds are sent to the land registry where the transaction is officially registered in Spain.

Cost of purchasing a spanish property

It is important to realise that although a property may be advertised at say €200,000, the costs of purchasing that property must be added to your budget. The general rule is that if you are buying a property without the need of a mortgage, the additional costs for legal fees, notary, stamp duty (if property is new), sales of transfer taxes will be equivalent to about 10%.

In the event a spanish mortgage is involved, it is suggested that a sum of 13% should be added to the purchase price.

Taxation

Sadly, the payment of tax is as certain as night is day. The answer, however, is not to evade tax but to mitigate liability.

Although no longer a legal requirement, as a foreigner, by far the simplist way to ensure that your tax affairs are in order is to appoint a fiscal representative; a lawyer or accountant is usual.

It is hardly surprising that once you have purchased your Spanish property, you will immediately need to contribute to the community, schools, local police force etc, in the form of direct taxation - Contribuciones - a form of council tax but significantly less punitive than UK bills.

Additionally, there is an annual wealth tax, property owners imputed tax and, when you sell the property, Capital Gains Tax and, if you die, Inheritance Tax.

Consequently, it is sensible to appoint a fiscal representative. They will make life easier and their work represents excellent value for money.

Spanish Wills

It is absolutely essential that any purchaser of Spanish property makes a Spanish will to dispose of assets in Spain. Spanish Inheritance Rules are complicated and a Will should avoid unnecessary legal problems for your heirs.

It is not expensive and a Spanish Will should be separate from your wishes to dispose of UK property.

Mortgage

Spanish Banks are happy to lend up to 70% of purchase prices to non-resident buyers. Many British buyers are more comfortable borrowing in the UK releasing equity from existing property ownership.

Residency

Legally, any foreigner can stay up to 90 days as a tourist. If you are an EU citizen and intend to stay for more than 6 months per year in Spain you should consider applying for residencia.

Conclusion

The above is a very basic guide to issues that should be considered when buying a propety in Spain. However, as in the UK, it is not necessary for you to know and understand the technical details but merely be aware of them; that is the task of the professional people you instruct to undertake the work.

Also in this section

• A Guide to buying in Spain
• How to run a successful holiday home abroad
• Legal Advice
• Property
• The Legal Process

 

HIFX - Foreign Exchange Specialists