How to Buy a Property in Spain
1. Before exchanging the title deeds:
- Acquisition an NIE
- Checking licens in the Property Registry
- Checking payments of municipal taxes
- Checking payments to the community of owners
- Checking of outstanding debts with the utility companies such as electricity, water, gas...
- Acquisition of mortgages and other credits
2. When exchanging the title deeds:
- Presentation of valid passport
- Presentation of NIE
- Receipt of payments required prior to exchanging the title deeds
- Proof of means of payment required at the exchanging of the title deeds
- In the case of a foreign non-resident, bank certification of the origin of the funds
- To be presented by the vendor; certificate from the community of owners
- To be presented by the vendor; last receipt of payment of the local rates
3. After the exchange of the title deeds:
- Recovery of the title deeds from the Notary Public
- Payment of taxes within 30 days of signing the title deeds
- Presentation of the title deeds for registration in the Property Registry
- Notification of change of ownership to the Municipal Property Tax Office
- Notification of change of ownership to the community of owners
- Contracting of utilities
- Notary : Approximately 0.25% of the purchase price
- Registries : Approximately 65% of the Notarial fees
- Lawyers : Whilst their intervention is not necessary, normally this is 1% of the purchase price plus VAT
The Spanish judicial system guarantees the legal security of a property owner. To access the same, it is necessary to complete a series of steps with the objective of registering the property purchase in the Property Register in such a way that it becomes the Registry that provides the legal guarantees against third party claims against ownership.
We can identify three stages: 1. Prior to the exchange of the title deeds before the Notary Public. 2. Exchange of the title deeds before the Notary Public. 3. After the exchange of the title deeds.
1. Procedures prior to the exchange of the title deeds:
If the purchaser is a non-resident foreigner in Spain, he must possess a residence permit, even if he is a European citizen, be registered with the Spanish tax office and paying taxes in Spain as a resident. He must also be in possession of a valid passport at the time of exchanging the title deeds and a Foreigner's Identification Number (NIE), a document which must be applied for in the offices of the National Police in the territory where the property to be purchased is located.
The NIE is an administrative control issued by the Interior Ministry and is essential for the payment of taxes inherent in the property purchase. The NIE must be applied for in person by the interested party, although it is possible for a third party with notarised power granted to this effect overseas, given that notarial powers granted within Spain are not being accepted for the NIE applications in the name of those requiring them. In addition to the relevant application form, the original and copies of the powers, in the case that they are to be used, original and copies of the passport of the interested parties (a consular or notary certified copy is sufficient) and a copy of the document which provides the reason for the application, which in this case would be a copy of the private purchase contract, although in the case of European Union citizens a copy of the contract is not required.
Before signing any document which would link one to the property, one should ensure that there are no liens against it, to this end we request a copy of the Nota Simple Informativa (Simple Informative Note) from the Property Registry, where the property is registered, providing the Volume, Book, Page and Number of the property in question. In the case of newly constructed properties where a purchase contract is signed before the division of the different apartments, only the original plot can be requested, to discover whether there are liens which could be passed on to the resultant apartments or plots in the future.
One then proceeds to check that the property is up to date with all payments to the community of owners, if this exists and is charging (generally not the case for new homes), as well as the payments required by the corresponding Town Hall, to ensure that there is no debt of local rates, rubbish collection taxes or any other fee or tax which could be levied by the Town Hall.
All processes to obtain finance (mortgages and other loans) should be completed in the event that they will be required to complete the purchase.
A private purchase, purchase option or pledge contract must be signed prior to the exchange of the title deeds in which the price is fixed, identifying the exact property to be purchased and he conditions under which the purchase is to be completed (completion period, division of costs, ...), clearly defining whether the VAT is to be added, as is the case with newly constructed properties as well as the rate to be applied, depending upon the type of property and its characteristics.
2. Exchanging the title deeds before the Notary.
This phase comprises signing the documents before the Notary Public, which allows us to register the property in our name. This document should outline the conditions agreed for the purchase and for this process the following documentation should be presented to be attached to the purchase title deeds:
- Valid passport
- Confirmation of payments made prior to the exchange of title deeds, allowing payments to be demonstrated, a legal obligation imposed to avoid money laundering.
- Confirmation of the means of payments to be made at the time of exchange of title deeds (cheques, promisory notes, post dated cheques, wire transfers, mortgages, ...)
In the case of non-resident foreigners, including European Union citizens, the providence of the funds must be credited, both for payments made in advance of the exchange and those made at the time of the exchange, identifying the receiving bank, the providence from the non-resident bank account, the account holder of the account of providence, and the property for which the payments are made , identifying the same (certificate of investment).
Presentation, by the vendor, of a certificate from the community of owners certifying that the property is up to date with payments, although, in the case of new properties, the obligation to make these payments does not come into force until a majority or all the properties have been registered.
Presentation, by the vendor, of the last payment of the local rates (IBI) whose payment deadline has passed, in which the registry identification of the property in question is clearly indicated.
3. After the exchange of title deeds.
Independent of the fiscal obligations of the vendor, given that theirs is the obligation to pay the capital gains tax, it is normal that the purchaser undertakes to pay all the costs related to the purchase, unless the parties agree a different division of the costs prior to the exchange of contracts, the procedures after the exchange of title deeds being:
- Collection of the title deeds from the Notary. The notarial fees for the exchange of title deeds usually represents 0.25% of the purchase price (excluding mortgage), although this may vary depending upon the number of pages in the deeds, the number of vendors and purchasers and the number of properties being transferred.
- Payment of taxes within 30 days of the exchange of title deeds to the Collection Agency of the Junta de Andalucía and the Property Registry governing the property, the amounts payable dependant upon:
- 1% of the purchase price with VAT (AJD);
- 8% fo the purchase price in the case of properties without VAT (ITP);
- Presentation of the title deeds for inscription in the Property Registry with jurisdiction for the area in which the property is found. The registration fees are, approximately, around 65% of the notarial fees.
- Communication to the property tax office of the change of ownership.
- Communication to the community of owners of the change of ownership.
- Contracting of utilities.
Lawyers fees, in the event that these services are used, normally account for 1% of the purchase price plus VAT, given that lawyers fees are freely set, it is advisable to fix the total cost of the operation in advance.