Buying A Property In Spain

The second home concept never ceases to be popular with us
Brits. Even when the property market may be slowing, Spain is one of the most popular choices for Uk property buyers.  Not just for investment reasons, but because they want a property to enjoy.  This is a lifestyle choice.

Many are unlocking some of the equity in their homes or using their
hard-earned cash, or taking a tax free lump sum from their pension and buying their dream home in the sun. Spain is the most popular destination in Europe for retirement
and that second home. If you have decided to buy a property in Spain there are important factors to be considered.

Price. You have probably found a property to meet your
needs, within your price range and almost certainly cheaper than a similar
property in the UK.
As enthusiastic as you may be, do not act hastily. Often buyers get carried
away and believe everything the seller says. Before you sign any documents or
pay any money, ask for a copy of the Escritura also known as the Land
Certificate, which will confirm that the owners do own and can sell the
property, and then seek advice.

In some instances the seller will insist that to speed up the
transaction the buyer and seller use the same lawyer.  However, good advice to all prospective
buyers is that independent legal advice should always be sought.

Once you have found a lawyer ask him to explain the
procedure for buying/selling in Spain and to provide a breakdown of the costs that you will incur in the purchase.
Legal, Notary and land registry charges and transfer taxes can add up to 15% of
the cost of the property.

The first thing that a lawyer acting for the buyer will do
is carry out a land registry search also known as a nota simple. The search
result will reveal who owns the property, if there are any charges on the
property and its dimensions. Whereas in the UK a local search will reveal details of planning permissions, adopted roads, etc
a ‘nota simple’ will not and if you are concerned about your views then
additional enquiries should be made.

Although you may have agreed the purchase price you then
have to agree the amount to declare in the Escritura with the seller. Based on
this amount you will be liable to pay transfer tax if the property is already
registered or VAT if you are buying a plot of land or new build. The seller
will be liable to pay capital gains tax and if they are a non-resident this
could be as high as 35%. Therefore it is likely that the seller will ask you to
under declare the purchase price in the Escritura. Try to avoid this if
possible. Further if you are buying fixtures and fittings consider if part of
the purchase price can be apportioned to these.

With the purchase and declared price agreed the seller will
either instruct a lawyer or agent to assist them in preparing a contract of
sale. The contract of sale will be followed by the signing of the Escritura in
front of the local notary who is an important official in Spain as he collects taxes and authenticates sales and purchases.

Assuming that all is in order and depending on whether or
not the property is built the parties will either proceed directly to the
signing of the Escritura and completion or agree a contract of sale. The
contract is frequently used where the property is yet to be constructed.

Spanish Law does not require a contract however it is
recommended as if a deposit is paid it can provide for its return in the event
of a breach by the seller. Or where a property is in the early stages of
construction, the contract will stipulate when payments are to be made.

Once the contract is agreed, a deposit will be paid with the
balance payable at the signing of the Escritura. If the property is being
constructed, stage payments will be made over the subsequent months with the
final payment being made at the signing of the Escritura.

The Escritura once drafted will state who the new legal
owners are. Therefore it is important to consider in whose name the property
will be held. This will usually depend on whether or not you intend to hold
onto the property long term or you have purchased the property as an investment
with a view to selling it in the medium term. Professional advice should be obtained
as this could have an effect on your capital gains and inheritance tax
liabilities at a later date.

The signing of the Escritura will take place after the
signing of the contract although it is not unusual to proceed directly to the
signing of the Escritura and forgo the contract. If it is unlikely that you
will be present for the signing of the Escritura, a deed can be prepared, also
known as a Power of Attorney, authorising someone to sign and act on your
behalf.

Unless obtained already it is essential you obtain your NIE
numbers. These are your Spanish Fiscal Numbers which can be obtained using a
Power of Attorney, so that transmission taxes can be paid on completion.
Without these completion or registration of the property in the buyers´ names could
be delayed.

Once the Escritura is signed before the Notary the lawyer
the property is yours! CONGRATULATIONS!

Your lawyer will then deal with payment of the transfer of
ownership taxes and notary fees and arrange registration of the property in the
buyers’ names.

Two final recommendations: Spanish wills, which you will
need to sign in front of a Notary, should be prepared as in the event of death
of one of the owners, title does not automatically revert to the survivor. If
you intend to live in Spain for more than 182 days a year, a foreign national residency permit is required.

For more information on this subject, or to make an appointment for a
private consultation, please contact us at De Cotta Law, De
Cotta McKenna & Santafé on:

Tel.: +34 952 931 781
Fax: +34 952 933 547