Process of buying a Spanish property

In Spain the purchase of a Spanish property is a regulated process, therefore our lawyer will follow all the process to guarantee maximum security on the transfer. To ensure that the Spanish property you wish to buy is free of debts and restrictive clauses, it is essential to have our English-speaking lawyer to protect your own interests.

Legal process for buying a Spanish property

The legal side for buying a spanish property falls into two parts, the preliminary contract (Contrato privado de compraventa) and the completion contract (Escritura de compraventa).

Stage 1: Preliminary Contract (Contrato privado de compraventa)

Once a price has been agreed with the vendor both parties are best advised to sign a preliminary private sales contract, a Contrato privado de compraventa. However, before signing this preliminary sales contract proof that the vendor owns the property and that it is free of charges should be demanded. In Spain debts are charged to the property and any outstanding mortgage will be passed on to the purchaser. A Nota Simple will confirm if a property has any outstanding debts on it.

Then, unless you are paying in full and in cash immediately, a private preliminary sales contract (Contrato privado de compraventa) is drawn up containing all the details such as a description of the property, purchase price, and date of completion. At this stage you will be expected to pay a deposit of between 5% and 15% of the purchase price, and the estate agent will hold these funds in a bonded client account. If you intend to raise finance for the purchase this private preliminary sales agreement should have an arres agreement (i.e. a 10% deposit) and a date specified for completion. It is possible to sign the private preliminary sales contract without such a deposit and technically you are permitted to sue a vendor who subsequently withdraws but with an arres agreement in place. Should the vendor decide to withdraw you are entitled to twice their deposit as compensation.

Stage 2: Final Contract (Escritura de compraventa)

On the completion date the balance of the purchase price (sales price minus deposit) and all fees must be payable by the purchaser. The vendor and purchaser then sign the Escritura de compraventa contract, which is equivalent to the Deeds of the property. The purchaser is then issued with the public deed of conveyance (escritura) in front of a Notary Public, and a copy will then be passed to the tax office and on to the property registry. The Notary Public in Spain is a public official who will be required to witness the deed of sale, however expert, independent legal advice should be taken to protect your own interests.

Costs related to buying a Spanish property

The purchaser must pay the Notary's legal fees and property sales taxes.

Property Sales Tax

The amount the purchaser pays will vary depending on the type of property and the nature of the vendor. If the vendor is a property developer the purchaser will pay 7% in VAT and 5% in AJT (stamp duty) unless the property is a piece of land or commercial property, in which case the purchaser will pay 18% VAT and 1% AJT (stamp duty). If the vendor is not a property developer, the purchaser will pay 7% in property transfer tax.

Plusvalia

Plusvalia is a tax levied by the local Town Hall based on the particular area where the property is located, on the surface area of the land, on the Catastral value and on the date of the previous title deed. This tax is essentially a tax on the increase in value of the land. By law the vendor (seller) is obliged to pay this tax. If you are asked to pay this tax when buying a Spanish property, make sure you establish exactly how much it will be as it can vary substantially.

Notary's legal fees

In addition to the property sales tax the purchaser also has to pay the Notary (usually between €400 and €800) and the property registry inscription fees (65% of the notary fee). If you take out a Spanish mortgage a further nominal cost will be passed on to you by your notary for registering the charge of the lender with the land registry.

Differences between buying new and old Spanish properties

Due to the high demand for new Spanish property, most purchasers buy properties "from specification also known as Off-plan" from Spanish property developers. This means that the purchaser will buy new Spanish properties from the plans, and select which property they want within a particular development. Typically, purchasers who buy a new property have to make regular installments during key stages of the property development (opposed to paying for the property when it is complete), and an initial deposit of 5% to 10%. The initial deposit and regular installments vary from one Spanish property developer to the other. If you are buying a new Spanish property you do not own the property until the work is completed and you are in receipt of the relevant certificates.