Nerja Today

Buying a Property in Spain

A licence or authorisation is no longer required in Spain which means that anyone can sell properties, so be careful with the estate agent you choose. 
Spend time looking around to find the area you would like to live in. Location can drastically affect the price, even within a small village. 
When buying a resale property a Contract of Sale & Purchase is drawn up and a deposit paid, normally 10% of the agreed sale price, and the contract is signed by both parties, Vendor(s) and Purchaser(s). This commits both parties to the price and condition of the Contract

Ask for a copy of the deeds of the property (Escritura) to verify that the people who are selling are actually the owners of the property. Also request a copy of a document from the Land Registry (Nota Simple) which shows if there are any mortgages or other debts registered against the property.

Ask for an explanation of any costs such as community fees and the cost of the transaction.

A CONTRACT SHOULD INCLUDE:
The price and conditions of payment.

All charges on the property which are the responsibility of the Vendor up until the day of signing.

A complete description of the property, size in square metres, with building licences for extra work carried out, not included in the original deeds.

Full registration details of the Land Registry.

A clear explanation of payment conditions.

A clause verifying the fact that the property is free of sitting tenants., unless otherwise agreed.

A complete inventory of furniture if sold furnished.

A clause referring to the 5% retention of the declared purchase price which is held back from non Spanish Residents selling a property for tax reasons.

A penalty clause with a specified date for payment and a back-out clause.

The purchase is formally completed when the public title deeds of purchase/sale are signed before a Notary Public, payment of the agreed price is made and possession is given to the buyer.

Four or five days after completion, the deed is collected from the Notary’s office. With the original deed, all the relevant transfer taxes are paid in the different tax offices and eventually the deed is taken to the Land Registry in order to procure formal registration of the title to the property.

Depending on the Land Registry of the area, registration may take about 15 days. The Land Registry will then give notice to the lawyer that the registration has been completed and the deeds are available for collection. Land Registry fees are paid then.

During the interval, as from the moment of signing, the purchaser can have a copy of the records by requesting from the Notary Public a ´copia simple´.

PROPERTY PURCHASE COSTS
Basically there are two taxes and two fees which have to be paid on the transfer of a property. The two fees are for the notarisation of the deeds and for its registration. According to the current law the notary fees are split between the buyer and the seller and the registry fees fall to the buyer. Usually the buyer pays all of the costs arising from the transfer.
The two taxes are dependent on who is selling the property.
In the case of a company selling the rate of VAT is 7% on the declared price and a 0.5% stamp duty which is added to the aforementioned VAT. If a company sells land only the rate is 16%.
The second tax is called Plusvalia..The local municipalities charge a tax on the increase of the value of the land since the previous sale. It is not based on the seller’s capital gains tax but on a number of calculations and values set by the Town Halls. This tax, according to the law it is the seller’s responsibility, although it is commonly stipulated in the contract that the buyer pays it. It is a point which will be negotiated between buyer and seller.

TAX OBLIGATIONS FOR FOREIGN OWNERS NON RESIDENTS
State taxes. Here there are only some guidelines about the general case of non-resident who owns just one property in Spain, which is simply for his private use. Other cases require specialised advice by a solicitor.

A) Tax on the income of natural persons (I.R.P.F.). Generally the property is simply for private use and, therefore, it does not generate income. In this instance is also subject to taxation, as the sum resulting from the application of the 2% cadastral value (which appears in the yearly local rate bill or IBI), is deemed to be income.

B) Wealth Tax (Patrimonio) % of the value declared in the Purchasing Deed. Both taxes are paid on a yearly basis. The term for the payment goes from the 1st of January until de 31st of December every year, and the tax paid corresponds to the previous natural year. This must be paid at the Tax Department. It is the obligation of the owner through his solicitor to fill in and serve the tax return at the Spanish Treasure.

Local taxes. Tax on real estate (I.B.I.). this is a direct tax with real value (on the house). Each Town Hall Council determines the percentage to be applied to the official value of the property within the limits laid down by de law. It is paid annually.

BUYING A NEW PROPERTY OR A PLOT OF LAND
Before handing over a deposit and signing a contract, you must ask to see a Nota Simple from the Land Registry Office, showing proof that the person from whom you are buying the property or the land is the registered owner of the land, and that there are no mortgages or encumbrances on the land.
In the case of a property under construction you must see proof that a building license has been obtained from the local Town Hall, and paid for.

For this type of purchase a contract should contain reference to the following points:

The size of the plot and of the house/villa and total price on completion

Reference to the deposit, normally 25% and the subsequent payments, subject to a certificate from the architect, up until the signing of the deeds and the handing over of the keys.

Reference to the fact that the Developer/Builder is responsible for the following payments:

The 10 year insurance policy for the foundations and structure of the property Seguro Decenal. Under recent legislation, if a planning application for the property that you are buying was submitted to the Town Hall after the 5th of May 2000, the developer must, by law, have an insurance policy called Seguro Decenal, which is an insurance guaranteeing the foundations and structure of the property for 10 years. Without this insurance policy, an deeds cannot be obtained for the property.

Building Licence (Licencia de Obra) which is obtained from the Planning Department of the local Town Hall;

Architects & Surveyors fees for a complete project for the building of the house/villa and when the building is completed.

The Certificate for the termination of the building; and the Licence of first occupation of the house/villa (Certificado de Fin de Obra and the Licencia de Primera Ocupación, respectively ).

The Boletín de Instalación (Certificate of installation) issued by the Delegacion de Industria (Delegation of Industry) of the electricity and water installations.

All the registration details of the land where your property is being build must be included. 

A detailed plan of the property, with all the dimensions, and a specification of the building, with prices where applicable of floor and wall tiles per square metre. The plans and specification should be annexed to the Contracts and signed by all parties. This is called a Memoria de Calidades.

A penalty clause should be included in the Contract, which states that if the building is not completed on the date agreed in the Contract, then the Developer/Builder must pay an indemnity for each day after the completion date. The sum per day must be negotiated with de Developer/Builder and reflected in the Contract.

The final payment and the signing of the Escritura will be made on the completion of the building and on presentation of the Licencia de Primera Ocupacion ( the Licence of First Occupation ).It is advisable to always ask for a written quotation with regards to any alterations or additions to the property, and this should be signed by both parties, to save any disputes on ‘extras’ when the building is completed. This may extend the completion date of the building in which case, a new completion date should be agreed in writing and signed by both parties.

THE PROCEDURE FOR BUYING LAND AND SUBSEQUENTLY BUILDING ON IT IS AS FOLLOWS:
Find the right plot and check with a nota simple that there are no claims on the land and that the person selling is the owner or is legally representing the owner. When buying a plot of land the building licence may not have been obtained in which case the plot will have probably cost you less and once the licence has been obtained the plot will increase in value. If the land does have a licence then check that it has not expired.

Sign deeds for the land.

Contract an architect to draw up a project with various alternatives including estimated cost of building. 

With the selected project go to the local town hall and apply for a building licence. This should take between 4 and 8 weeks depending on the locality and local laws. Your project will have to conform with local laws with regards to construction.

Pay for the building licence. The town hall will then come and mark the limits for construction with regards to public access roads.

Take the project to various construction companies and compare cost estimates.

When you decide to go ahead tell the architect and he or she will supply the libro de ordenes in which everything to do with the work is written down including specific mention of changes to the original project.

An agreement must be made with the construction company with regards payment in stages. This usually in accordance with work done and certified by the architect, more or less monthly.

During the construction period certificates will be issued by the technical company to guarantee the work done. These are called D5.1 for the foundations, D5.2 the structure, D5.3 the outside walls and finally D6 for the end of the work being carried out. The construction company will take responsibility for this.

When the building has been completed, with the above mentioned certificates, you apply to the insurance company for the Seguro Decenal which insures the structure for 10 years. If you are planning on building a property arrange for an approved and registered company to carry out a geological survey of the land including laboratory tests which are carried out on the quality of the reinforced concrete being used for the foundations and the structure, in order to obtain this certificate.

You will also need a certificate of the end of the work Certificado Fin de Obra which is issued by the technical architect. Also a certificate showing that the building has been registered for taxes at the town hall as well as certificates from the plumber and electrician to certify the work done. This must come from registered professionals.

With certificates mentioned above you apply for Licencia de Primer Ocupación, from the Town Hall. When you sign the deeds for the now completed property you will need to show all of these certificates as well as a sworn declaration from the architect that the work has been carried out according to specification in the original project.

The purchase of property or land and the construction of property should be dealt with very carefully using reputable estate agents and lawyers.