property conveyance in spain
The Purchase or sale of a property in Spain is a straight forward transaction, so long as certain procedures are followed and understood correctly.
Learn the basics before you start looking.
Please visit the sections listed below with useful information about the different aspects to consider before buying a property in Spain.
We recommend the following steps:
Always use a reputable Real Estate Agent .
Instruct legal counsel as early on in the purchase procedure as possible, preferably before any exchange of funds or reservation deposits take place.
Once a reservation deposit has been delivered to the Real Estate Agent or to the Vendor’s Lawyer, your legal counsel should carry out a full and thorough due diligence on the property to inspect any hidden liens or defects on the title.
Once a satisfactory search of the property has been made, legal counsel shall then prepare a purchase and sale agreement, which will specify the terms and conditions of the sale, including price, payment terms, completion date and any covenants of the parties or existing liens on the property.
The standard procedure when a resale of a property is negotiated, is that 10% of the property’s value is tendered to the vendor upon execution of the private purchase and sale agreement, and the payment of the balance by the specified completion date or effective date, time at which the title deed (Escritura Publica) is signed before the Notary Public, and the buyer takes effective possession of the property.
When purchasing a new property, the form of payment of the purchase price may have one of the following characteristics;
Payment in two installments eg: 30% + VAT at the time of execution of the purchase and sale agreement and 70% + VAT upon completion (subject to specific terms), or
Payment in monthly installments payable throughout the construction period.
If clients foresee the possibility that they will not be able to attend the signing of the title deed before the Notary Public, then it is customary for clients to grant a Power of Attorney to their legal counsel beforehand, to represent them and intervene on their behalf at that time.
Upon execution of the title deed before the Notary Public, taxes are paid on the transfer of the property to the Local Tax Office (oficina liquidadora) and the title deed is registered with the Local Land Registry.
Costs and Applicable Taxes
In general terms, one should anticipate that the total costs involving the purchase or sale of a property is approximately 12-14% of the purchase price. This total amount estimate would include legal fees, land registration fees, notary fees, land registry fees, management fees and related taxes.
The break down of estimated taxes due would be as follows:
New Property:10% VAT + 1.5% Stamp Duty tax.
Resale: 8% Transfer Tax for properties with total value below 400.000 €. 9% for properties with a total value equal or in above 400.000 €. Properties in excess of 700.000 € will pay 10%. (Law 18/2011 Government of Andalusia).
According to Spanish applicable law, parties involved in the purchase or sale of a property in Spain are required to hold a Foreigner’s tax Identification number, N.I.E. (Numero de Identidad de Extranjero), which is a fiscal identification number. This is legally required to enable the purchaser or seller to pay taxes on the property, formalize a mortgage, file annual personal income tax forms, and formalize house insurance policies, among others. To apply for a NIE the applicant must appear before the Local Police Station in the area in which the property is located.
Power of Attorney: On many occasions clients are unable to travel to Spain on a regular basis and particularly attend the execution of the title deed before the Notary. Should this be the case, then a power of attorney granted in favour of the client’s legal counsel, is usually the best way to proceed during the initial stages. In order to formalize such power of attorney, the client should do so before a local Notary Public during a visit to Spain, or alternatively back in their home country either before a licensed Notary Public or before the Spanish Consulate abroad.