Costa Del Sol Property Spain will always recommend you use a lawyer to take you through the purchase process and below is a brief summary of terms and official documents required.
Buying Guide Costa del Sol
VALOR CATASTRAL.
The cadastral value of the property as decided by local tax authority.
CONTRATO DE OPCIÓN DE COMPRA.
Private purchase contract.
ESCRITURA PÚBLICA DE COMPRAVENTA.
Title deeds.
ESCRITURA.
Ownership deed.
HIPOTECA.
Mortgage.
IMPUESTO SOBRE EL VALOR AÑADIDO (IVA).
VAT.
IMPUESTO SOBRE BIENES INMUEBLES (IBI).
Annual property tax.
NOTARIO.
A Notary who records the sale and purchase of land or property.
NOTA SIMPLE.
Property Registry certificate.
NÚMERO DE IDENTIFICACIÓN DE EXTRANJEROS (NIE).
Fiscal identity number for number residents.
BUYING PROCESS
As with every property purchase, when you find the perfect property in Spain you will need to agree the price with the vendor.
Reserve your property
In order to secure the property (at the agreed price) and take it off the market you’ll need to pay a small deposit of between 3,000€ to 6,000€ and sign the Private Purchase Contract (PPC). We can recommend a Spanish lawyer who speaks your language and has bags of experience and together, as your agent, we would handle of this for you.
As soon as you have signed the PPC, your lawyer will carry out legal searches to check that the Title Deeds are in order and there aren’t any charges, debts, sitting tenants or occupants and that all taxes and utilities are up to date. If not, then you can allow for these charges when making the final payment.
Option to Purchase Contract
Approximately, 2 or 3 weeks after you reserve the property, once the searches have been carried out, you will need to formalise the purchase by signing the Option to Purchase Contract and paying 10% of the full purchase price. At the same time you sign this contract, the date of the Purchase and Sale Title Deed signing will be agreed. At this stage the vendor must sell the property to you and cannot change its mind or sell to another party
Purchase and Sale Title Deed
You will sign the Purchase and Sale Title Deeds before a Notary, who will legally identify you as the purchaser and vendor, ensuring that all legal requirements have been met and bills have been paid etc. If you prefer, rather than attend the Notary, you can give your lawyer Power of Attorney so they can deal with it on your behalf. Of course, at this stage you will need to make the final payment, less any taxes and disbursements. Once you have signed and paid the balance, you will become the legal owner of the property, you’ll receive the keys from the seller and you can crack open the champagne to celebrate. The last step is to register you as the official owner with the Land Registry.
BUYING COSTS
You’ll need to allow an additional 10% to 12% of the purchase price to cover all fees and taxes, including the Notary, lawyer and of course your agents.
Here is a breakdown of what to expect:
Notary fees
The majority of the property purchase costs are calculated on a sliding scale according to the value of the property. The Notary is slightly different; the price will also depend upon the length of the contract and the number of purchasers.
Land Registry fees
Immediately after signing the Deeds and getting the keys, you’ll need to be registered at the Land Registry as the new owner. How much you pay in Land Registry fees will depend on the complexity of the document and the process can take up to 8 weeks.
Transfer Tax
The amount of the transfer tax payable will depend upon the ‘declared’ value of the property, in other words, the value listed on the Title Deed. For example, tax on a property valued under €400,000 is 8% cent and if valued between €400,000 and €700,000 the tax will be 9% per cent of the purchase price and from €700,000 + the transfer tax will be 10%. These figures are for resale properties – this rate increases to 16% if you are purchasing plots of land, commercial premises, or garage spaces. Please note that 10% transfer tax will be payable on all off plan properties and new developments.
If you are looking to acquire a Spanish mortgage there will be a further 2% to 3% costs. These costs are made up of the mortgage arrangement fee and additional notary and land registry fees for the registration of the mortgage. Your total purchase costs therefore will be approximately 14% to 15% depending on the purchase price.
Lawyer’s fees
Your lawyer will usually charge around 1 per cent of the purchase price + IVA.
NON – RESIDENT FISCAL IDENTIFICATION NUMBER - NIE
Firstly, as a non-resident, before you buy a property you’ll need to register for an NIE number at the local police station. This will be your unique fiscal identification number. It’s compulsory and must be produced when you carry out any financial activities, opening a bank account, applying for credit etc. But don’t worry you don’t have to do this yourself, we can arrange for someone to take care of this for you.
COST OF OWNING PROPERTY IN SPAIN
Once you have purchased your little part of Spanish paradise, you will need to budget for a number of running costs, some universal such as taxes, utilities and others like community fees which are peculiar to Spain.
Utilities (water and electricity – gas is not generally mains supplied)
Most electricity companies operate a similar system of monthly bills, which include a small fixed rate for rental of the equipment and usage, plus a charge for consumption based on the amount of kilowatts used. Water is generally billed on a monthly basis according to consumption, water meters or included in community fees.
Community fees
Unless you live in a stand-alone property on your own land, your property will most likely be part of a community, in which case you will be liable for community fees. The fees cover all aspects of running the community including gardening, maintenance and electricity (communal areas) administration and sometimes water supply is included. The rate is set according to the running costs and is divided amongst all of the owners.
Income tax (non-resident)
As a resident and a non-resident you are liable to pay tax on any assets you own in Spain, such as property. The tax will be calculated on a sliding scale according to the ‘catastral’ (i.e. the tax value as decided by the regional tax authority, not the market value) and should be paid annually.
IBI (real estate tax, local rates and council tax)
This charge is also based on the ‘catastral’ value of your property as set by the local tax authority and is payable annually.
Basura (Rubbish collection)
The sum is set by the local authority and is payable annually.