Buying Property in Spain

Whatever your reasons for buying a property this is probably the first time that you have bought a property in Spain, or even abroad.

We have put this guide together to help you understand a little more about the process of buying in Spain.

This guide is aimed at providing some basic information about buying in Spain and tries to answer the majority of the common questions that we are asked about. Although we hope that you will find it useful it is important to remember that it doesn’t cover all legal issues involved and certainly isn’t a step by step DIY guide to buying in Spain. It is still recommended that you seek advice from a professional before proceeding – after all we do this every day and have been doing so for many years and therefore know all the tricks and pitfalls that you may come across.

We also know the practical solutions to the problems that exist and also know how Spanish Law interacts with UK law.

Buying property in Spain faq’s

Is the legal system in Spain the same as the UK?

No, they are very different, but there is an interaction between them when you buy a property in Spain. That is why the best person to advise you on your purchase in Spain is somebody who understands both Spanish and UK law

Do I need a lawyer to help me buy in Spain?

Surprisingly this is the most common question that we get asked. No, you don’t – just like you don’t necessarily need a lawyer when buying in the UK. However, in reality you would always use a lawyer when buying in the UK so what is so different about buying in another country where you probably don’t have experience of buying before? For further reading.

I have been told that I don’t need a lawyer but need a Notary. Is this true?

The Notary is important in Spain but tends only to get involved at the end of the transaction. His role is to carry out some basic checks at the end and attend to the signature of the title deed and in some cases to register the property. He doesn’t normally advise on whether the contract is OK to sign, whether you should pay the deposit, who should own the property, and so on.

I have heard that there are problems with buying property in Spain. What is the situation?

Certainly there are potential problems when buying in Spain, just like there can be in any country including the UK. Most of the potential problems that you read about can be avoided by using common sense and by instructing an independent lawyer to advise you on the purchase. We often see people with problems with their property and they invariably tell us that they didn’t use a lawyer or used the lawyer given to them by the seller or estate agent.

Are the costs more in Spain than in the UK?

Yes, the total costs in addition to the purchase price are higher than you will be used to in the UK. It is therefore important to factor these into your budget from the beginning. Luckily property prices are currently rock bottom which not only reduces some of these costs but also makes the purchase price much cheaper.

Costs and timings

The total cost of buying in Spain is higher than in the UK. As a rough rule of thumb you should budget for something in the region of 11% to 13% of the value of the property although the costs vary across the country. This should cover all legal fees, Notary fees, taxes and so on. If you are taking out a mortgage the cost will be slightly higher as there are normally bank costs and extra taxes to take into consideration.

You may be asked to sign a reservation contract and pay a small deposit (typically around €3,000) to take the property off the market for a couple of weeks. This doesn’t commit you to buy but it is still worth having your solicitor to check that the contract is OK before signing. Just because a contract says “Reservation Contract” on it doesn’t mean that it is one.

After that you would work towards a full purchase contract and pay typically around 10% deposit. That contract commits you to buy the property.

On a new property you may have to make stage payments throughout the course of construction.

The balance is paid upon signature of the title deeds and registration.

Mortgages

There are two ways of financing your purchase in Spain through a mortgage.

The first is to release equity from your UK assets to buy the property in Spain. The second is to mortgage the property in Spain. Each has advantages and disadvantages but getting it wrong can cost you dearly so take advice on this.

If you wish we can put you in contact with mortgage brokers either in the UK or in Spain. We do not receive a commission for doing so and are not tied into a particular broker – we simply recommend them because they have given our clients good service in the past.

Obtaining a mortgage in Spain is more difficult than it has been in the past. If you are buying a property in Spain that already has a mortgage on it then it may be possible to take over that mortgage from the current owner.

This is often seen as an easy way of obtaining a mortgage but you should be aware that that mortgage might have been the right one for the seller but may not be the best one for you. For further reading.

Surveys

If you are buying a property we would always recommend that you obtain a survey. If you obtain a mortgage the valuation carried out for the mortgage company will only look at whether the property is worth the amount you have negotiated.

Any defects in the property which do not affect the value will not normally be shown on the report. A survey will rate the condition of all permanent structures and will highlight any important problems that could affect the property value. Depending on the survey this may also give advice as to future maintenance. The survey should reduce the chance of discovering any nasty surprises with the condition of the property once a purchaser has bought the property. If there are any defects the survey will help the buyer negotiate the price or require certain works to be carried out before the property is purchased.

The survey may also reveal that certain works have been carried out or highlight rights that are necessary for the property which we can investigate before the property is purchased.

Currency

Buying any property involves a lot of money.

When you are converting from one currency to another the difference between one exchange rate and another can literally make a difference of thousands of pounds on your purchase.

Do not underestimate the difference that a good exchange rate can make.

We know people who have sold properties and have made more money on the exchange rate difference than they have on the sale of their property.

We are not banks or currency dealers, but would recommend that you investigate the cheapest way of sending your money abroad. If you would like we can put you in contact with currency dealers that we know will give you a good exchange rate and a good service.

Currency dealers have increasingly sophisticated products. You can agree rates for the future. You can get them advising you when to buy or agreeing to buy for you when the rate hits a certain level. You can even agree a fixed rate for longer periods of time if you make regular payments abroad (for example for a mortgage or moving your pension money).

We work with Smart Currency Exchange who can give you a good exchange rate for your purchase and whom we have known for years. We will normally receive a commission for introducing them to you. This does not cost you anything more as they are simply paying us part of what they make. This commission is costed into our overall charges for providing our services.

Powers of attorney

A Power of Attorney is a document which allows somebody to do something on your behalf.

If the title deeds are not being signed in the UK then often clients prefer to grant a Power of Attorney to somebody to sign the title deeds on their behalf.

This has several advantages;

  • You are normally busy and haven’t time to go out to Spain to sign the title deeds
  • Signing title deeds is not particularly exciting and most people prefer to use their time off enjoying the property rather than signing pieces of paper
  • It normally works out cheaper than you going out to Spain to sign
  • You should only give a Power of Attorney to somebody that you trust as they allow that person to do things legally on your behalf
  • In Spain Powers of Attorney have much wider faculties than we are used to in the UK and often have very general clauses in them “just in case”. We try and limit the Powers of Attorney down as much as possible whilst still allowing the person appointed the freedom to do what you need them to do
  • We charge £200 plus tax for drafting up a Power of Attorney. On top of that you will have Notary fees, foreign and Commonwealth Legalisation fee (£30 per document) and often Courier fees. For further reading.

Fractional ownership

Fractional Ownership is not a new concept and has been around for many years – although back then we called it Co-ownership.

Put simply Fractional Ownership is where several people buy a property together. This can be members of a family, friends, work colleagues or even complete strangers.

You buy a share in the property and also share the running costs.

The best Fractional Ownership schemes are those where the cost of buying is closest to the value of the actual share in the property – i.e. the ones where there are not huge margins built into the sale.

Timeshare is a type of Fractional Ownership but Fractional Ownership is not necessarily Timeshare as there are strict definitions as to what Timeshare is.

NIE

The NIE (Numero de Identidad de Extranjeros, which translated literally is your Foreigner’s Identity Number) is your Tax Identity Number in Spain.

There are several times when you are likely to be required to produce your NIE number;

  • When you buy a property
  • Opening a bank account
  • Dealing with the utility companies
  • Taking out insurance
  • Dealing with the tax authorities
  • Buying or selling shares, bonds and stocks
  • Buying a car

The rules on NIEs change regularly and between geographical areas. Sometimes you have to obtain this yourself and sometimes it can be done by somebody on your behalf. We will therefore advise you how this is working and costs at the time that you contact us.

Who should own the property?

This is probably the most important decision that you can make. Getting this right can save you thousands in costs and taxes. Getting it wrong can be an expensive mistake.

The way that you would buy a property in your home country is not necessarily the best way to buy in Spain so don’t assume that you can adopt what you have done here to your purchase in Spain.

There are many options – ranging from personal ownership to company ownership but there is no “one size fits all” solution that works for everybody.

Your circumstances and priorities are different from the next person. We are able to look at your circumstances and your priorities and advise you who should own the property based on that information. The solution may not necessarily be immediately obvious

When deciding on the best form of ownership we would need to take into consideration both Spanish and UK tax and also a range of other circumstances such as your plans for the property in the future. For further reading.

Miscellaneous

Residents Association (Comunidad de Propietarios)

If you are buying in a complex then there will be a Community of Owners. We would need to make sure that all Community charges have been paid up to date before you buy.

Water and Electricity

It is important to check that there is a connection and that the charges are paid up to date.

If you are buying a new property we will need to check that the property has the appropriate Habitation Certificate which allows the services to be connected.

Land Registry (Registro de la Propiedad)

Almost all land and properties in Spain are now registered.

We would obtain a search at the local Land Registry for office copy entries (Nota Simple) of the previous owner’s deed which will show who the registered owner is and whether there are any charges on the title

Town Hall (Ayuntamiento)

Checks should be made at the Town Hall to make sure that the Council Tax (Impuesto sobre Bienes Inmuebles – IBI) has been paid up to date. It is also possible to obtain a certificate from the Town Hall showing that the property has the necessary building permit and complies with local planning and building regulations.

Moving in

Just like back home you will need to arrange to have the utilities and services in your name and often have to set up a direct debit at your Spanish bank to pay the bills. You also need to inform the local Council and the Residents Association that you own the property

Wills

Spanish inheritance laws are probably very different to those that you are used to in your home country.

We can advise you on the various different options regarding your Spanish Will. It is possible to have two wills – one in the Spain covering your Spanish assets and one in the UK covering your other assets. Both Wills need to be drafted carefully to make sure that they do not revoke each other

You can leave your assets in Spain to somebody with a UK will but this doesn’t make sense – the cost of the subsequent inheritance will be more and it is possible that you will inadvertently cause inheritance tax problems

The cost and extra complications of leaving no Will at all is great and should be avoided.

Whilst as a foreigner you do not have to follow the same rules that Spanish people do in terms of who you have to leave your property to, it often makes sense to do so as this can save your beneficiaries huge amounts in tax.

A Spanish Will can be prepared and signed in your local area or in our offices – there is no need to go to Spain. We can arrange for the registration of your Will at the Central Wills Registry in Madrid.

We charge £395 plus VAT for drafting a simple Will for one person or £595 plus VAT for two “Moirror” Wills. On top of that there are Foreign and Commonwealth Office Legalisation fees (currently £30) and Notary fees, which will depend on the Notary.

The Spanish Will can be signed in the UK or Spain. For further reading.

Inheritance

Spanish Inheritance Law states that when you die your property will be shared among your heirs according to the law of your residence. It is a common misconception that as a foreigner you have to leave your assets in accordance with Spanish law, which imposes certain “forced heirs”. A “foreigner” that is resident in Spain can make a Spanish Will leaving his own property to the person of their choice. This Will must contain a declaration that their personal law is governed by the principle of free disposition of property by testament. This is then acceptable to the Central Wills Registry in Spain. Generally speaking a valid Spanish will is sufficient to dispose of the estate as you wish

If a foreign resident dies domiciled in Spain the estate will be distributed according to Spanish law. Domicile is not the same as Tax Residence.

Inheritance tax on property or assets in Spain has to be paid in Spain. The property or assets also have to be declared back in the UK although due to Double Taxation Laws you can offset the tax paid in Spain against the tax payable in the UK.

The rate of inheritance tax payable in Spain will depend on three things;

  1. The relationship between the person who died and the beneficiaries
  2. The amount that each beneficiary receives
  3. The individual wealth of each beneficiary
  4. The autonomous region of Spain that applies

The tax is a tax on the individual beneficiaries rather than the estate as a whole.

Each Autonmous region of Spain sets it’s own Inheritance Tax rates and therefore also sets the tax free allowances that apply. There is a trend towards these tax free allowances to increase, meaning that even though there is no total exemption between husband and wife there is often an increasing amount that can be inherited without having to pay any tax.

….Inheritance

The rates of Inheritance Tax in Spain for a given amount change according to the area of Spain. An example is as follows. Multipliers may also apply to these figures depending on the relationship between the parties and the wealth of the beneficiaries.

AmountBase Tax PayableRemainder Taxed at
Up to €7,993.46€07.65%
€7,993.46€611.508.50%
€15,980.91€1,290.439.35%
€23,968.36€2,037.2610.20%
€31,955.81€2,851.9811.05%
€39,943.26€3,734.5911.90%
€47,930.72€4,685.1012.75%
€55,918.17€5,703.5013.60%
€63,905.62€6,789.7914.45%
€71,893.07€7,943.9815.30%
€79,880.52€9,166.0616.15%
€119,757.67€15,606.2218.70%
€159,634.83€23,063.2521.25%
€239,389.13€40,011.0425.25%
€398,777.54€80,655.0831.75%
€797,555.08€207,266.9536.50%

Ongoing obligations

After you buy a property in Spain there are ongoing obligations that you need to meet;

Insurance

It makes sense to insure your property and contents.

Council Tax (Impuesto Sobre Bienes Inmuebles)

This is normally paid annually in one lump sum between 15th September and 15th November. The amount will depend on the location, size and age of the property.

Non payment of IBI can lead to legal proceedings being taken against you and an embargo on the property.

Utilities

You will be responsible for the utility charges – electricity, gas, water sewerage, rubbish collection etc. from the time that you buy the property and should make arrangements for these to be put into your name.

Community Charges (Cuota Comunidad de Propietarios)

You should pay these otherwise the property can be confiscated and auctioned in order to settle the debt.

Income Tax

If you are non-resident you must declare any income you have earned in Spain. This applies even if you receive this income by renting out to people from your home country and the money never touches Spain.

Even if you do not receive any rent from the property it is assumed that you have received some sort of benefit and you are taxed on this (but only at 0.5% of the Valor Catastral).

You will also normally have to declare this income in the country where you are tax resident but can normally offset the tax paid in Spain through Double Taxation Treaties.

Tax residence

The taxes that you pay when you buy a property in Spain will normally depend on whether you are tax resident there or not.

Tax residence is a determined by a number of factors;

  • How long you spend in that country? Is it 183 days or more a year (not necessarily continuously). If so you are likely to be tax resident there.
  • Is your main home there? If it is then you are likely to be tax resident there.
  • Is your immediate family (spouse and dependent children) based there? If so you are likely to be tax resident there
  • Is your main economic interest there? If so you are likely to be tax resident there.
  • If you do become tax resident in a country then you will normally stop paying taxes in your home country and start to pay taxes in the new country.
  • Do not be tempted to have selective amnesia when it comes to declaring taxes the authorities in both Spain and the UK are clamping down on people who do not do not do things properly.
  • Sometimes you should declare something for tax purposes in one country and also in another. Spain and the UK have a Double Taxation Treaty which means that you don’t normally pay tax twice and can offset the tax paid in the other country against the tax that you would otherwise pay in your home country

Fees and taxes

IVA (VAT) is payable by the purchaser where the vendor is considered a developer who pays IVA and / or this is the first time that the property has been sold / transferred.

The VAT rate depends on the type of property being sold as follow;

  • Residential properties 10%
  • Plots of land 21%
  • Commercial premises 21%

Stamp Duty is payable at the rate of 1.2% where VAT is payable

Transfer Tax (Impuesto sobre las Transmisiones Patrimonilaes – ITP) is payable if the property is a resale (second transfer). This is paid by the buyer at the rate of between 8 and 10% depending on value and area. This has to be paid to the Spanish Treasury within 30 days of the date of signing the title deed and is needed in order to register the property.

Plusvalia is a tax based on the increase in the value of the land since the last transfer. The rate varies according to where the property is. Technically the vendor pays this although often it is agreed that the buyer will pay this. This is not normally a huge amount.

A Retention of 3% of the value of the property is made when you buy from a person or company that is non-resident in Spain. This is so that the authority can make sure that the seller has paid all their taxes. If the seller has paid their taxes they can then reclaim that amount, typically in around a year. If the retention is not made than any outstanding amount due to the authorities can be claimed from the buyer.

If the vendor is a private individual and can prove that they are tax resident in Spain or bought the property before 31 December 1986 and no improvements have been made to the property then the retention may not apply.

….Fees and taxes

Our charges. We charge 1% of the purchase price subject to a minimum of £1,500. If the property title is defective or unexpected additional work is required then there may be additional charges. We would inform you before incurring this cost

Our charges include;

  • Legal advice on the terms of your offer to purchase
  • Searches at the Town Hall
  • Searches at the Land Registry
  • Obtaining certificate from the Community of Owners (if appropriate)
  • Checking the legal status of the property and the seller’s right to sell
  • If appropriate checking the guarantee provided by the vendor
  • Preparing a report on our searches and advising you on the purchase
  • Arranging the signature of the title deed
  • Arranging payment of the relevant taxes
  • Arranging registration of the property at the Land Registry
  • General hand holding and advice throughout the transaction

Other work required may include obtaining NIE numbers, signing the title deed on your behalf, transfer of utility contracts etc. which are charged extra

Useful terms

AbogadoLawyer or solicitor
Agente de propiedad inmobiliarioEstate Agent
Apartamento / pisoApartment
ArquitectoArchitect
Asesor fiscalTax consultant
AyuntamientoTown Hall
BañoBathroom
CocinaKitchen
Comunidad de PropietariosCommunity of owners / Residents Association
Compra / compraventaPurchase / Buying and selling
Contrato de compraventaPurchase contract
Contrato de reservaReservation contract
Declaración de obra nuevaDeclaration of new building work (At the Notary)
DirecciónAddress
DormitorioBedroom
EscrituraTitle Deeds
GarantíaGuarantee
HipotecaMortgage
IBI (Impuesto Sobre Bienes Inmuebles)Council Tax
ImpuestoTax
InmobiliariaEstate Agency
IVA (Impuesto Valor Añadido)VAT (Value Added Tax)
LlaveKey
LeyLaw
LicenciaLicence
LuzLight (but often refers to electricity)
MueblesFurniture
NIE (Numero de Identificación de Extranjeros)Foreigner’s Identification Number
Nota SimpleLand Registry Search
Nota SimpleLand Registry Search
NotarioNotary Public
Permiso de obraPlanning permission
PiscinaSwimming Pool
PoderPower of Attorney
Póliza de segurosInsurance policy
PromotorDeveloper
PropiedadProperty
Registro de propiedadLand Registry
RentaIncome
ResidenteResident
Seguros(s)Insurance
SociedadCompany
TerrasaTerrace
TerrenoPlot
TestamentoWill
TrasteroStorage room
Valor CatastralOfficial value of the property


Buying in Spain checklist

 To doCompleted
1Decide what you are buying, where and why. If necessary take advice on this. 
2Instruct us as your independent lawyer. 
3Look at the cost of buying. Fix a budget. Stick to it 
4Investigate finance and think about how to finance deposit. 
5Learn about the process of buying 
6Look at who should own the property. 
7View properties / choose a property. Be honest with the estate agent about what you are looking for – that will save a lot of time for you and them. 
8Survey and valuation 
9Send any contract to us to check prior to signature. 
10Speak to currency dealer about getting the best rate for your purchase 
11If it is a reservation contract pay a small reservation fee 
12Lawyer carries out checks on the property and advises you on whether it is safe to proceed with the full purchase contract 
13Payment of Full purchase deposit 
14Lawyer deals with purchase 
15If you are moving to Spain arrange removal company 
16Arrange NIE 
17Arrange Power of Attorney if needed 
18Arrange insurance – contents / buildings / health 
19Signature of title deeds and registration at the Land registry 
20Make a Spanish Will and review your English Will 
21Arrange for Fiscal representation 
22Enjoy a well deserved holiday in your new property 

Why use Judicare

Spanish lawyers

We have an experienced Spanish legal team comprising Spanish lawyers and English lawyers who have studied Spanish law

We are Solicitors

We are a UK based firm of Solicitors regulated by the Solicitors Regulation Authority and who specialise in international legal issues.

We understand both sets of laws

Because we understand both sets of laws we understand the difficulties that come when two sets of laws meet.. This is particularly important when it comes to issues involving ownership, taxation and inheritance.

We are members of AIPP

The Association of International Property Professionals was set up to improve standards of professionalism in a largely unregulated overseas property market.

Experience

Our Spanish team has many years of experience dealing with a whole range of legal issues with Spain.

We speak your language

You need a lawyer who can speak your own language. More importantly you need somebody who can explain and discuss often complicated issues in terms that you understand.

Independence

We are independent. We are not allowed to act for the buyer and the seller at the same time. We are not linked with any Development Companies, Builders or Estate Agents