The legal steps involved in buying property in Spain. Once you decide which property to buy, the process is as follows:
“Nota simple informativa”
The first step is to order a “Nota Simple Informativo” from the Land Registry. This document contains information about the legal situation of a property, such as any charges that may be associated with the dwelling, whether it really belongs to the vendor, mode of purchase, boundaries, etc.
“Acuerdo de compra” (Purchase Agreement - preliminary contract)
The next step when buying property in Spain is to arrange the Purchase Agreement between buyer and and the vendor. This agreement acts as a preliminary contract and establishes the date and place where the contract will be signed, and the conditions of sale. At this stage the buyer will pay a deposit (usually 10% of sale price). If the buyer does not purchase the property, the deposit is lost to the vendor. If the vendor does not sell he must pay twice the value of the deposit to the buyer.
The documents usually requested by the bank when applying for a mortgage in Spain are:
- Official ID document: Spanish citizens have a DNI (Documento Nacional de la Identificación). Foreigners require a Foreigner Identification Number known as the NIE (Número de Identificación de Extranjeros)
- Work contract
- Three most recent payslips
- Copy of income tax certificate
- Purchase Agreement
- Receipt of payment of property tax
- Details of any other mortgages or loans
- All deeds and titles in Spain and abroad
- Certificado de vida laboral: The ”Certificate of working life” is an official record of the companies that a person has worked for, the duration of the contracts and the specific dates.
- Investment details: Funds, stocks, bank accounts, etc…
- Marriage contract: If applicable
- Non-residents: Non-residents must submit a non-resident certificate, which will be provided by the bank.
- Professionals working under the Spanish autonomo regime (basically Contractors): Must present a copy of the “Impuesto de Actividades Económicas, IAE” Tax on Economic Activity and VAT for the last quarter and the previous year
If the mortgage application is approved, the property will be assessed by a Valuer. The bank secures the loan based on the resulting valuation and the property will be liable should the mortgage payments not be made each month. The Valuer is a technical architect and is qualified to answer any questions regarding the quality of construction, besides giving a detailed account of the price relative to sales made in the area, the quality of the property and the size in square meters.
The sale must be completed in writing and witnessed by a notary.
The notary will read out the contents of the deeds to the the contracting parties (and the bank representative if a mortgage is required). If all parties are in agreement the deeds are signed.
When the buyer and seller have signed, the signature is authorized by the notary, and the deeds are ready to be taken for the payment of taxes and registration of the property at the Land Registry.
Transfer tax and stamp duty applicable when buying property in Spain
If the seller is an individual, and the property is not brand new, the tax rate is 8% (7% in some regions) of the deed price.
If the seller is a developer, and it is the first sale of the property or land, the sales tax is currently 4%. It was reduced from 8% on August 19, 2011 as a temporary measure. At the time of writing the measure is still in place and the new government is considering retaining it throughout 2012.
Stamp duty in Spain varies according to the region, but the average is 1.5%.
Capital gains applicable when buying property in Spain
The vendor must file a copy of the deeds at City Hall, or the local tax office, in order to pay the capital gains. The ordinary procedure is to leave the copy, complete the form and receive the amount payable by mail. The amount depends on the number of years of ownership of the property and the value (as defined by the Valuer. In Spain capital gains is a local tax and as such the form of payment is different in each city. Please contact us at firstname.lastname@example.org if you require further information on this point.
Once the deeds of sale are signed and the mortgage and taxes have been paid, one final step remains; the registration of the title with the Land Registry. This is necessary in order to protect and secure a property.
This registration will ensure that:
- the buyer is fully protected by the law
- the buyer is considered the only true owner until declared otherwise in court
- the property is protected from any creditors relating to the vendor
- the buyer is protected against possible hidden charges
- judicial protection can be obtained in case ownership is disputed by a third party. Once the registration has been completed, no one can any rights to the property without first obtaining the owner’s consent
- that the buyer can obtain a mortgage with which to finance the acquisition of the property; the bank can only guarantee the loan if the property is registered.
Once the registration has been made with the Land Registry the next Property Tax bill will be sent to the buyer.
It is essential, as already explained, that property or land are only bought from the person listed as the owner with the Land Registry, to verify whether there is a mortgage or other charge on his record and that once the deeds are signed that ownership is registered at the Land Registry.
At Barcelona Prime we will help you through this entire process, ensuring at each step, that there are no additional service charges for non-Spanish citizens. Please contact us at email@example.com if you require further information.