Services
Legal formalities & costs involved in purchasing property in Spain
J.L.MORALES ESTATE AGENTS always recommends that purchasers of property in Spain retain a qualified solicitor to represent them and qualified financial advisors to deal with tax issues.
Purchasing property in Spain is a relatively straightforward procedure. The “last word” in property ownership is the property registry, which will show immediately if the seller owns the property free of debts and encumbrances. Most frequently, unless an immediate payment of the full purchase price is made, a private contract of purchase is drawn up wherein the details of the purchase are reflected – the legal description of the property, purchase price, form of payment, date of completion, date of possession, etc. Upon signing the private contract, a payment on account of the purchase price is always made which can vary substantially according to the terms of the sale and the date of completion. A quite normal deposit for completion within 30 to 60 days could be upto 10% of the agreed purchase price.
New properties which are unfinished obviously are paid for over the construction period, and all payments on account before finishing must be guaranteed, according to the BUILDING ORDENANCE LAW (LOE), LAW 38/1999, by a bank or insurance company: if the property is not finished by a certain date, a purchaser has the right to reclaim the monies paid, plus legal interests. Additionally, this law obliges the property developer to arrange a TEN YEAR insurance policy with respect to any basic building defects with the purchasers as beneficiaries.
When the entire purchase price is paid for the property, the seller will issue the public deed of conveyance (escritura) to the purchaser, free of debts and encumbrances. This deed is issued before a Spanish Notary, is passed from the notary to the tax office to be assessed for stamp duty if the property is a resale or second hand property, and then presented to the Property Registry for inscription. A provisional inscription in the registry is made immediately upon the signing of the title deeds.
Property purchase costs
7% TRANSFER TAX (I.T.P.) payable by the buyer for the purchase of any Real Estate provided the vendor is not a developer or normally trading in the business of resale properties ie private sale.
8% VAT and for any VILLA or APARTMENT, or GARAGE where the vendor is a developer, promoter or habitual trader in these generally new properties.
17% for PARCELS OF LAND, COMMERCIAL PREMISES or COMMERCIAL GARAGES
Notary fees and property registry inscription fees
Notary and land registry fees can cost up to approximately €1.750 although the cost increases according to the number of pages or complexity of the title deed and should a mortgage also need signing..
Municipal Added Value Tax (Plus valía)
This is an “added value” tax based upon the increase of the Town Hall index value of the land only, from the prior (vendor’s) purchase to the present sale. It is usually not a significant amount with respect to apartments or townhouses – but can be more in the case of villas with a large tract of land.
This tax corresponds, by its nature, to the vendor who is responsible for its payment, unless otherwise negotiated. As there are several variable factors used in calculating this tax, especially the length of time of ownership of the property, the amount payable can vary substantially and should be verified before proceeding with the purchase.
Summary
The total official costs involved in purchasing property should be less than 10% if it is a resale property purchased without a mortgage, or less than 13% if purchased with a mortgage plus lawyer’s fees.
Other costs involved in owning Spanish property:
Local Rates or Annual Property Tax (IBI)
Local rates are payable annually, and are calculated from the cadastral or rateable value of the land assigned by the Spanish Tax Office. The cadastral value takes into account the value of the land plus the value of the building, according to type, location, and usage. Upon this value, each municipal Town Hall decides on the percentage to be charged in respect of local rates.
Rubbish collection & water rates (Basura) (Agua)
The rubbish collection rate is applied by the Town Hall according to the property and payable in different forms dependend on the town hall.
Water consumption is calculated by the water meter consumption in cubic meters and is payable every 3 months. Payment is usally made directly by bank with direct debit instructions.
Electricity
Electricity is billed bimonthly. Minimum rates are applicable whether you are in residence or not, and the minimum varies according to the amount of electricity your house could potentially use with all power and lights turned on.
With all the sunshine here on the Costa Blanca, you will nevertheless be using less lighting and heating than in a lot of other countries.
