The Property Banks Buyers Guide to Spain
First and foremost, it is essential
to secure professional legal and financial advice before you invest
in a property in Spain. Spanish property law is complicated and
there have been some cases of unwary investors being misled by
unscrupulous sellers. No matter how tempting the offer might be,
never sign anything without the express agreement of a qualified,
Spanish-speaking lawyer.
It is impossible to overstate the importance of appointing a
qualified lawyer to look after your interests when you’re buying a
property in Spain. When choosing a lawyer, make sure that he or she
fluently speaks and writes a language that you understand and don’t
hesitate to ask questions.
Spanish property law is complicated and there have been some cases
of unwary investors being misled by unscrupulous sellers. The fact
of the matter is that there is only one person who is entitled to
sell you the property and that is the person who is named on the
title deed.
No matter how tempting the offer might be, never sign anything
without the express agreement of a qualified, Spanish-speaking
lawyer.
As well as giving legal advice at each stage of the process, your
lawyer will check the property registry to investigate any
encumbrances or debts registered against the property. If anything
untoward is discovered he will advise on how best to deal with it
and whether you should, in fact, proceed at all.
When completion takes place your lawyer will lodge the title deed
with the land registry and then take care of any remaining
formalities such as opening accounts with local utility companies in
your name and the payment of any transfer taxes.
In general terms, allow about 10% to 11% extra to cover your tax
liabilities and miscellaneous costs. This will cover the Spanish
equivalent of VAT, known as IVA, which is calculated at 6% of the
value of a pre-owned home or 7% of the value of a new property. It
also covers stamp duty, which at present is 0.5%; a small fee that
has to be paid to the property registration office; a charge for
obtaining copies of the ‘escritura publica’; connections to local
utilities and legal fees, which are usually about 1% of the sale
value.
You should also be aware that, as the buyer, you may be required to
pay the seller’s fees, although this is a point for negotiation.
Additional costs and fees
If you buy from someone who is not an official Spanish resident you
will be required to lodge a deposit equal to 5% of the sale price
with the Hacienda or local tax office. This system was introduced to
offset the risk of the seller leaving the country without settling
his bill for capital gains and other taxes and it means that the
seller won’t receive the proceeds of the sell until he has
discharged his financial liabilities.
Capital gains tax on property
Capital gains tax, or ‘plus valia’ must be paid when the property is
sold. It is calculated as 35% of the difference between the present
value of the land and it’s value when last sold. Spanish law does
not specify who is liable for this tax so it’s very important to
include this in your negotiations and to have the agreement
documented by a lawyer.