Brief Guide to Purchasing Residential Property in Spain
When purchasing a property in Spain there are many differences in legalities and technicalities so it is important that you have the best advice and understand fully all aspects of the purchase process.

When purchasing a property in Spain you should in our opinion always use the services of a local BI-LINGUAL lawyer, who will ensure that you receive proper legal advice from the outset, and that you understand exactly what is involved and what will be expected of you throughout the transaction, using a lawyer will also prevent you from becoming a victim to any unscrupulous property dealers.

The first step is to find a property or plot of land to purchase as appropriate. Most prefer to use the services of a trusted real estate agent your agent will give you a full description of the property and arrange a viewing, they will also be able to advise you on the realistic price of the property as, particularly in the current economic climate some sellers are open to offers and some are not.

When you have found a property that you think suits your requirements and if you are serious about making an offer we strongly suggest you carry out a property search. The search is to ensure that the seller of the property has full rights to be selling the property, that the property is free of debts and charges etc. Your lawyer will conduct this search for you (for a fee) and then provide you with a full report. If the property is clear of debt you can go ahead and make your offer.

Your offer should always go via your lawyer rather than direct to the seller, this ensures that you are fully covered. In Spain it is customary to pay a Reservation Fee to confirm your serious interest in a property. A reservation fee ranges from 3,000 euros upwards.

Once the reservation fee is paid, the process of exchanging contracts will occur. Contracts will be drafted by the lawyers of both parties and should include all the terms and conditions for the sale and set the completion date for the transfer.

Deposits are usually paid upon the exchange of contracts and these can be for up to 30% of the selling price with new properties and between 10%-20% for a resale or older properties however this depends on the vendor and you real estate agent will advise you about deposits.

It is important to remember that it is only when the sales purchase contracts have been exchanged and signed by both parties (seller and buyer) that the seller is legally obliged to sell the property to you. It is also advisable to pay the deposit direct to the seller and not the agent although in some cases and with the proper controls in place the agent can offer this service.

Taxes and Fees payable on purchase of a property
When purchasing in Spain, buyers should always budget an extra (circa) 10 % of the total purchase price to cover incidental taxes and charges that are obligatory in Spain. Details of these charges are set out below.

Transfer Tax (ITP)
If the property is a resale or an older property (which has not purchased directly from a developer) ITP of 7% is payable. The tax is calculated against the purchase price of the property. Where ITP is the applicable tax, it is paid on completion of the sale.

Value Added Tax (IVA)
This is applicable on new properties. IVA of 7% is charged on all new properties bought from a Developer, Promoter or a person acting as a Trader of such properties. The IVA tax payable is calculated against the purchase price of the property.

Stamp Duty
Stamp Duty of 1% is payable on the property where the Seller is a Developer, Promoter or a person acting as a Trader of such properties. This is payable at completion.

Plus Valia Tax
This is a municipal tax, which is calculated on the official increase of the property since it was last transferred or sold. The amount changes depending upon the location of the property and the tax levels in the area.

Land Registry Fees
Land Registry fees are payable in order to register your legal title to the property in Spain. As a guide you should budget for fees at approximately 70% of the rate charged by the Notary Public. Your lawyer can further assist you with these taxes.
What else you may need to be aware of when purchasing property in Spain.

NIE Number
NIE is stands for Numero de identidad de extranjero, which is "Identification number for foreigners". The main purpose of the NIE for Spain is fiscal control. Without a Spanish NIE number the Spanish tax authorities are unable to assess or process annual tax payments such as income tax (IRPF), and the annual wealth tax (Patrimonio), both of which are paid by non- resident property owners. Not paying these taxes (or making provisions with the Spanish tax authorities to pay in your country of residence under a double-taxation treaty) can incur fines. You will be required to obtain a NIE number when purchasing property in Spain. The NIE number is used on official documents and in order for your agent and lawyer to pay taxes on your behalf.
When buying property in Spain, you need to have an NIE number by the time you sign the deeds of purchase before notary, an event known in Spain as the escritura. Getting your NIE number in time for escritura means applying at least 1 month before hand. The actual time it takes depends upon where and when you apply.

Bank Account
For ease of payment you may wish to open your own bank account in Spain. There are various bank providers and we work with several who are bi-lingual and accredited.

Translation of Documents
All contracts and other legal documents are in Spanish. Your lawyer may or may not offer translation services of legal documents, if these are offered they will normally incur an extra fee. ONLY DOCUMENTS IN SPANISH ARE CONSIDERED LEGAL - TRANSLATIONS ARE FOR YOUR CONVENIENCE ONLY.

Mortgages
Mortgages in Spain for non-residents vary but will generally be available for between 70-80% of the property value. Banks will usually charge a set up fee of approximately 1% of the value of the loan. Additional costs may be incurred such as taxes and administrative charges such as stamp duty. Your lawyer or estate agent will be able to advise you further on mortgages.

Information for Non Spanish Residents
Non Resident property owners in Spain are required to pay taxes following the purchase of a property as follows:

IBI Tax
The IBI tax is a public real estate tax which all property owners in Spain must pay annually. The tax is calculated according to criteria which will include the size and type of your property.

Wealth Tax
All non resident owners of property are liable to a tax on the capital assets they own in Spain; which includes real estate. The tax is calculated against the purchase price of the property.

Imputed income Tax
This tax is calculated as a percentage of the official value of the property (set by the tax authorities) which is then treated as an income in Spain.

Important Note
The information provided here is for guidance and assistance only, taxes, legislation and fees are subject to change. Always consult an independent lawyer before entering into any contracts or agreements. The information above is our understanding and correct as at March 2010.

Residential Rentals
Our rental section has numerous high quality properties available for both long and short term lets. We also offer a range of additional services according to the needs of the client. Search for your perfect rental (here for residential - link to re-sales online) here for commercial - link to re-sales online)

This information is for guidance only - always consult with your lawyer and/agent before signing contracts.

Here are some points we hope will assist you when renting a residential property in the Costa del Sol.

Rental Contract - Always read all the terms and conditions before signing. Read the terms of the contract carefully. There may be a penalty to pay if you wish to terminate the agreement early for example.

Deposit - Most landlords ask for a months deposit and a month paid upfront (2 months total). The deposit will be returned when the contract ends providing all terms of the contract have been met.

Expenses - property expenses such as Real Estate Tax (IBI) and Community Fees (maintenance of the urbanisation the property is situated in) are normally paid by the landlord. However always check your contract

Utilities and Bills - With long term lets these are normally paid by the tenant unless otherwise stated in the contract. Short term lets are often inclusive of bills and utilities. Always check Witt your agent if in doubt

Inventory - tenants are often asked to sign an inventory of the contents in a property (if the property comes furnished). Beware of the penalties resulting from damaged or lost items; the penalty often includes losing your deposit.

Repairs - generally maintenance and repairs to the property should be carried out and arranged by your landlord or agent, unless the damage was inflicted by the resident.

The information provided here is for general guidance only, each rental property is different. Remember… ALWAYS READ THE CONTRACT BEFORE SIGNING.