Buying a Spanish property can prove to be a daunting task if you are not aware of the specific legalities involved. Financial issues such as taxes and duties discussed in the previous section are only some of the motley of complications and hurdles a buyer is faced with when deciding to buy a Spanish home. These difficulties can add up to a great deal of money if not taken care of properly and effectively.
In order to assist and guide property buyers here is assembled a brief introduction to the most important issues concerning legal matters. Please note however that this information is only an overview and it is strongly encouraged that those interested in buying a Spanish property seek professional legal advice. Legal errors and infractions are very costly and can easily be avoided through legal consulting.
If you have any legal questions you can find further information in the Ask a Spanish Lawyer section.
The first step towards buying property in Spain is to obtain a fiscal number (NIE). Since this may take some time to acquire, it is best you take care of this in advance as you will need it to pay the stamp duty immediately after the purchase. Another decision you must take before the buy is that of deciding whether or not to designate Spain as your fiscal residence. This decision will affect the amount of taxes paid for the sale and annual costs of the property. If you decide however, to reside for more than 183 days a year in Spain you are legally bound to make Spain your fiscal residence.
Signing a contract is a serious matter, and before doing so you must be certain of a few crucial things regarding the property, the owner and the local government. To begin with, you need to be certain that the seller actually owns the property. To do so, you can get a certificate of the title deed of the property in question from the Registro de Propiedad (Property Registrar). This is the only official way of knowing whether or not the seller owns the property and has the right to sell it.
In the case of an off plan Spanish property you purchase directly from a developer, you are advised to get as much information as possible about the constructor (i.e. name and type of company, address, official inscription and reputation). The developer should be able to provide you with this information (of course recheck about the reputation of the constructor) but also with the deed of declaration of new construction, construction licenses, bank guarantee, property deeds and occupancy permission.
If the property is being sold second hand, the seller should provide receipts of the preceding year's real estate and wealth taxes. This is important since if a failure to pay these taxes happens the new owner will be held accountable for up to one year's worth of payment as these taxes are attached to the property and not to an individual.
You also need to double check the vendor's land and/or property description and you need to consult the Catestro Certificate, the only legal document describing the land and/or property. If the desired property has additional community taxes or fees, you must make sure that these too have been paid in full. Do not forget to enquire in detail about the rules of the community that could affect the legal matters surrounding your property.
Furthermore, it is recommended that you check with the local government regarding any future plans for the area in which the property is located. A house plan of the property can be found at the city's planning department. Lastly, you must be aware of and comply with the Coastal Law (1988) if the property is near the coast. Fur further information about different areas of Spain we recommend this travel agency (agencia de viaje).
The contract procedure in Spain is a two step process. Generally, you will sign a private contract previous to signing a public contract before a public notary. Both contracts are legally binding, and much thought should be given before one or both are signed.
Aside from the two kinds of contracts, there can also exist many different types of private contracts with different implications. Generally, you will first sign a reservation agreement or a pre-contract where the buyer places a deposit of typically 3000€ to 6000€, taking the property off the market. The reservation agreement is a simple private contract allowing the buyer some more time to acquire the necessary 10% deposit normally paid when signing a private contract. Furthermore, as these types of contracts require a lower deposit, consequently the penalties are much lower if you decide to break the contract. If the public contract is signed shortly after a reservation agreement is made, a full private contract is not always necessary. Another type of private contract is an option contract where fixed terms and conditions are stated by the vendor for a fixed amount of time. This contract will not legally bind you to purchase the property but you will loose your deposit if you don't.
A private contract will generally contain information in greater detail than the reservation agreement regarding the purchase. This contract will clarify the conditions and details of the purchase (price of the property, method of payment, current state of the property, what the sale will include, date and place of purchase, etc…). The private contract will also determine who will be held responsible for the costs, taxes and fees associated with the transaction. The terms and conditions of this paperwork should be clearly understood as you can end up paying for costs that should be paid by the seller like plusvalia.
The private contract is legally binding and penalties are generally included for non-performance by either party. If the buyer decides to break the contract the deposit will be lost; in the case where the seller wants to break the contract, the double amount of the deposit will have to be paid. These precautions are taken in order to avoid the unfortunate case of a lawsuit that could take several years to resolve in the Spanish system, and to encourage both parties to take the contract seriously.
The private and the public contract are the two types of contracts that will legally bind you to buy your Spanish property. Because of several things (i.e. waiting list for appointment at notary’s cabinet, seller’s move of private items, buyer getting the necessary deposit together) quite some time can pass until you sign the public contract. Therefore the private contract is necessary to ensure the deal till conditions are finalised in the public contract. It will also protect you in a legal fight in the unfortunate event that the former owner made charges on the property outside your knowledge.
However, until it has been signed in the presence of a public notary, the private contract cannot be stated in the property register. This could be a problem if you need to prove that you own the property in order to obtain a loan for example.
Once a contract is signed in the presence of the notary, it becomes public. According to the public registry, all sellers and buyers must be present to sign the contract. If you are unable to be there you can give an attorney power to someone to sign on your behalf.The act of signing the public contract is called the Escritura and it is the official confirmation that the transaction for your Spanish real estate is in order (i.e. that the procedure is legal and that the money has been paid).
The notary should give you a ‘copia simple’ which is basically a signed copy of the contract. According to Spanish law, the buyer has the right to select the notary, but usually the seller or promoter suggests one.
Finally, you need to register the original Escritura by sending it to the Property Register. From the beginning ask the notary if this is included in his fees as some notaries do.
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