Property Buying Procedures In Spain
Property Buying Procedures In Spain
In the property buying procedures In spain, as a buyer, before or after you must have a bank account in Spain for the following reasons:
BEFORE THE FINAL APPOINTMENT AT THE NOTARY
Normally, initial payments like the reservation deposit (3.000- 5.000-10.000 EUR), and partial payments to the deposit of the final price, lawyer fees, etc, can be paid directly from your bank account in your country. But, having said that, it is more than advisable to open a bank account in Spain as soon as possible, because you must have already opened a bank account in Spain to be operative in the last stages of the procedure. Then, if it is done, it will be one of the completed points of the operation.
PAYMENTS AT THE NOTARY’S FINAL APPOINTMENT
So, although the opening of the bank account before the appointment of the notary is not mandatory, at the finalization of the purchase, it is different. Please note that in Spain the function of the notary is different than in other countries like France, Belgium, Switzerland, etc, where the notary is the intermediary of the transaction. As a buyer, you pay directly to the notary, and the notary pays the seller once all the procedure is completed. But, in Spain, the notary does not carry out this function of payment intermediary. So in Spain you have to pay directly to the seller. In fact, it is necessary to have a very well identified traceability of the origins of the funds, and its destination to the seller, to comply with the law of prevention of money laundering.
Step 1 – Obtain your Foreigner Identification Number
If you want to buy a property in Spain to settle there, to rent it or to spend your holidays there, you must have in your possession a NIE (Foreigner Identification Number) if you are European, or a TIE, Tarjeta de Identidad de Extranjero (note: the identity card for foreigners) if you are not a national of the European Union.
Why is this document mandatory?
These documents are essential to identify you to the Spanish State.
You will need them for any real estate transaction, for opening a bank account, to have electricity, water, gas, Internet installed, to create a company, buy a car or even receive a package…
New: since 2021, it is possible to buy without a NIE, on one condition…
COVID-19 has moved the lines of the administration and since the end of 2021, an agreement between the General Council of Notaries and the agency responsible for collecting taxes now authorizes notaries to request a tax number (the NIF, Número de Identificación Fiscal) on a transitional basis and without the mandatory presence of the applicant. This tax number allows you to do without the NIE temporarily. You can thus go to the end of your purchase project without being slowed down by this formality. This process makes things considerably easier when you buy a property from abroad.
If you are looking for more information on the subject, this article will interest you: Buying without a NIE is now possible!
Step 2 – Definition of the budget and financing
One of the first points that we quickly seek to clarify with potential buyers contacting us is the question of financing.
Indeed, the first thing to know about financing in Spain is that Spanish banks only lend to non-tax residents 60% of the value of the property excluding notary fees.
To be a tax resident under Spanish law, you must be in one or more of the following situations:
Living in Spain for more than 183 cumulative days per calendar year
Have economic interests in Spain
That his official spouse and children live in Spain
Overall, for a mortgage in Spain, count a personal contribution of 50% of the price of the property. We advise you to do your calculations before you start because there is no withdrawal clause for not obtaining the loan.
You can also get financing in France, but be careful, the bank will most likely ask you to provide it with a guarantee (collateral of life insurance or real estate) in exchange for this loan. If you do not have one or do not want to entrust your life insurance or your property to him, contact us, we have partners on French territory. We could find you a tailor-made solution.
Note on this chapter, whether your financing is set up in France, Belgium or Spain, each situation has advantages and disadvantages: rates, deadlines, cost, etc.
Step 3 – Taxes and fees upon purchase
Any property you buy in Spain is subject to a range of fees and taxes. These vary according to each property. However, this is about 15% of the purchase price. This increase over the total purchase price must cover all costs, including real estate, lawyer, notary and tax costs.
The ITP, the Tax on Patrimonial Transfers
The main tax you have to pay if you buy a second-hand house in Spain is the Patrimonial Transmission Tax (“ITP”). The percentage of this tax varies depending on the Autonomous Community in which you are buying and may be subject to change. At the time of this article’s update in August 2022, the current ITP rate in Valencia is 10% of the purchase price.
Notary fees are set by an official scale. Rates vary according to the area of the land, the size of the property and its selling price. Namely, in Spain, the role of the notary is very limited. It only certifies the legal conformity of the acts. The costs are therefore also high if we compare to France.
Legally, notary fees can be shared but it is often the buyer who pays them. Add to that fees payable to the cadastre.
If he makes a profit at the time of the sale, the seller must pay the capital gains tax (the ganancia patrimonial) at the same time as the Plusvalía municipal which is a municipal tax.
Normally, the buyer will pay the transfer duties and costs mentioned above. Spanish consumer regulations advise splitting this expense between buyers and sellers, but in some cases the seller insists that the buyer pays them all. Again, this is something your lawyer should discuss with you and the sellers.
The IBI, the Tax on Real Estate
The IBI (Impuesto sobre Bienes Inmuebles) is the equivalent of property tax. In Spain too it is paid by the owners to the local town hall. Anyone who owns a property on the other side of the Pyrenees must pay this every year.
This receipt is very important when buying a property for two reasons:
- It indicates the number of the cadastral property, this reference can give you information about the property you are buying.
- It also shows the cadastral value of the property. You will often need this reference value to declare your taxes.
When buying a property, your lawyer will need to ensure that all IBI taxes have been paid within the last 5 years. This ensures that the previous owner and therefore the property you are buying is not in debt.
Step 4 – Selection of properties
Your project is maturing, you are at the research stage for your future property in Spain. You have surely been redirected to articles like this, or ads from real estate portals like Idealista, Habitaclia, Pisos.com, Kyero.com, Green-acres.com etc…
Only, between the photos sometimes (if not in most cases) of questionable quality, the language barrier, the doubts about the legal situation of the property, its geographical location etc… you are a little lost!
You can plan round trips between your country and Spain but you risk unnecessary travel…
For all these reasons, we advise you (obviously…!) to call on a French-speaking property hunter. This option allows you to save time and avoid unpleasant surprises.
Step 5 – Legal checks
In Spain, the role of the notary is very different from that which he occupies in French-speaking countries. It only guarantees the conformity of the deed of sale with the law.
It is for this reason that the intervention of a lawyer is necessary and essential when you buy a property in Spain. He will be responsible for carrying out all the necessary checks: identity of the owners, absence of debts, charges, conformity to the cadastre, non-existence of urban planning offences, etc.
To offer the most complete service possible to our clients, we systematically include in our fees the intervention of a lawyer registered with the bar of the province of the property in question. It’s not nothing. This lawyer will give you a written legal opinion that will allow you to decide whether or not you should continue with this real estate acquisition. He will also be present at your side on the day of the signature at the notary.
Find our article on the role of the lawyer in Spain and our interview with a French-speaking lawyer in Málaga.
To remember, it is the cadastral office which makes it possible to identify the exact limits and the location of the property. The cadastre provides a brief description of the property.
Although the variations are usually minor, it is important to ensure that the property you are buying is described in the deed, land register and cadastre in the same way.
Step 6 – Reservation of the property: the señal
In Spain, for your intention to buy to be considered, you are required to pay the agency or the owner of the property a sum which can vary between €1,000 and €3,000.
This, called Reserva or Señal, is accompanied by the signing of a pre-contract which contains the main information and characteristics of the property. For more information on the reservation contract, click here.
The owner then has between 2 and 5 days to accept or refuse the offer. In theory, the visits should stop. Unfortunately, in practice, many landlords or agencies persist in trying to get a better deal.
If your offer is not accepted, the agency is required to refund the full amount of the reservation amount.
On the other hand, if it is accepted, the amount advanced is to be deducted from the sale price. It will generally be completed until it reaches 10% of the value of the property at the time of signing the sales agreement, that is to say during the seventh stage of the purchase process.
Step 7 – Signature of the sales agreement: las arras
The sales agreement is a private contract established between the buyer and the seller. Called Arras in Spanish, it is not signed before a notary but will be requested by the latter on the day of the sale. He will thus verify the conditions agreed between the parties.
The Arras Contract in Spain is a “pre-purchase” contract containing essential terms of a property purchase agreement. Usually, the real estate agent has an arras contract template. However, these are usually drafted in favor of the seller. You can use them, but be sure to add clauses that protect yourself.
The arras (deposit) contract will include a lot of essential information:
- The identity of the seller and the buyers
- The address of the property
- The sale price of the property
- The deadline for signing at the notary
- The address of the notary where the sale will be signed
- Any outstanding debts
- Payment methods
- The distribution of notary fees
- Penalties in the event of withdrawal of one or other of the parties, etc…
In most cases, the financial advance made by the future buyer at the time of the señal (reservation), will be completed up to 10% of the price of the property.
With regard to compromises, in the majority of cases they are signed between two individuals and are called arras penitenciales. They are regulated by article 1454 of the Spanish civil code.
If the acquiring party withdraws, it loses the amount advanced. On the other hand, if the selling party withdraws, it is required to reimburse double the amount advanced by the buyer.
Step 8 – Signature at the notary and delivery of the keys: the escritura
The big day has arrived ! You will conclude the transaction by signing the Escritura, the authentic act in French. It is at this time that you will have to pay the outstanding balance.
Some notaries agree to receive the transfer of the amount of the property into their account and then issue bank checks for the sellers. Others, on the other hand, refuse to receive a foreign transfer as part of the prevention of money laundering. In this case, you will need to bring bank check(s) issued by your Spanish bank. To do this, you must have taken care to open a bank account in Spain beforehand.
Good to know:
Ask your Spanish bank adviser in advance for the rates for issuing a bank cheque. You might be surprised! Indeed, some banks display attractive promotions, offering you certain fees such as the opening commission. On the other hand, they make up for it generously on the issue of the check with prices sometimes reaching several hundred euros.
What if the seller of your future Spanish country house was none other than five brothers and sisters who inherited a family property? In this case, you would have to issue five bank checks, and no one would pay them for you…
The keys are always handed over on the day of the signature of the authentic deed. The notary certifies the payment and the new notarial deed will then be registered at the Registro de la Propiedad (Property Registry) by his office or through a collaborating firm.
The taxes inherent in the purchase and in particular the ITP (Tax on the Transmission of Heritage), must be paid within 30 days of the date of signature.
Now that you know each step of the process of property buying procedures In Spain, get started!
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