Buying in Spain

The Three Golden Rules

With almost 30 years’ experience in selling here in Spain we have come up with 3 Golden Rules for purchasers
  1. If an agent asks you to sign a contract only in Spanish, do not buy
  2. If an agent asks you for a deposit in cash, do not buy
  3. If an agent tells you that you do not need a solicitor, do not buy
We hope the following short guide will help you understand the purchase and its implications. If you have any questions on any of this please contact us.

The basic process is the following;

1. The Initial Reservation Document & Holding Deposit

A reserve document to reserve the property (normally with a reserve of €3,000 to €6,000)

2. The Purchase Contract

A full purchase contract on which you normally pay 10% of the purchase price.

3. The Deeds and The Notary

The signing of the deeds is done in front of a Notary and is when you pay the rest of the price of the property.

This document serves to give your details, make an offer if relevant and removes the property from sale reserving it in your name and requires that you pay a holding deposit to reserve the property. The holding deposit is usually between €3,000 and 6,000 and counts towards the final price of the property. This is normally valid for 10 days and within this period you proceed to a full PURCHASE CONTRACT. If you have made an offer and the seller does not accept your offer, the holding deposit is returned in full. If the seller accepts your offer and you decide not to go ahead you lose your deposit.

There are two main reasons we ask you to sign a reservation when buying, one, it secures the property for the purchaser whilst the contract is prepared and two, it assures the seller that the buyer is serious, and he can take the property off the market whilst the contract is prepared.

A lot of people say that estate agents want to turn the momentum and enthusiasm of your visit into a commitment as quickly as possible working on the theory that if you go home having signed an Initial Reservation Document and paid a deposit you are more likely to proceed with the purchase than if you go home having seen a property that you plan to buy, but without having made any commitment. The deposit paid makes a change of mind costlier, so fewer people change their mind if they have paid a deposit.

However, if you are dealing with a reputable company you should feel no pressure at all to sign an Initial Reservation Document and only do so if you are completely happy with the purchase. A reservation contract should not be designed to “trap” the purchaser into buying but to be a useful instrument to assure that all parties have real interest.

If you are completely happy with the purchase and want to take a property off the market, then you can sign the Initial Reservation Document, BUT, remember this is not “sign a bit of paper and think about it”, this is “think about it properly” and then sign.

This contract requires that you pay (normally) 10% of the agreed price when the contract is signed. If you fail to go through with the purchase having signed the PURCHASE CONTRACT you will lose all of your deposit to the vendor, however if the vendor backs out before signing the deeds then the vendor will have to pay you back double the deposit (Art. 1454 of the Spanish Civil Code). This contract makes it expensive for either side to back out, but at the same time it does leave the door open should either side wish to do so.

You should only sign a PURCHASE CONTRACT once your solicitor has done the necessary due diligence and given the all clear.

Putting in a lower amount on the deed to pay less taxes. This is a practise that has gone on for years, the full amount you have agreed to pay the vendor will be stated in the contract but a lower amount is stated in the deeds the rest being paid “under the table” in cash, a practise we do not recommend but needs explaining as many people know about it. Basically, it is done to pay the 8% “stamp duty” or transmission tax on a lower figure hence making a saving on buying costs.

The government are wise to this and now value your property based on its rateable value hence rendering private agreements of this kind invalid for the purchaser as his purchase taxes will not be based upon the purchase price paid but on the Taxable Value (see below). Once again, we must state that we do not recommend this practise.

However, on properties that are furnished there is the possibility to reduce taxes by declaring in the deeds that part of the funds are for the property and part are for the furniture and fittings which pay tax at a lower rate. The viability of this would depend on the Taxable Value of the property and in no case would there be cash involved.

This is the value is based on the Rateable Value of a property multiplied by a factor, these are set values, they do not “make them up”.

Our main business is “distressed” or bank sales, many being for the cancelation of debt, and their value is quite often considerably less than the Taxable Value. Yes, you go to the notary, sign the deeds, pay the 8% on the price you paid but, some weeks or months later, you will get a letter from the taxman saying that they think your property is worth more based on the figures they have and that you owe them the 8% tax on the difference. You can recur against it, but, at best, all you can hope for is to stall the payment. We always advise you of the Taxable Value prior to sale as we do not want you having a nasty surprise and it is our strong advice to pay the tax on the Taxable Value not on the Purchase Price.

PLEASE NOTE. If the property is new and has never been transmitted before (that is to say you are the first person to purchase the property) then you have to pay 10% IVA (VAT) plus 1.5% “stamp duty” tax. This is not affected by the Taxable Value syndrome as per the re-sale properties.

Lastly, whenever you sign any document that involves making a taks payment or any payment at all, the payment method should be clearly noted in the document you sign. We recommend all payments to be made via bank transfer from your own account, that way there is never any ambiguity about payment or where the funds came from.

All contracts should provide unambiguous details on the following

  • The buyer
  • The vendor
  • The property
  • The price agreed
  • The deadline for signing the deeds
  • Vacant possession
  • Debt-free title
  • How the transaction costs will be paid
  • Clauses that allocate responsibilities
  • Conditional clauses that need to be met for the contract to be valid
  • How disputes will be resolved

All contracts should be in Spanish (we are in Spain and subject to Spanish law) and in your native language or a least one you understand fully and are happy to sign in.

Deeds are signed in front of the notary. His role is to guarantee the legality of the sale certifying the presence of all the papers and people required by law to be present in any property deal and that the property is transmitted free from debt and incumbrances. In the UK the legal responsibility of the sale falls upon the solicitors whilst here it falls upon the notary.

Normally within 3 to 5 days the deeds will be ready to collect from the notary (you will have been presented with an official copy know as a “copia simple” on the day of the signing).

While the notary guarantees the legality of the sale and does the “search” to make sure that there are no debts etc on the property you need a lawyer for various reasons;

The estate agent submits the “nota simple” (a simplified version of the deeds from the registry office which shows all relevant legal information and any encumbrances on the property) to the lawyer who checks the validity of the documents and them submits them to the notary. The notary will obtain another of these documents on the day of sale to confirm the continuity of the document.

The estate agent submits the service bills, rates bill etc to the lawyer who checks the validity of the documents and them submits them to the notary.

The lawyer will obtain your NIE for you. You can do this yourself, but it does require more than one visit to government offices with all the complications that that implies.

The lawyer will translate the deeds for you on the day of signing, the notary will formally ask the lawyer if he or she has translated the deeds for you and will ask you if you are in agreement to sign. Your lawyer will appear in the deed as the person that legally translated the deeds for you.

The lawyer will collect the deeds and documents from the notary and take them to the tax office to pay the purchase taxes for which there are 30 days from the date of the signing.

After a few weeks the deeds will be available to be collected from the tax office and your lawyer will take them to the registry office for the final registry.

Again after a few weeks the registry office will contact your lawyer and he can pay the registry fees and collect the deeds for you.

The lawyer will also either, connect the services for you if it is a new property, or change them over to your name if it is not, and organise direct debit payments for you.

Obviously, you will need to pay on-going taxes (rates etc) on the property, so your lawyer will change them over to your name and organise direct debit payments for you. The same will be done on community charges if applicable on the property.

You also need to pay a yearly property owners’ tax which again your lawyer can do for you. (This does not normally enter in the fees you pay to the lawyer for the purchase.)

Legally you can do all these things yourself and save the cost of a lawyer, in the end it is really the notary who legally protects the purchase and in fact local Spanish never use a lawyer to purchase property, that is what the notary is for.

However, ask yourself this; Do I speak fluent Spanish? Do I fully understand the Spanish purchase and tax systems? Do I really want the hassle of going to the notary to take all of the paperwork in, going again to sign the deeds, again to collect them, then take them to the tax office to pay the taxes (two visits minimum) then pick them up, then take them to the registry office, then pick them up again, organise water and electricity connections and payments, organise changing rates and setting up payments, then sitting at home wondering if you have done it all correctly. We think it is money well spent and indeed our company policy is that we will not sell you a property without a lawyer unless we are confident that you are completely “au fait” with the Spanish system and language.

If you do not have contact with any lawyers, here are a few local lawyers we have found to be very good.

Gecko Services
Gecko Services, headed by Mr. Lucas Mayo offer their services on the purchase and a series of on-going financial, tax and general legal services aimed at the expatriates. Mr Mayo is half English; half Spanish so he can sail through both worlds with great ease. He is also a local councillor.

Paseo del Mediterráneo 46
04638, Mojácar, Almeria
+34 950 475949
lucas@geckolegal.com

Alonso & Garrido Abogados
Alonso & Garrido Abogados, headed by Mr. Francisco Alonso, extremely professional, an ex-judge who is a renowned lawyer at a national level being one of the top legal people in property law and its application. Mr. Alonso speaks good English and one of his assistants is fluent in French.

Plaza San Francisco, 1
04800, Albox, Almeria
+34 950 121040
francisco@alonsoygarridoabogados.com

M. Mercedes Flores Mirón Abogados, C/
M. Mercedes Flores Mirón Abogados Headed by Mercedes Flores, offer their services on the purchase and a series of on-going financial, tax and general legal services aimed at the expatriates. They speak English and they are very professional.

Duque de ahumada, 3 Bajo
04800, Albox, Almería
+34 950 120553
mercedesflores@telefonica.net

Mario Redondo Abogado
Mario Redondo Abogado offers his services on the purchase and a series of on-going financial, tax and general legal services aimed at the expatriates. He speaks English, and very professional.

Calle Andalucia 25
04880, Albox, Almeria
+34 950 430222
mariosolicitor@gmail.com

Parque Comercial
Saugar Abogados headed by Alfredo Saugar Saugar, offer their services on the purchase and a series of on-going financial, tax and general legal services aimed at the expatriates. They speak good English, German and Dutch and again they are very professional.

Mojácar 100, 04638 Mojacar, Almeria
+34 950 615038
saugar_abogados@hotmail.com

Lex Consulting Abogados & Economistas
Lex Consulting Abogados & Economistas, headed by Linda de Rijck, offer their services on the purchase and a series of on-going financial, tax and general legal services aimed at the expatriates. She speaks good Dutch, French, German and English and they are very professional.

Calle Mojigato nº 1
04620, Vera, Almeria
+34 950 390995
linda@lexconsulting.es

Costs will normally be between €1,200 and €1,500, however we recommend that you confirm this in writing with the lawyer as individual cases can vary

A

  • Abogado – Lawyer
  • Act de notoriedad – Legal act or document
  • Acta notarial – Notary’s certificate (debts)
  • Actos jurídicos documentados – Title registry
  • Agrupación de Fincas – Group of country properties
  • Aseroria – Accountant
  • Alta catastral – Land registry inscription
  • API (Agente de la Propiedad Inmobiliaria – Official estate agent
  • Arrendamiento de obra – Building contract
  • Asiento de presentación – Provisional property inscription at the land registry

B

  • Banco – Bank
  • Cuenta de Banco – Bank account
  • Tarjeta de Banco – Bank card
  • Boletin de enganche – Supply report. It contains information on how much power and water a property is allowed.

C

  • Cargas – Land charges registered against the property
  • Cancelacion – Cancellation
  • Cédula de habitabilidad – Habitation certificate
  • Certificado registral – Certificate showing debts attached to a property
  • Certificación – Certification
  • Certificado final de obra – Building completion certificate
  • Código civil – Civil Rights
  • Comisión de urbanismo – Building/Planning commission
  • Comunidad de propietarios – Community of owners
  • Condición resolutoria – Condition to concel a contract
  • Contrato de opción – Optional contract, with the right to buy a property, mostly by paying 10% deposit
  • Contracto privado de compraventa – Private purchase contract
  • Copropietarios – Co-owner , when several persons own a property together
  • Cuerpo cierto – Non variable condition. A condition that cannot be changed
  • Cuota – Instalment, changes

D

  • Declaración de obra nueva – New build certificate
  • Demarcación de Costas – Coastal
  • Derecho de retención – Deposit that you pay to the internal revenue office if you are not resident in Spain
  • Deracho de superficie – Land management rights
  • Deracho de tanteo/retracto – Purchasing Rights enables you to reserve an object to them later buy it or not
  • Deposito – Deposit

E

  • Edificabildad Máxima – Construction limits
  • Embargo – Repossessions
  • Escritura – Deeds
  • Escritura publico de compraventa – Public sales deeds

F

  • Finca – Country property
  • Finca registrada – Registered country property

G

  • Gestoria – Specialists used to obtain official authorisations, permits & licences

H

  • Hacienda publica – Internal Revenue
  • Hipoteca – Mortgage

I

  • IBI (Impuesto sobre bienes inmuebles) – Real Estate Tax (Rates)
  • Impuesto de actos jurídicos documentados – Documented legal acts tax, that is to be paid to lawyers
  • Impuesto sobre Transmisiones Patrimoniales – Property Transfer Tax currently 8% levied at all re-sale property
  • Impuesto sobre el incremento del valor de los terrenos – Tax on increase of land value
  • Impuesto sobre el patrimonio – Wealth tax
  • Impuesto sobre sucesiones y donaciones – Succession and gift tax
  • Impuesto municipales – Local tax
  • Información urbanística cédula – Urban planning department
  • Institución de heredero – Appoint an inheritor
  • IRPF – Income tax
  • IVA – Value added tax (VAT) currently 10% levied at new property not yet registed

L

  • Ley de arrendamientos urbanos – Local rental laws / Tenancies Act
  • Ley de la propiedad horizontal – Horizontal property tax
  • Ley del suelo – Floor area regulations
  • Libre de cargas – Debt free
  • Licencia de obras – Building Licence (building permission)
  • Licencia de primera ocupación – First occupation licence

N

  • NIE (número personal de identificación de Extranjeros – Foreigners personal identification Number
  • NIF (número de identificación fiscal – Fiscal identity Number
  • Nota simple – Information document on a property and its owner
  • Nota simple informativa – Land registry certifícate – local searches
  • Notario – Official authorised to certify contracts

O

  • Obligación personal – Obligation to pay tax as a resident
  • Obra nueva – New build
  • Oferta vinculante – Bank document specifying mortgage conditions
  • Ocupación Máxima – Maximum occupancy

P

  • Parcela – Plot
  • Permiso de obra menor – Minor builing permission
  • Plan parcial – Urbanisation plan
  • Pago en efectivo – Cash payment
  • Planta – Floor or level
  • Plusvalia – Municipal tax for increase value on land a property sits on
  • Poder – Authorisation / Power of Attorney
  • Prestamo / con techo – Loan / with variable interest rates minimuma & maximums
  • Posesión – Possession
  • Prestamo hipotecario – Mortgage loan
  • Precio de venta – Sales price
  • Procurador – Barrister
  • Promotor – Promoter
  • Propiedad – Property
  • Propietario – Owner

R

  • Recepción definitiva – Construction completion
  • Registro de la propiedad – Land register
  • Representante fiscal – Foreigners official tax representative
  • Residencia – Residency permit – required for foreigners livig in Spain for more than 180 days per year

S

  • Representante fiscal – Fiscal representative
  • S.A. (Sociedad Anónima) – Association / Incorporation
  • Saneamiento – Reconstruction
  • Seguro multirriesgo hogar – Home insurance
  • Seguro de amortizacion de prestamos – Loan repayments insurance
  • Segregación de fincas – Country property positioning
  • Señal – Deposit or down payment
  • Separación a linderos – Distance between plots
  • Servidumbre de tránsito – Accessibility
  • Solar – Building Plot
  • Subasta – Auction
  • Suelo no urbanizable – Non buildable floor
  • Suelo Rústico – Non permanente floor
  • Suelo urbanizable – Building land or plot
  • Suelo urbano – Urban area

T

  • Tarjeta de residencia – Residence card
  • Tasa de cambio – Exchange rate
  • Tasa – Fee
  • Titulo de propiedad – Title deeds stating the ownership of a property – date of sale etc
  • Tipo de interes – Rate of interest
  • Toma de posesión – Taking possesion
  • Tasadores – Assessor required by the bank before granting a mortgage
  • Tasación – Independent valuaton of a property
  • Traspaco – Transfer

U

  • Urbanización privada – Private Urbanisation
  • Uso de oficinas – Office use
  • Usucapión – When you get a plot for a time period awarded by the courts
  • Usufructo – Rights of use
  • UTM – Plot number at the land register

V

  • Valor catastral – Land registry value for tax purposes
  • Valor comprobado por la administración – Amount checked ny Internal Revenue
  • Valor real – Real estate value

Z

  • Zona de servidumbre de protección – Accessibility protected area

The NIE (Numero Identidad Extranjeros) is a personal, individual, and unique identification number required for all foreigners in Spain who for economic, social or professional reasons need to deal with the Spanish administration or authorities. Regardless of whether you plan to live in Spain permanently or not you do need to obtain a NIE number to purchase a property. It is possible to request a NIE Number in Spain by appointing a representative. ie your solicitor, by means of a Power of Attorney without the need for the applicant to come to Spain. The Directive 3/12 dated April 13/2012 re-enables the application for NIE through a representative by means of a Power of Attorney expressly stating that it empowers him to apply for the NIE. It can also be done at the Spanish embassy in your home country.

You give power of attorney to your lawyer for him to be able to represent you in the purchase of your property. This enables him to be able to obtain your NIE, open a bank account in your name for the transfer of funds to purchase the property (Spanish law requires all payments to be done from the purchasers account and having one in Spain reduces the Money Laundering Law regulations making the whole process less complicated) and finally sign the deeds for if you are not here and translate them for you if you are. This power of attorney can be done whilst here in Spain or indeed at a notary in your own country in which case it must be officially translated to Spanish and have The Hague Stamp to say so.

As a rule of thumb people say 10%, however this is not always the case therefore you must have all the costs very clearly stated prior to purchasing. If it is a new property, then the purchase taxes alone add up to 11.5% without taking into account the other costs. The percentage can vary given that some of the costs are, more or less, fixed whilst others are a direct percentage of the purchase price, hence if the purchase price is low, the fixed costs push the overall percentage cost up.

Resale Property Example with an existing property of €100.000

  • Transmission tax 8% of the purchase price: €8.000
  • Notary fees of averagely €700
  • Registry fees of averagely €400
  • Solicitors fees, averagely €1.690
  • Admin fees (if applicable), normally around €3.600

Total €100.000 + €13.500 = €114.420

Newbuild Property Example with a new build property of €100.000

  • IVA at 10% of the purchase price: €10.000
  • The IAJD tax (Stamp Duty) at 1.5% of the purchase price: €1.500
  • Notary fees of averagely €700
  • Registry fees of averagely €400
  • Lawyer fees, averagely €1.690
  • Admin fees (if applicable), normally around €3.600

Total: €100.000 + €17.890 = €117.890

All in all, we prefer to say allow 15% to 18% of the purchase price as a basic rule of thumb, but as said this can vary depending on the property. We can give you accurate figures on any property prior to any purchase.

The basic running costs on a property are several and we’ll use again a €100.000 property as an example

The IBI rates vary depending on the property, but even so, they are considerably less than in the UK and most Northern European countries. For example, an average 2-bed apartment on the coast can cost around €250 a year.

The “Basura” tax (a rubbish collection tax) about €35 every 3 months.

Community fees obviously vary depending on the property. This fee is to pay for the cost of running the urbanisation, so if your property is not on an urbanisation they do not apply. If the property is in a block of flats with no pool they tend to come out at €30 or less. If the urbanisation has pools and gardens, then more in the region of €50 to €70 a month. Properties on golf complex urbanisations tend to cost a little more as there is the added cost for the golf complex its self. Again, we can give you accurate figures on any property prior to purchase though normally it is around €50 a month.

Annual Property Ownership Tax for Non-residents will be the cadastral value x 1.1% then x 19% or 24% depending on place of residence of the owner = EU resident 19%, non-EU resident 24%. You can basically say at approx. 0.2% of the cadastral value. In Spain the cadestral value can be around the value of the house. 0.2% of €100.000 = €200

Lawyer fees for handling this tax are normally in the region of €35 euros for each return, so 2 owners = €70 year, the tax has to be paid before the end of the following year, e.g. 2019 purchase will have paid non-resident tax end of 2020, a 2020 purchase will be paid at the end of 2021. If the property is rented you will be subject to tax on the net rental income. When you rent you do not pay the non-resident tax for this period of time; e.g. If you declare rentals for all of August = non-resident tax for 11 months + rental tax declaration for the August income. Rental declarations are trimestral. We highly recommend that clients ask their lawyer if they can do this for them as it will not happen automatically. Also, not all solicitors handle this tax side. Though in general €50.

  • IBI = €250
  • Basura = €35
  • Community = €600
  • Property Ownership Tax = €200
  • Lawyer = €50

Total = €885 per year

To these costs you have to add your water and electricity bills which depend on use. All in all, annual property ownership costs are considerably less than in the UK and most northern European countries.

The documents typically required by a bank are

  • Your NIE number. (You must get apply for a NIE number before you can buy a property in Spain.)
  • Your contract of employment.
  • Your last 3 payslips.
  • Your latest income tax return.
  • Your pre-agreement with the seller.
  • Proof that the property tax (IBI) on the house is paid up.
  • Details of other mortgages or loans that you may have.
  • All property deeds, both in Spain and overseas.
  • Certificate from work authorities, showing your past work history.
  • Records of your current assets (bank/mutual fund statements, etc.).
  • Prenuptial agreements, if any.
  • If self-employed: Local tax on economic activities (IAE)
  • If self-employed: Records of your assets during the last two years
  • If self-employed: VAT tax you paid for the last quarter and last year

The vast majority are variable-rate mortgages, though you can also find fixed-rate and interest-only mortgages. In a variable-rate mortgage, repayments vary according to the Euribor, the base rate set by the European Central Bank. A typical bank offer might be “Euribor + 0.41%, with no opening fee, no cancellation fee, and a first-year fixed rate of 3.50%.

The banks will decide this after reviewing your personal and financial profile. In general, Spanish mortgage are around 60%-70% of the value of the property to foreign buyers of Spanish property. However, you may be able to find mortgages offering up to 80% of the property value.

Yes, these can be summarised as follows

Property Valuation Fee
Before granting a mortgage, a Spanish lender will require the property to be valued by one of their own appointed appraisers. The buyer is responsible for this upfront fee.

Mortgage Opening Fee
Many lenders charge a fixed fee of around 1% for setting up the mortgage.

Mortgage Insurance
It is a legal requirement of Spanish mortgages that you obtain general house and contents insurance. Depending on your circumstances, you might also consider life and mortgage insurance.

Mortgage Early Cancellation Fee
Buyers should be aware of this as it varies between lenders.

Mortgage Notary Fee
If a Spanish house is to have a mortgage registered against it, this must be declared before a Notary. The Notary will charge for this.

Spanish Stamp Duty
(known as AJD) is a tax on mortgages which is paid to the government. It is calculated as a percentage of the mortgage.

Deed Arrangement Fee
The lender employs a gestor to arrange for the deeds to be correctly registered at the Land Registry. The buyer is responsible for the gestor’s fee.

Land Registry Fee
Following completion the buyer will incur the land registry fee for completing the Registration.

The buyer should consider the above carefully when budgeting to purchase a property. The buyer should make sure they can get approved for a mortgage before signing a full contract on the property. Since 2007, banks are much more stringent as to who they will approve, especially to a foreigner without a regular payslip.

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