Professional & Legal Property Advice on the Costa Blanca
PROCESS OF BUYING A PROPERTY (THE CONTRACT):
Once you have decided on a property, a contract will have to be drafted and you need to make provisions for the deposit. The standard deposit is 10% of the purchase price. The deposit is payable upon signing a Purchase/sale Contract or an Option Contract (Contrato de Compraventa o Opción de Compra), which will include a completion date and transaction conditions which usually contains an assurance by the vendors that the property is sold free of charges, tenants and mortgages. Once both parties have signed this contract and the deposit has been paid, you have secured the property. This is a binding contract for both sides with penalties for breaking it or for failing to honour the terms of the contract. After you have signed and paid your initial 10% deposit on the property, it is imperative to review the important legal details. Check the receipt for the paid Rates (Impuestos sobre Bienes Inmuebles also known as I.B.I.), which is the annual real estate tax. This receipt gives the all important “Valor Catastral” the official assessed value of the property, on which your property owners Income Tax will be based. Check with the Town Hall that the I.B.I. receipts have been paid up to date. Any outstanding amount should be requested from the vendor.
Do not buy a Spanish property until you have obtained a current extract of the title from the Land Registry (Nota Simple).
PAYMENT AND SIGNING OF DEEDS:
The next stage is to complete the purchase at the Notary’s office, usually, within a month or so, you will be ready to make the final checks before signing the the Title Deed (Escritura Pública de Compraventa) in the presence of a Spanish Notary (Notario) who certifies that the contract is officially made. The notary does not certify that all statements are true, only that the parties have sworn to them. There you will be required to pay the balance of the purchase money, taxes and Notary`s fees.
NOTARY CHARGES:
These are collected by the Notary for preparing the deed and presiding of its signing. His fees are fixed by law and are based according to the value of the property. Please note that all professional fees including the notary’s and land registry charges are subject to 16% VAT.
PROPERTY REGISTRY:
All property in Spain should be registered in the Land Registry (Registro de la Propiedad), where you can obtain the full details of the owner, the exact size of the property and full details of any mortgages, debts or judgements against the property will be normally registered. Only the persons or the Company named on the title deed (“Escritura Pública”) have the right to sell the property, unless a notarised power of attorney has been given to a third party. When the title deed is signed, you will automatically become the new owner. The final step is to have the title deed (Escritura Pública de Compraventa) inscribed in the Land Registry Office as soon as possible to prevent any mortgages or other charges being registered against the property, while it is still in the name of the vendor.
PROPERTY REGISTRATION FEES:
Registration fees are charged by the Land Registry Office to inscribe the new deed into your name. These are based on the official registered value of the property. The length and complexity of the deed and other factors are also considered. The fees do not exceed 1% of the registered value. It is not advisable to try and do this yourself unless you are experienced and speak Spanish fluently.
TAXES: (PROPERTY TRANSFER TAX OR IVA (VAT)
Which of these two taxes are levied will depend on the type of property you are purchasing. The property transfer tax is levied on resale properties. The General rate for this tax is 7% . If you purchase a newly built property from a developer you will pay a different tax called “I.V.A.” (VAT) which is charged at 7% of the purchase price plus 0,5% stamp duty.
LOCAL MUNICIPAL TAX ( PLUSVALÍA) : This tax is based on an officially assessed increase in the value of the land since the last time the property was sold . This can be quite small if purchasing an apartment, but expensive on a villa with a large plot, which has not changed hands for years. Find out the exact amount from the Town Hall. Do not confuse this tax with the vendor’s capital gains tax on his profit on the sale. In practice “who pays what” is negotiated prior to signing the Option Contract or Contract of Purchase/sale and this must be stipulated in the contract, as well as any listings of the contents/fittings to be included in the sale, when the owner accepts your final offer in writing. In accordance with Spanish law, the purchaser is responsible for transfer tax or (I.V.A. + stamp duty when buying from a developer), plus Registration Fees and Notary’s Fees.
THE PURCHASER IS RESPONSIBLE FOR :
His own capital gains tax on any increase of value in the title deed, the local municipal tax (Plusvalia) and real estate agent’s fees. The payment of the local municipal tax (Plusvalía) is the vendor’s responsibility by law, but if agreed between the parties, the normal custom is for the purchaser to pay it to assure that it is paid within the time limit. If, however, both parties decide that the vendor should pay this tax, please remember that is registered against the property and you will have to pay if the vendor fails to do so. This tax is often not demanded until some time after completion this is why, in most cases, the purchaser prefers to pay this tax liability.
WITHHOLDING TAX:
If you buy a property from a non-resident person or a company, you must withhold a 3% of the value declared on the deed and pay that amount to the Spanish Treasury (Tesoro Público). The Spanish Treasury makes it the purchaser’s responsibility that this amount (3% retention of the purchase price) is paid to the Tax Authority on account of any Capital Gains tax generated by the vendor with the sale.
OUTSTANDING DEBTS:
If there are any debts, outstanding mortgages, unpaid Comunity fees etc, then you should make sure that the debts are paid by the vendor before paying him the purchase price and signing the Deed of Purchase/sale, or you can deduct the amounts owed by the vendor from the purchase price to be paid and settle the debts on his behalf. This should be agreed between the parties.
PROPERTY OWNERS ASSOCIATION:
If you purchase an apartment in a block, townhouse or villa in an urbanisation, you will automatically become a memeber of the property owners association, with the right to vote at the AGMs, which administrates the general maintenance of zones of common ownership, such as streets, gardens, hallways and swimming pool etc. An annual budget is calculated to cover these costs, which is divided between all owners according to the size of their properties. Fees depend on the services offered and are reflected in the annual amount. Check the latest receipt for the payment of monthly or yearly maintenance charges (cuotas de comunidad) and discover how much you will have to pay. It is advisable for your legal representative to obtain a certificate from the association that there are no charges outstanding. Ask the president or the administrator for a copy of the Minutes of the Meetings and a copy of the Regulations governing the Community. The Minutes should highlight problems, such as failing water supply and the Regulations will confirm your rights. Please note some communities have special rules. It is advisable to check up if there is anything special such as “no dogs” etc. Other items such as domestic services, electricity, water & telephone are metered and charged as used. If the building belongs to a community it is important that the property has a Public title deed Escritura in which the plot as well as the house is shown. The Community of Owners is the legally registered body that administers the urbanisation or apartment building.
