The aim of this guide is that you become familiar with the names, dealings and taxes related to the purchase of a property.
If you buy an off plan property, the developer must issue an insurance policy or bank guarantee; you will then be insured in the case the works are not finished. Also you have to request the building technical specifications, detailed plans, copy of the property titles and works license.
In case of a new property, you have to request the following information:
If it was a second hand property:
Once you have decided to purchase a property, we recommend you two type of contracts:
It is a contract in which the buyer pays to the seller an amount on account of the agreed price, normally 10% or less and there is a deadline of one up to three months to sign the title deeds. If the buyer wants to cancel this contact, the buyer would lose this deposit. It if is the seller who wants to cancel it, the seller would have to refund to the buyer the double of the deposit paid.
It is normally used when it is paid an amount higher than the 10% and the duration of the contract is higher, as difference to the deposit down payment contact, in which the vendor is forced to sell.
The aim of this Guide is to provide a short summary of general information, please note that it does not substitute any legal advice.
TAXES
SECOND HAND PROPERTY
Property Transfer Tax (I.T.P. in Spanish)
To be paid by the buyer for the acquisition of any type of property (villas, apartments, plots of land, premises, parking spaces), as long as the seller is not a developer or its normal business does not consist of developing or reselling properties.
If the minimum tax value of the property pursuant to what has been fixed by the Regional Government of Andalusia is higher than the price, then it will be applied the above mentioned minimum tax value: it is applied the 8% to the first section up to 400,000€ or 30,000 in case of parking spaces, with the exception of those parking spaces annexed to the property and up to a maximum of two. It will be applied the 9% to the section between 400,000€ up to 700,000€ or between 30,000 and 50,000€ for the parking spaces. It will be applied 10% to the section which is higher than 700,000€ or 50,000€ for parking spaces.
PROPERTY OF NEW CONSTRUCTION
VAT. + Stamp Duty Tax (I.A.J.D. in Spanish)
10 % + 1.50%
For any VILLA, APARTMENT or PARKING SPACE annexed to an apartment, when the seller is a developer or habitual trader of BRAND NEW PROPERTIES (first transfer).
21% + 1.50%
For the first sale or resale of plots of land or only for the first sale of business premises when the seller is a developer or habitual trader of these type of properties.
COSTS FOR A NEW PROPERTY AND SECOND HAND PROPERTY
NOTARY AND REGISTRATION COSTS AT THE LAND REGISTRY OFFICE
The costs increases depending on the number of pages, the complexity of the title deeds and the value of the property. As guidance it can be around 0.50% plus VAT.
LAWYER
The lawyer’s fees will be approx. 1% of the property purchase price, depending on the lawyer and price of the property.
ADMINISTRATION
The payment for the arrangements to pay the costs and taxes and registration at the Land Registry Office. The costs vary depending on the necessary arrangements, it is normally between 300 € up to 400 €.
SUMMARY
The approx. Costs related with the purchase of a residential property represents round the 10% of the price of sale in case of the second hand properties and approx. 12% of the price of the sale for new properties, plus legal fees.
All the property owners in Spain who are foreigners must obtain from the National Police Department the Identification Number for Foreigners (N.I.E. in Spanish).
PURCHASE PROCESS
Normally, and if you have not paid the total price of the purchase, a private purchase contract is drafted. In this contract all the details and information of the operations are registered – registration details of the property, purchase price, method of payment, deadline to sign the deeds, delivery date, etc. When this private contact is signed, a deposit is paid, this amount varies considerably depending on the terms agreed for the purchase and the deadline to sign the deeds.
Normally, if the deadline to close the operation is between 30 to 60 days, the deposit would be 10% of the full agreed price.
The properties of new works, logically, are paid while these are built and all the payment son account made before the works are finished must be guaranteed, according to LAW 38/1999 of Building Regulations (LOE in Spanish) by a bank or insurance company. If the property is not finished within the agreed deadline, the buyer is entitled to claim the amount paid plus legal interests applicable. Also, this law binds the developer to take out an insurance of TEN YEARS for any defects in the building, being the buyer the beneficiary of the above mentioned insurance. After payment of the full price of the purchase, the seller will issue the title deeds of purchase free of charges and encumbrances in favor of the buyer.
This title deeds will be signed at the notary, then it will be sent to the office of the Tax Department to pay the Transfer Tax if the property is a resale or second hand, or to pay the Stamp Duty if it is bought directly from the developer.
Then the title deeds will be submitted to the Land Registry Office for their registration. When the title deeds are processed, a provisional registration is done at the Land Registry Office.
