Buyers guide
Buying a property abroad is probably the largest investment you will make, other than purchasing your property in the UK. Therefore, you don’t want to make a mistake in the property you buy. A general guide to buying property in Spain is given below:
Resale
The advantages of buying resale are that you can see exactly what you are buying and that, once you have completed, you can move in as soon as you wish. As resale properties are often sold including furniture, this can simply be a case of moving in! The disadvantages are that you might like a particular villa but not the location, or you may find the perfect view but that the tiles, kitchen units, condition or layout are not to your liking.
New Construction
If you don’t have to move in straight away you may wish to build your own villa in the location of your choice. You will be able to choose from a number of individual building plots with the freedom to place a villa in the position you prefer. Then you will be presented with various designs and sizes of villa to choose from which, should these need modifying to suit your taste and circumstances, could be done very quickly. Finally, you will receive a final set of plans for approval.
The advantages of building instead of buying a resale property are that you are able to choose the fixtures and finishings for your villa: floor and wall tiles, finish on woodwork, kitchen units and appliances, bathroom suites, etc. Another advantage is that when building a villa stage payments are made. These usually are:
- On signing the contract
- At pre-roof level
- Rendering stage
- On receipt of the keys
How to proceed with a purchase
Reserving a property
Having found the right property and agreed the terms and method of payment with the vendor, it is standard practice in Spain to pay a deposit (usually a £2,000 cheque) to secure the property .
In the case of a resale or a completed property this is called an Option Contract or Reservation Contract. This document acts as a signed receipt for the deposit and is normally valid for 30 days. This allows the purchaser’s legal representative sufficient time to carry out the necessary searches. After this period, the Escritura (Title Deed) is signed in Spain by both parties before a Notary. If it is not possible for the purchasers to attend, they can grant their lawyer a Power of Attorney which enables him to sign on their behalf.
In the case of building a new property, the Option Contract reserves the plot of your choice allowing the lawyer sufficient time to carry out the necessary searches on the plot, after which the Main Contract is signed. The Main Contract will set out the payment structure at the different stages of construction. This document protects the purchaser’s legal status to the property. It clearly states both the purchaser’s and the vendor’s (the developer) contractual obligations and responsibilities.
Conveyancing
Buying property in Spain is as safe as in the UK, provided you have the appropriate legal assistance. The Spanish legal system is different from that of the UK and Cala Blanca Villas strongly recommends that all purchasers use an Abogado (a Spanish lawyer and a member of one of the Spanish Bars) or a Gestor (a licenced conveyancer) when buying a property, in order to thoroughly safeguard their interests.
An Abogado or Gestor carries out the necessary searches. They will handle all payments on behalf of the purchasers and, subject to a Power of Attorney being granted them, will sign over the deeds in favour of the purchasers. In the case of construction, it is their responsibility to execute the Main Contract.
The cost of an Abogado in Spain varies between £500 and £1,000, and a Gestor’s charge will usually be between £250 and £400. Some purchaser’s prefer to use the services of a solicitor in the UK and, as in Spain, their fees will vary. Some charge a fixed rate, others charge for time spent on the purchase. Whether you choose to use a lawyer in the UK or in Spain, it is wise to establish beforehand the total cost of conveyancing.
Notaries
Abogados or Gestores must not be confused with Notaries. The Notary´s function is that of an impartial witness to the signing of all public documents before their inscription in the property registry. It is his responsibility to verify title to the property before giving good faith. He receives the Transfer Tax (applicable only to resale properties) on behalf of Hacienda (the Spanish Tax Authorities). Notaries fees can vary from one region to another.
Completion of a purchase
When the final payment is made, the vendors, together with the purchaser’s Abogado, will sign over ownership of the property before the Notary. The document is called the Escritura.
The original signed document is held by the Notary. He then issues a first legalised copy which he signs and stamps. This is then sent to the Land Registry where it is registered in the purchasers’ name “free of all charges and encumbrances”. Approximately one month later, the fully legalised deeds are ready for collection. If these deeds were ever lost or misplaced, the Notary will issue a second legalised copy. The Transfer Tax (in the case of a resale property) is normally paid at the time of signing the Escritura.
Land Registry (Registro de la Propiedad)
The Land Registry Office is where all Escrituras are inscribed. The Abogado or Gestor will carry out all searches at the local Land Registry Office and any charges or encumbrances relating to the property will be registered here.
Registry fees vary according to the individual Land Registry. The charges are similar to that of a Notary.
NIE
The NIE (Foreigners Identity Number) is given to all non-residents buying a property in Spain. This is applied for at the Police Station in Denia. A passport sized photograph will be needed.
Taxes
Transfer Tax
All resale property is subject to 7% Transfer Tax but is exempt from VAT. The notary receives the tax on behalf of Hacienda.
Transfer Tax is not paid on new property, but a duty of 1% is payable when a newly built property is declared on a plot.
VAT
VAT, known as IVA in Spain, is applied to all new property sales. There are different ratings as follows:
- 7% - New ready-built properties
- 7% - Plot with construction*
- 16% - Plot only
VAT is not applied to Resale properties.
*Assuming that the landowner is the same as the developer.
Plus Valia
Plus Valia is a local tax calculated as a percentage of the difference in the increased value of the property from when it was last sold. The calculation is based on the Rateable Value (not the real value) of the property and is a one off payment charged when the property changes hands.
The percentage is defined by the Town Hall and varies according to municipality and the tax is the repsonsibility of the vendor.