1. Select a real estate agent who is a seasoned professional who will guide you in the search for a property and the legal queries.
2. It is essential to have a lawyer by your side that you trust, who speaks your language and is experienced in the sector. Your legal counsel will provide you with valuable information concerning the expenses that arise from the sale and/or purchase and will advise you during the whole process until registration in the Property Registry. Each sale and/or purchase transaction is different.
3. The vendor must evidence that all taxes and expenses were duly paid by the date of the signing of the Title Deed before a Spanish notary public. Your lawyer will be in charge of collecting this data and, where appropriate, requesting it from the vendor’s lawyer. It will be mandatory to check that the payment of the following expenses was duly made:
- The Real Estate Tax (I.B.I.), a local tax that is paid yearly
- The Community fees (Cuota de Comunidad)
4. Your lawyer will check the ‘legal existence ‘ of the property that you intend to buy. He will, among other things, check whether the description of the property that will be provided to you by the vendor does coincide with the description in the Property Registry. This will involve checking whether the surface area of the plot actually coincides with the square meters that are indicated in the Cadastre and Property Registry and making sure that all building features were properly legalized by way of a deed of Declaration of New Building Work (Declaración de Obra Nueva). Furthermore, it will be of vital importance to check whether there are any rights of way, charges and encumbrances, such as mortgages and any kind of caveat in the Property Registry regarding this property, which might affect its sale.
5. The stages of a sale and/or purchase transaction usually are, as follows:
- A few weeks prior to the granting of the Title Deed before a Spanish Notary Public, it is customary to sign either a private purchase/sale agreement or an option to purchase agreement and pay a 10% deposit towards the purchase price. This agreement contains the essential data concerning the transaction, such as the purchase price and the deadline set for the granting of the Title Deed. Between the date of the agreement and the date of the Title Deed, both parties will have time to settle any tax and other pending invoices and to exhibit receipts of those payments.
- On the date of the granting of the Title Deed, the vendor and the purchaser and/or their representatives must appear before a Spanish Notary. Upon the granting of the Title Deed to the property, the agreed purchase price will be paid and possession delivered to the purchaser.
6. The expenses that are borne by the vendor usually are, as follows:
- The Municipal Plusvalía (a local tax that is levied on the appreciation of residential land). The accurate tax amount that ought to be borne by the vendor is provided by the City Council. The amount of this tax is not usually significant.
- Furthermore, the vendor must pay Spanish Income Tax on the proceeds of the sale (i.e. the difference between the price that was declared in the previous Title Deed received when he purchased the property and the price that is declared in the current Title Deed that he granted upon selling that property). Under current laws, a vendor, who is not an official resident of Spain, will pay a 35% tax rate on the proceeds of a property sale. Upon the signing of the Title Deed before a Notary, the purchaser will withhold 5% of the declared purchase price to make sure that the Income Tax levied on the proceeds of the sale will be paid by the vendor; this 5% amount must be transferred to the Spanish Tax Office within one month. Thereafter, either the vendor’s lawyer or tax consultant will file a tax statement and the vendor will either receive this 5% amount or pay any difference, if ever the final tax amount was higher than the 5% paid on account. A vendor, who is an official resident of Spain, will pay a global rate of 15% for Income Tax arising from the capital gains obtained from the sale (I.R.P.F.).
As for any plot of land purchased prior to December 31, 1994, an 11, 11 % rate can be written off for every year after December 31, 1996.
7. The expenses that are borne by the purchaser are, as follows:
- The expenses borne by the purchaser usually amount to 8,5%/10% of the declared purchase price.
- A 7% Stamp Duty (I.T.P.) will be paid on the declared purchase price. On the contrary, in the event of a property purchase from a developer, the current V.A.T. rate (I.V.A.) will be paid.
- Notary fees: broadly speaking, about 1,000 €, sometimes less.
- Lawyer’s fees: between 1% and 1,5% of the total purchase price.