Business & Economy
The Process of Property Purchase in Spain
By Martin Bright
Jun 20, 2007, 05:08
- Having found the property you want to purchase, then it is usual that you will be asked to give a small non-refundable holding deposit to the selling agent as a “proof of intent” and that can effectively block the property for at least 2 weeks while searches are made. The money is held “in trust” by the agent until such time as the private sales contract is agreed and signed by the vendor and buyer. The money is then utilised as part of the initial 10%.
- The lawyer or legal representative you select to act for you should be able to give you a full explanation of the process of the purchase, make the appropriate searches and prepare the private sales contract for you with a translation in your own language. Your legal representative can advise you on taxes, wills and Spanish fiscal responsibility and also arrange a power of attorney with you, in order to make all the arrangements in your absence should you wish - but not without your agreement.
- Before completing on the sale it is important that you apply for your NIE (Spanish Identity number) and also a certificate of non-residence. This can ONLY be done in person, and is free – all you need is to complete the application form and provide a photocopy of your passport with the original when you present yourself at the local Comisaría de Policía. From the moment of application to the actual document being issued you need to allow 4 or 5 working days. The NIE is also the document required when purchasing a vehicle in Spain, too.
- A Spanish bank account is essential when considering to purchase a property in Spain. There is a wide choice available, but it is best to shop around not only for the mortgage (if you need one) but also to look at the services offered – English speaking staff, internet banking, bank charges, etc. Remember that in order to justify your property purchase in Spain then you will need a Spanish bank account in to which your monies are transferred and extracted for the purchase. The bank will also supply for the completion the bankers draft / cheque identifying your status as a non-resident account holder.
- Most people remember to open a bank account in Spain but few look at the currency transfer issue. Recently both in the UK and in Spain there have been more controls on individuals transferring large amounts of foreign currency. As a consequence it is important to not only check with your UK bank or building society operation, but also to pre-register with specialist Currency Transfer Companies who often offer very competitive rates. The registration process is quite simple but can take 3 or 4 days to confirm. Also allow for the days taken for the transfer to move from the UK to Spain. It is usual to take 3 days to arrive at the central bank in Madrid and then a further 24 hours before coming to the provinces. This time line may be an important consideration for you if it is important that the money be on your account for a specific date.
- Once your lawyer has checked the documents for the property, and you have arranged to have your funds available you will then be presented with a private sales contract / agreement. This private document is a pre-contractual agreement between the vendor and purchaser. The document will include the full names, title and addresses of both parties, the title details of the property for sale, the status of the property (eg.; furnished or unfurnished), the sequence of payment, date of place of completion and fiscal responsibility of both parties. Once both parties have signed and monies have been exchanged then this legally binding document ensures both parties exchange on or before the agreed date. If the vendor decides to no longer sell the property to the buyer then they are liable to refund the amount received plus the same amount in compensation. If on the other hand the buyer decides to pull out of the purchase then they loose the monies paid. It is therefore important to ensure that as a buyer you are available to complete on the purchase within the time agreed; and that if needed you are able to obtain a mortgage. Remember the concept of a chain system does not operate in Spain; once you agree to purchase a property here then you are contractually bound to exchange.
- On completion (exchange) at the notary the purchaser will have 30 days to pay the transmission taxes and to register the property. While the vendor will be responsible to pay the Plus Valia (a land value added tax levied by the town hall) within this period. If you have taken a Spanish mortgage then the banks legal department will be responsible for the registration costs and will have asked you for a provision of funds to cover them in advance of the date of completion. It is usual that on the day you complete you will also receive all the keys for the property; and if you are concerned then we strongly advise that you change the locks simply for your own peace of my mind. For more detailed information see our guides “Taxation in Spain” & “Your Fiscal Responsibility”
- The electricity and water will also be changed to your name only after completion. It is common with re-sales to change the bank details and name rather then the contract title holder. However in recent months, and in line with European norms, when application is made following exchange of ownership then both the water and electricity company will investigate the installation and metre prior to issuing approval of changeover. If a new certificate of installation and/or meter be required, before the connections can be made, then the cost of this rectification could be as little as 200 Euros or more depending on the age of the installation. This is especially common with older village or town houses where the contract remains in the name of the original contract title holder, in some instances for more than 20 years.
- Gas in Spain, apart from the larger cities, is supplied by the familiar orange butane bottles. The average bottle lasting 2-3 weeks for normal use cooking or heating water. Each bottle weighs approx. 20 kilos and costs around 12 Euros to re-fill. In properties where gas is installed there should also be a contract for the supply and also the ownership of the bottles; and usually 2 or 3 bottles is the norm. The bottles are supplied by a local agent who delivers in the area either once or twice a week (depending on the population of the local community).
- Finally, on taking ownership of your property here you will also be faced with other new ways of doing things: telephone line, satellite television coverage and availability of channels in your own language, fittings and furnishings, lighting and installation, community observations and local by-laws, even registering yourself at the town hall (empadronamiento) for when you need to purchase a car or to send your children to the local school. All the things that make living in Spain that little bit different to what you were used to.
For information in properties in the Costa Tropical area, please contact Tropicana Properties
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