BUYING A PROPERTY IN SPAIN

BUYING A PROPERTY IN SPAIN

Is the conveyance process in Spain similar to that in England?

No. The Spanish legal system is very different from the English system. Spain is not a country of Common Law.

Generally speaking, however, we can make check searches and enquiries similar to those that we would make in England. If these are made then there is hardly any more need to worry about buying a house in Spain than there is about buying one in England.

Unfortunately, very often people purchasing property in Spain take little or no legal advice and indeed are quite "casual" about the purchase and about the signing of legal documents. They may then find there is no title to the property, that it was built without planning permission, or that it does not even exist!

You will, no doubt, have heard of cases where buyers have suffered loss. There is no reason why this should happen to you provided that you take independent legal advice.

Please also note that in Spain the Public Notary ("Notario") -in front of whom all land transfers in Spain have to be signed -is not there to give legal advice to either the Buyer or the Seller. His function is to witness the signature of the title deeds and to deal with certain administrative matters.

How do I find a property in Spain?

Your agent will normally find your property but we can also help you finding properties in Spain and recommending reliable agents.

How will you be able to help me buy a home in Spain?

The first and most important thing we would say to you is that you NEVER SIGN ANYTHING until you have sought independent legal advice.

Most estate agents are, of course, honest, but however honest and helpful they may be you must remember that they are being paid by the person selling the property to sell it for them and not to protect your interests. They are not able to give you independent legal advice.

Once we have been instructed to look after your purchase for you, we will check to see that the title of the property is satisfactory. We will make sure that the person who is selling the property to you actually owns it and we will find out whether there are any charges on the property that adversely affect it.

When appropriate, we also check to see that the property, when built, had the necessary licences and permissions.

We will check the terms of the contract suggested by the person selling the property to ensure that it is fair and reasonable.

If you decide to go ahead, we will arrange for the funds needed to be imported into Spain, for the title to the property to be transferred into your name in the way required by Spanish law, for any fees and taxes to be paid and for the title to be registered with the government Land Registry.

What about a survey?

As is the case of the purchase of a property anywhere, it is often prudent to have the property you intend to buy surveyed. We can, if you wish, make arrangements for such a survey and will be pleased to advise about the merits and cost of doing so.

What is the Escritura?

This is the title document proving who is the owner of the property and containing a detailed description of the property itself.

It is, under Spanish law, necessary for the Escritura to be signed before a Spanish Public Notary. We will arrange this.

Who is the Notary?

The Notary is a public official who is there simply to put on the public record the fact that the title deed recording the sale/purchase has been signed in his presence and understood by the parties concerned.

What does the Notary do?

The Notary is not there to advise or to protect either your interests or the interests of the person selling the house.

When the Escritura is signed in front of the Notary either the purchase price is, in his presence, handed over to the person selling the house or the Seller confirms that the money has already been handed over.

In certain cases the price may be paid wherever in the world the parties wish. In others, it must be paid in Spain. lt is usually necessary for the importation of the funds used to buy the property to be recorded with the authorities in Madrid. We will deal with this for you.

The Notary will report in the deed how exactly the money has been paid and will inform the Tax Authorities if he/she thinks the parties are laundering money.

Do I have to be in Spain to complete the transaction?

The person buying the house may attend in person before the Notary, but, if this is inconvenient, arrangements can be made for a Power of Attorney to be granted enabling another person to attend on their behalf. We can draft a Power for signature near your home.

What about paying the taxes due?

Once the purchase formalities with the Notary have been completed we arrange, on your behalf, to pay any taxes due in relation to the transaction.

Is there a Land Registry system in Spain?

Yes. After the Escritura has been signed in front of the Notary we arrange for it to be presented to the appropriate Land Registry and for the payment of the Land Registry fees.

Several months can elapse before the process of registration is concluded, but as soon as we are notified that the deeds are ready we will have them collected, check them and then forward them to you.

In whose name should you purchase the property?

There are a number of ways to purchase the property:
-in your own name
-in the names of you and your wife or co-purchaser(s)
-in your children's names or in the name of somebody who will eventually inherit the property from you
-in the name of a limited company, whether English, Spanish or "off-shore"

Each method has its own advantages and disadvantages. Everything depends on your own personal circumstances. We shall be pleased to discuss the various ways of buying and to advise as to the most advantageous method for you.

It is worth paying careful attention to this point because of the potential tax and other savings that can be made at a later stage. These tax savings arise because of the Spanish system of inheritance tax under which gifts on death can still attract very high rates of taxation.

There may be tax savings because of the way that each time a property changes hands, certain taxes and fees become payable. If, therefore, you can prevent the property being inherited and minimise the number of times it changes hands, you can greatly reduce your tax liabilities.

As always with tax savings schemes there is a danger that the Government can come along and close the loopholes that allow the schemes to operate and, as always, there are disadvantages as well as advantages. In each individual case, you will have to weigh up the advantages and the disadvantages and decide how you wish to deal with the transaction.

What about raising the money?

It is possible to raise finance to assist with the purchase of a property in Spain either by mortgaging the property itself or by mortgaging or adding to the mortgage on any property which you may have in England.

We will be pleased to advise you about the possibilities of obtaining mortgages and finance both in Spain and in England and to assist in the obtaining of any finance that you require.

What does all this cost?

The TOTAL costs in such a case (our charges, land registry fees, Notary's fees, taxes, bank charges, etc) normally come to about 10% of the price of the property. In the case of properties less than £60,000 it may be more.

In the case of a property under construction the costs will be higher. This is because, in this country, a contract for the construction of a property gives rise to a variety of legal obligations that may stretch over a long period of time. In these cases we will give you an estimate of the likely overall charges once we have had the opportunity of seeing all of the existing paperwork in relation to the transaction.

What is included in your basic fee?

Our fees will be between 0.4 % and 0.8% of price, depending the work involved and the nature of property you want to buy. For normal investments we charge 0.5 % (but minimum 1,800 €). Our standard charge covers advice about the contract, investigation of title and -where appropriate -the planning circumstances of the property, a report on the results of our enquiries, remitting any funds to Spain, arranging for the completion of the transaction by the execution of a public title deed, arranging for the payment of taxes and arranging for the registration of your new title. In short, everything needed in an ordinary transaction.

What is NOT included in your basic fee?

Our standard fee does not include negotiations about the price of the Property, sorting out any defects in the title, dealing with a mortgage or power of attorney or any advice about matters that are ancillary to the purchase. We will be happy to undertake this work for you. Any such work would be charged on the basis of our normal charging rates and the time spent on it. We will give an estimate on request.

What extras are there on top of your legal fees?

- A fee is paid to the Notary for the preparation of the Escritura. This fee varies but is usually in the region of approximately £250 -£550.

- A fee is payable to the Land Registry. This depends on the value of the property but is usually in the region of £200.

- Plus valia -a sort of municipal capital gains tax -has to be paid on the transfer of a property. The amount of such tax is calculated from the value of the land on which the property is situated. The cost of the tax should be borne by the Vendor but many contracts try to impose this tax upon the Purchaser. As the tax can be several thousands of pounds it is vital that you are aware of the implications of this. We will advise on this point.

- A transfer tax or VAT and Stamp Duty has also to be paid. Again this depends on the value of the property, the type of property in question and where it is located. It is typically 7% of the price of the property declared in the deeds.

- In many cases you may not wish to be in Spain at the time when the public title deed needs to be signed. In these circumstances we can prepare a Power of Attorney that can be signed in the UK or in Spain before a Notary. The cost of doing this is normally £40 plus our fees of £35.

- In order to buy property in Spain, you now need to be registered with the Spanish tax authorities and to have a foreigners identification number (NIE). We will also have to pass on to you the cost of any surveyors fees, bank charges and the like involved in your particular transaction. Finally, all or part of these charges may attract Spanish or English VAT at the current rate.

What about the Sellers' taxes?

The Buyer is usually obliged by Spanish law to pay 3% of the purchase price to the tax office on account of the Seller's potential tax liabilities in Spain. There are certain exceptions to this rule.

This does not increase the amount the buyer has to pay -he simply pays 3% of the agreed price to the tax office and 97% to the seller.

Having done this he has no further exposure to liability in respect of the Seller's taxes.

This responsibility is the same whether the money is paid in Sterling or in Euros.

How do I get the money to Spain?

This is sometimes the most tricky bit of the whole affair!

- You can transfer money by bank telegraphic transfer to your account in Spain. Unlike transfers within the UK which are effected within a few hours it can take several days for the money to reach your account in Spain.

- You can pay the money into our Clients' Bank Account which we hold in Spain. This is the method we recommend as our bank is dealing with such transfers daily and so we have less problems.

- Finally you can take out traveller's cheques but this tends to be a bit cumbersome and expensive for the sort of sums involved in the purchase of a property.

The important things to remember are that transferring money to Spain does take time and that is not as reliable as transfers within the UK.

Are there any other things I should do at the same time as I buy a property?

We believe that it saves a great deal of time and effort later on if you now review your English Will and make a separate Spanish Will. For most people the cost of this is fairly small.

It is highly advisable for any person who has a property in Spain but does not live there all the time to nominate a "fiscal representative". This is the person to whom the tax authorities can send all correspondence relating to your affairs in Spain, secure in the knowledge that it will arrive. The fiscal representative must be resident in Spain, but it is for you to choose whom to appoint. We do recommend to choose one legal professional. We would be pleased to be your fiscal representative in Spain. Our yearly fee is £145.

If you wish to know more about this service, please ask.

You will wish to insure your property and its contents. Once again we can assist you in doing this. We can prepare an Insurance Policy ready for the day you sign the Escritura (Deed).

You will wish to have the electricity, water and rubbish collection charges transferred to your name. You will need to notify the Town Hall that you own the property and register for local rates, open bank accounts and register with the Spanish authorities for tax and other purposes. We will help you in all these matters.

You should register as the owner with the Community of Owners if you live in an apartment block or an estate with shared facilities.

What happens if I decide to live and/or work in Spain?

As part of our service we can assist you with the Residence Card, work permits and licences and permits in connection with the opening of new businesses.

After I have settled in, what are my continuing obligations?

If you keep a home in England and you spend less than 183 days a year in Spain then you are generally speaking classed as a non-resident and you must:

- name a fiscal representative in Spain (see above).
- pay your local rates (Impuesto Bienes Inmuebles/ IBI).
- make a declaration of all your capital assets in Spain and where appropriate pay wealth tax on them.
- make a Spanish income tax declaration and pay income tax on any income deriving from your activities in Spain.
- if you have a car, you must pay car tax and arrange suitable insurance cover.
- you must pay your electricity, water and other bills. It is usual to do this by arranging for your bank to pay the accounts directly to the suppliers but you are responsible for ensuring that this is done and payments are made.

What happens if either I or my co-owner should die?

Jointly owned property does not automatically pass to the survivor. It will be dealt with according to any instructions which you leave in your Will (either English or Spanish) or, if you do not leave a Will, under the rules relating to intestacy.

It is generally much cheaper and simpler to deal with your affairs if you have made a Spanish Will. We will be pleased to help you do this.

Surely there can't be anything else?

We can also arrange your property to be insured from the moment you sign the deeds of purchase with one of the most reliable insurance companies.

We wish you every happiness in your new home in Spain.

What do I do next?

If you would like further advice, please telephone us.

We can then have a brief discussion over the telephone and, if necessary, make an appointment so we can meet to look at the matter in more detail.

We are used to acting for Clients from all over the world and, generally, find it is not necessary to meet in order to deal with the purchase of a property in Spain. Of course, we would be delighted to meet you and discuss matters personally if it is convenient for you.