Buying Property in Spain
Spanish Estate Agents, Lawyers, Notaries & Surveyors
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Hardly a week goes by without one of the UK or Irish tabloids recounting some 'horror' story involving some hapless expatriate couple in Spain. In reality, Spain has a highly developed legal and conveyancing system but one fundamentally different than that of the United Kingdom and Ireland. However, if independent advice is sought from specialists conversant with BOTH the UK/Irish and Spanish legal and tax systems there is very little to fear together with a number of surprising benefits.
The Spanish Purchasing Process - A Quick Overview:
1) Estate Agents - should preferably be licensed by either the API (agente de la propiedad immobiliaria) or by GIPE (gestor imtermediario en promociones de edificiones). Of course, there are some perfectly reputable estate agents that are not members of either organisation but it is recommended that potential purchasers keep to members of either the API or GIPE. It should further always be borne in mind that, like the UK or Ireland , the primary obligation of the estate agent is to the seller and not the buyer.
2) Lawyers/Abogados - Always use lawyers conversant with both UK/Irish and Spanish Laws. A Spanish abogado might be an excellent lawyer but the needs of an investing/property purchasing expatriate, whether he/she are going to be fiscally resident or not, requires a holistic approach. It should also be remembered that as in England debts can attach to the property so not only should searches be carried out but also contracts should be properly drafted.
3) Spanish Notaries - Most Spanish people simply use notaries to convey their properties without the use of a lawyer/abogado. For many Spanish people this is fine as they will have local knowledge and of course understand what are and most importantly what are not the obligations of a notary. Unfortunately, there have been many instances where British people have assumed that a notary occupies a similar position to that of a conveyancing solicitor in the UK. In reality, notaries have no duty of care to either party and are only concerned with the validity of the paperwork, that certain government regulations have been satisfied including payment of duties/taxes. What the notary does do however is give legal veracity to the pertinent legal or conveyancing process - without a properly adhered to notarial process there could be difficulties in enforcing any given agreement/contact.
4) Surveyor - In Spain there is no direct equivalent to the British or Irish chartered surveyors profession and hence no equivalent to a 'contract subject to survey'. In many ways, this situation is strange as if anything extra care needs to be taken when buying real estate (bien inmueble) in Spain not less. Nevertheless, a professional advisor will always recommend that the following precautionary steps are taken:
(i) Confirm that the seller is the absolute owner of the property.
(ii) Make sure that the house is Free of Debts (cargas) or Mortgages (hipotecas).
(iii) Verify that the land where the bien inmueble is located is classified as suelo urbano (not rustic land but urban land).
(iv) Check the Urban Development Plans (planes de desarrollo urbano) of the locality including any future potential developments that may have applied for planning permission.
(v) Instruct a well known/respected local builder to check out the property for defects, sanitation, build quality, adherence to building and fire regulations, adherence to local planning rules and regulations etc.
(vi) Apply for an Information Note (nota simple informative) in the Registro de la Propiedad. This is just a document saying who the proprietor (propietario) and title owner (titular) of the property are and whether the property is subject to any debts/charges or other incumbrances.
(vii) Check at the Planning Office (Ayuntamiento) for the Urban Clasification (clasificación urbana del suelo) and whether there are any known or intended future developments that may have a bearing on the purchase or on the future value of the applicable land (planes de desarrollo urbano).
5) Who/What Should Own Your Spanish Property - For most people this is the crucial question as an incorrect decision could literally cost tens if not hundreds of thousands of Euro. Factors determining what is best in any given set of circumstances would include:
(i) The value of the property
(ii) Whether one is going to be fiscally resident in Spain or not
(iii) The centre of economic interest
(iv) Age
(v) Family interests and inheritance issues
(vi) Nationality and double taxation treaty provisions
(vii) Whether one intended to rent out the property
(ix) Whether a business is to be established in Spain, and
(x) One's overall wealth.
Depending on the answers to the above, a property can be bought directly by an individual or individuals, a local Spanish company, a branch of a UK or Irish company covered by the Spanish/UK/Irish double taxation treaties or directly or indirectly by an offshore company.
6) Powers Of Attorney (Poderes) - These can be granted to a lawyer or other suitable party to sign the escritura documentation on your or your company's behalf but must be done before a UK notary public and then ratified by the UK Foreign & Commonwealth Office or the Department of Foreign Affairs in Dublin.
7) Tax Identification Number - In Spain it is the law that all fiscally resident individuals have either a NIE (Numero de Identificacion de Extranjeros) or Foreigners Identification Number, or in some areas a NIF (Numero de Identificacion Fiscal) Fiscal Identification Number. Non-fiscally resident individuals but owning a property in their own name will also require a tax identification number. Non-fiscally resident individuals purchasing a Spanish property through a Spanish Srl Company or a registered foreign company branch do not need their own identification number as the companies/branches will have their own identification numbers.
8) Costs Involved When Buying A Spanish Property - The overall cost of purchasing a Spanish property is dependent on whether a property is new or a second hand or resale property. In the case of the former, the overall direct taxes/duties would be around 8% to 9.5% whilst the latter would generally come in a little lower at 7% to 8%. In addition, one must add the virtually universal property conveyancing fees of 1% plus various disbursements/surveyors/builders fees. In other words, a realistic overall rate would be between 9% to 10.5% for New Property and 8% to 9% for Resale Property.
A much more in-depth explanation - including examples and diagrams - is given in the new book "How to Buy Spanish Property", available now for just £4.99. |
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