Buying and Selling Property on Costa Blanca and Costa del Sol

How do I buy the property?
Reservation Agreement
Private Contract of Purchase and Sale
Bank Bonds / Insurance Certificates
Title Deed
What are the costs on top of the purchase price?
Notary & Registry
Plus valia municipal
Stamp Duties or V.A.T (I.V.A.)
Holding Company
Wills

Feria Properties International provides you with basic information about buying and selling property in Spain, with emphasis on the regions of Costa Blanca and the Costa del Sol. This information is meant as a guide only and you are advised to seek professional legal advice when purchasing a property in Spain. We can put you in touch with a number of English speaking Abogados (solicitors) in Spain that can deal with legal matters for you.

How do I buy the property?
To purchase property in Spain is as easy as anywhere else in the world. As it might be different to what you are used to at home you should always use a lawyer right from the outset. The following is an example of a standard property purchase procedure.

Reservation Agreement
Normally the purchase is initiated with a reservation agreement, which takes the property off the market. The deposit to pay at this stage could be anything between €600 to 10% of the purchase price. Now your lawyer will begin to check the registration of the property, which will show if there are any charges against it, and the correct ownership of the vendor.

Private Contract of Purchase and Sale
Within a week or two a private agreement is signed between the purchaser and seller, and at this stage it is normal to pay between 20-30% directly to the seller. The buyer's lawyers should determine license of building, all outstanding debts and rates in order to arrange the payment of these according to the agreement, these could be municipal rates (I.B.I.), community fees, electricity and water bills.

Bank Bonds / Insurance Certificates
It is compulsory by law in Spain that when the property is under construction, the vendor must give a bank bond or insurance certificate to all the purchasers as guarantee of the sums paid during the construction period. In case that the property is not finalized or something happens during the construction, the bank or insurance company will refund the monies paid by the purchasers up to date plus 6% interest. By this way the purchasers are absolutely guaranteed by a bank or insurance company.

Title Deed
When the house is finished according to the contract and the law, the completion takes place in front of a Public Notary, who issues the Title Deed "escritura". If the purchase is financed with a mortgage, the bank representatives are present in order to pay and sign the mortgage. The Title Deed should then be registered by the lawyer at its corresponding Land Registry.

The Title Deed to an apartment will transfer not only the freehold of the apartment but also the freehold to a prefixed percentage on the common elements of the complex such as staircase, gardens, swimming pools, etc. which also governs your duties towards the general maintenance of the property.

What are the costs on top of the purchase price?
The law states that the seller should pay what is known as "plus valía municipal", all other costs are to be paid by the buyer, as Notary fees, Land Registry fees, Transfer tax, Lawyer fees. However, in most sales it is agreed that also "plus valía municipal" are paid by the buyer, which is also legal. The lawyers normally charge 1% of the purchase price.

Notary & Registry
The cost for Notary and Registry together for a property of;

€60,000 is approximately €660

€150,000 is approximately €810

€300,000 is approximately €1,100

Plus valia municipal
This is a Municipal tax that is paid each time a property changes hand. It is a bit complicated to calculate. Basically it depends on the property's tax value and how long the property has been owned by the seller, it usually is between €300 and €1,800.

Stamp Duties or V.A.T (I.V.A.)
Depending on the parties juridical status and the type of property, there is 6% Stamp Duties or 7% or 16% V.A.T. (I.V.A.). This means; first hand homes, you pay 7% V.A.T. + 0,5% Stamp Duties. Second hand homes, you pay 6% Stamp Duties and not V.A.T.. Villa plots from the promoter, you pay 16% V.A.T. + 0,5% Stamp Duties.

Holding Company
For some purchasers there might be an advantage to form a holding company. Earlier it was popular to form Gibraltarian or other tax exempt companies, now it is mostly Spanish limited companies that cost around €1,800 in fees to constitute and an additional 1% of the desired capital as stamp duty. This is most likely only an option for the purchasers of houses more than €600,000 or up as running the company costs around €1,800 a year.

Wills
It is very advisable to grant a will in Spain regarding the assets in this country in order to avoid any kind of problems arising from the differences between the Spanish and the purchasers' law in succession matters and the execution of a will from one country to another through the Courts.

The Spanish law states that the assets must be left to the children, or parents, and the person is only free to leave a third part of their assets to anybody. So that it is advisable to grant a will in Spain, in which the foreign people state that the applicable law is the law of their country, and they can decide to leave their assets in Spain to whom they would like.