Employ a Lawyer The process involved in completing a sale of property is quite technical and requires legal support from start to finish. You will need a lawyer (un abogado) to help you through the full process starting with preliminary negotiations with the vendor right up to the final registration of your name as the new owner on the Land Register. The earlier that you involve lawyers, the more they will be able to help you. In Spain there is often negotiation on a number of issues before a sale is agreed and the lawyers can help you consider the options, risks and benefits in such negotiations. There are a number of questions you should ask. If you don't, misunderstandings may arise at completion.

Preliminary Sales Contracts

Formal preliminary sales contracts are not common in Spanish property transactions. However, it is the practice to draw up a simple document (contrato privado, contrato de opción de compra) which is signed by both parties. You pay a certain amount as a deposit and you will lose this if the transaction is not completed and the vendor is not at fault.

Searches

Before committing yourself to buying a property, your lawyer should undertake all the usual checks to make sure that the property can be sold to you by the vendor and that there are no technical problems. He/she will check, for instance, that the property is registered in the name of the vendor and that there are no third party interests attached to it such as mortgages, charges etc. If there are such interests they will make sure that they are removed before completion or should advise you accordingly. Your lawyer may also recommend that you consider having a survey done on the property to make sure that there are no structural problems.

Costs and Fees

There are a variety of taxes, duties and charges that relate to property sales in Spain. The purchase process should cost you around 10% of the property value, though this can be higher. In general, the parties to a property sale in Spain come to an agreement on who will bear some of the tax costs and other duties or charges. This means that, for the unwary purchaser, a vendor may add considerable to the cost of the purchase by passing on some of his tax charges (the plusvalía in particular). Your lawyer will ensure that the appropriate person pays taxes and other costs.

The usual fees and tax charges are as follows:

• The Transfer Tax on second hand sales is at 7% in Andalucía, and is paid by you as the purchaser.
• If it is a new property purchased from a construction company or developer, you pay VAT of 7% plus 0,5% Stamp Duty
• The special tax assessed by the municipal authority where the property is based (Impuesto sobre el Incremento del Valor de los Terrenos - usually known as Plusvalía) is - by law - payable by the vendor, but the vendor will often try to pass this tax charge to you as the purchaser. Your lawyer should help you discuss this with the vendor.
• You pay for all notarial fees and deed registration costs.
• Estate agent’s fees
• If you take out a Spanish mortgage, this process will cost approximately 3% of the purchase price. This sum is in additional to the 10% cost of the purchase process.

Completion

The completion of the sale process and transfer of title to you will involve the preparation and agreement of a deed which passes title from the vendor to yourself. This deed will be prepared by your lawyer who will then arrange for it to be executed before a Notary Public. The lawyer will then usually pay the taxes and other governmental charges on your behalf and the title deed will be forwarded to the Land Registry. Once registered, the transfer of title to you will have been effectively completed. There is sometimes a delay in the Land Registry and this part of the process could take a few months. In the meantime, once you have completed the transfer deed and paid the vendor, you will receive access to the property and the property will be yours to use as you wish. Your ownership will be protected as soon as the deed is filed with the relevant Land Registry. * If you purchase a parking space, it is not usually attached to the property. This is usually done by a separate legal transaction, at the same time as the property purchase. You will also get separate Municipal Tax bills for this parking space.

Municipal Taxes

The property must also be recorded with the relevant municipality in which it resides for purposes of the annual Real Estate Tax (Impuesto sobre Bienes Inmuebles, often called IBI - pronounced "ebe"). The level of this tax varies within municipalities and is calculated on the basis of officially set land values. You can ask you lawyer to check the level of tax on the property you are considering buying.

Fiscal Identification Number

You will normally also need to obtain a Fiscal Identification Number (known as Número de Identificación de Extranjeros- NIE), which is required by all foreign property owners in Spain. It is obtained at national police stations (la comisaría), which have a foreigner’s department.

Finance

An increasing number of Spanish banks and savings banks (equivalent to our building societies) are happy to lend to foreigners purchasing a second home. See FINANCING YOUR PROPERTY page

Estate Agents Fees

You should also be aware that, in Spain, the buyer as well as the vendor can be asked to contribute towards the estate agents fees, as part of the deal. These fees tend to be higher than the UK – usually around 5% of the property value, though some will charge more. You should check this with the agent at time of purchase. This cost would normally come within the 10% cost of purchase.

Running Costs

In addition to the cost of purchase, you should also take into account ongoing running costs. These include local property taxes, annual wealth tax, income tax if you let your property, rubbish tax, community fees if it is a community property, buildings and contents insurance, standing charges for utilities (electricity, gas, water, telephone). Annual running costs usually average 2 to 4% of the cost of a property.

Making a Will

If you own a property in Spain, you are strongly advised to make a will. If you die intestate, the Spanish government can dispose of your property under the terms of Spanish law. Under Spanish law, when a person dies and leaves children, the estate is divided into three parts. One third is shared equally between the surviving children, one third is left to the children but may be divided according to the testator’s wishes. A surviving spouse may retain a life interest in this share. The final third may be disposed of according to the testator’s wishes. Such a distribution may be contrary to your wishes, so it is worth formalizing the way in which you would like to dispose of your property. If you have made a will in the UK, it is not strictly necessary to have a will drawn up in Spain too. However, this would speed up the execution process, providing it reflects the disposition in your will in the UK.

Recommended Reading

• David Hampshire, Buying a Home in Spain, Survival Books Ltd, 2000, ISBN: 1 901 130 36 3
• David Searl, You and the Law in Spain, Santana Books, 2000, ISBN: 84 89954 09 7