ACQUIRING A PROPERTY IN THE COSTA DEL SOL
THE RESERVATION DEPOSIT
For a property to be removed from the market, it is customary for the potential buyer to place a deposit of between 6,000 - 10,000 Euros (this amount varies depending on the property purchase price). This deposit can be paid to the Real Estate agency or to the lawyer's clients account, as the buyer’s legal representative.
DUE DILIGENCE / SEARCHES
Once the deposit has been paid, your lawyer will request the real estate agency to provide the contact details of the vendors lawyer to request from them the necessary documentation to carry out the appropriate due diligence in which the lawyer will verify all relevant aspects related to the property, such as:
PURCHASE FROM A DEVELOPER (OFF PLAN OR NEW PROPERTIES)
1.The legal identity of the seller of the property you intend to buy.
2. That the property under construction is legally registered in the corresponding Land Registry.
3. That the property is free from charges (mortgages, liens, encumbrances, etc.). It is customary for the developer to have finance to build which may take the shape of a mortgage.
Should the buyer not be interested in taking over the proportional part of said finance in the way of a mortgage on the property, then it will need to be cancelled prior to completion, with all the cancellation costs paid by the developer.
4. That the property has been granted the corresponding municipal building permit and habitation license (where applicable) by the Town Hall in question, and respects local urban planning rules.
5. That the construction specification or quality specifications are made available to the buyer and included in the annex to the purchase agreement.
6. That there is a Guarantee or Insurance policy in place to provide guarantees for all monies paid to the developer during the construction process.
7. Confirm and check the content of the mandatory 10-year insurance guarantee (Seguro Decenal) that will provide coverage for any structural defects on the property.
8. Revision of the purchase contract drafted by the developer to assure that its content respects the buyer’s rights and that it is fully understood by the buyer.
PURCHASE FROM AN INDIVIDUAL (RESALE OR SECOND TRANSFER
1. The legal identity of the seller of the property you intend to buy.
2. That the property is legally registered in the corresponding Land Registry.
3. That the property is free from charges (mortgages, liens, and encumbrances, etc.)
4. That the property has been granted the corresponding municipal building permit and habitation license by the Town Hall in question, and respects local urban planning rules.
5. The study, preparation and signing of whatever private contracts (reservation agreement, option contract, sale contract) or public, notarial, documents (purchase/sale deed) which are deemed necessary to the purchase.
The standard procedure is to first sign a private contract normally with the payment of 10% of the purchase price, and after a reasonable lapse of time, to sign the public deed of purchase.
TAXES AND EXPENSES
The expenses and taxes arising from the execution before a Notary public of the corresponding deed of purchase are as following:
IN THE CASE OF FIRST TRANSMISSION - NEW DEVELOPMENT:
VAT 10% for residential properties.
VAT 21% on plots, garages, and storage rooms.
Stamp Duty (for Andalucía) 1.2%
PURCHASE OF RESALE HOUSING
- Transfer Tax: 7%
Notary fee: Notary fees are calculated according to a scale agreed by the authorities and is dependent on the nature of the purchase and the number of sheets contained in the deed of purchase. Therefore, all notaries charge the same fee for the same concept. The notary fee for the purchase of a typical residential property would vary between 500-1,800 Euros.
Land Registry fee: Land registry fees are calculated according to a scale agreed by the authorities. Normally, the land registry fee amounts to 50-70% of the notary fee.
Legal fees 1% of the property purchase price plus 21% VAT.
Once the lawyer has completed the due diligence, and providing that everything is in order, in a period of 2-3 weeks from the signing of the reservation deposit, the lawyer will proceed with the preparation and subsequent signing of the private purchase contract with the payment of the amount previously agreed with the vendors. Upon the signing of the private purchase agreement, it is customary for the buyer to pay to the owner an amount equivalent to 10% of the purchase price in the case of resale property and an amount equal to 30% of the purchase price in the case of off plan properties
The private contract is a very important step, as herein the lawyer will set out the terms and conditions of the purchase.
PUBLIC DEED OF PURCHASE
After the signing of the private contract, in a period of 4-6 weeks, depending on the conditions agreed with the vendors, the public deed of purchase will be signed by the client. At this moment the balance of the purchase price must be paid to the seller, with the buyer taking physical possession of the property.
UTILITIES, RATES, GARBAGE COLLECTION, COMMUNITY FEES AND TAXES
Our office will take care of contracting changing the title of all the contracts with supply companies as well as the relevant taxes concerning the property, and if you so wish we can arrange the direct debiting of those bills (direct payment made by your own bank in Spain). A bank account in Spain will be needed to set up the direct debit for the utilities, rates, household waste collection and community fees. We can also assist you in the opening the Spanish bank account.
OTHER COSTS YOU SHOULD BEAR IN MIND
THE NON-RESIDENT INCOME TAX
Regardless of whether your property is rented or not, you will always have to pay income tax as per the following rules: If you do not rent out your property, the Spanish authorities will assume that you have what is called “Deemed Rental Income” which is subject to Non-resident Income Tax. This legal rent is obtained by applying the percentage of 1.1 on the cadastral value of the property, on this base amount the rate of 19 % is applied for European Union citizens and a 24% for the non-European Union Citizens. This cadastral value is listed on the (tax council rates) invoice and is usually lower than the purchase price reflected on your title deed. If the property is rented out, the rate applicable is based on the net rent obtained by the landlord of the property and is 19% for European Union Citizens and 24% for the non-European Union Citizens. According to the new law, citizens from the EU are allowed to deduct the expenses incurred during the period the property was rented out: electricity; water; community fees; home insurance; interests on mortgage; Council Tax Rates (IBI) & waste collection; maintenance; cleaning services; legal fees for dealing with the income tax returns as well as a 3% annual building depreciation. In this case, a Tax Residence Certificate issued by the tax authority of the country where you reside, must be submitted together with the tax forms (one for each tax payer).
According to regional legislation in force since May 2016, properties that are rented for touristic purposes for periods of less than two months duration at a time must be registered in the Tourism Office of the Regional Government of Andalusia (Junta de Andalucía) if they comply with the basic requirements demanded by the legislation in force. To this effect, we are at your disposal to carry out the registration process before the corresponding authority.
GRANTING A WILL IN SPAIN
When you have purchased a property in Spain, or you are the holder of any other assets in Spain, such as bank accounts, life insurance policies, shares or any other type of financial products, granting a last will and testament in Spain over your Spanish assets is highly recommended. A Spanish will ensure a smooth distribution of your assets in Spain and that you avoid future formalities, complications, delays, and additional costs derived from the process of succession and inheritance over those properties or assets located in Spain, as otherwise the assets will not be transferred easily to your wife/ husband or relatives.
In the last will and testament, the testator may choose the law of his/her nationality as the law that governs succession. This choice of the applicable law allows the testator to freely dispose of his/her properties and assets in Spain always according to the limitations established by the legislation of his country of nationality, but in any case, avoiding forced inheritance rules applicable under Spanish law. In that regard, the testator shall appoint his inheritors and legatees and will determine the percentages allocated to each of the heirs and the specific assets to be transferred to the legatees.
Otherwise, i.e., not having a Spanish will means expending time and incurring costs associated with the process of giving validity in Spain to a foreign last will and testament. Not having any will and testament at all means that for the distribution of the Spanish assets, it will be necessary to strictly follow what it is stated in the intestacy laws of the country of the last habitual residence of the deceased. Additionally, in the last will and testament, the testator can establish specific rules to be followed in the distribution of the assets, and appoint an executor who will ensure the fulfillment of his/her last wishes as detailed in the will, and it is also an opportunity to appoint tutors for the children, when these are minor. To summarize, the Spanish last will and testament will make the process of succession and inheritance over your Spanish assets quicker, easier and less costly.
We work with several different banks to find the best solution for you.