What is the usual procedure?
The purchase process in Spain is reasonably straightforward, with our help, support and guidance, we aim for it to be as streamlined and hassle free for you as possible. We will handle the negotiations between the buyer and the seller, answer any queries and ensure that the sale / purchase process is progressing at an adequate pace.
Outlined below are the main stages:
1. Negotiation and Deposit
The buyer would pass a non-binding offer for a property, we would commence the negotiations with the vendor. Once we have reached an agreement, a reservation deposit of (usually) 10% would be made by the purchaser in order to take the property off of the market. We would then commence the process of drafting the Private Option Contract with a lawyer.
2. Private Option Contract
Once the lawyer has carried out the relevant searches and is confident that all is in order with the property, the Private Option Contract would be signed by both parties (purchaser and vendor), if there are any irregularities with the property, the contract can be signed, however there would have to be some contingent clauses included in it, in order to protect and indemnify the purchaser. Should the clauses be satisfied, and thus become void, and the purchaser decides to pull out of the deal, they would forfeit their reservation deposit (usually 10%). If the vendor pulls out at any point, they would need to return the reservation deposit paid by the purchaser as well as a penalty of 100% of the reservation deposit, so under usual circumstances, this would be 20% of the sale price agreed upon.
The final stage of the purchase process takes place at a Public Notary, where the deed of conveyance is signed and the balance of the purchase price is paid. The purchaser will then take possession of the property, and their lawyer would lodge the deed at the Land Registry, as well as transfer any utility bill direct debits.
What are the purchase costs?
There are several costs to bear in mind when purchasing a property in Spain, below we have prepared a breakdown and some interesting points.
1. VAT (IVA) or Property Transfer Tax (ITP)
IVA is currently payable at a rate of 21% on commercial properties and developable land, and 10% on new-build residential properties, Stamp Duty (Impuesto de Actos Juridicos – AJD) also applies in this case, and currently amounts to 1.2%. All other property purchases and transfers would be liable to pay ITP according to the following scale:
up to 400,000 EUR – 8%
400,001 to 600,000 EUR – 9%
600,001 to 1,000,000 EUR – 10%
over 1,000,001 EUR – 11%
2. Notary and Land Registry Fees
These are fixed by law on a sliding scale, and amount to around 0.25% to 0.5% of the purchase price.
3. Lawyer’s Fees
Depending upon the complexity of the transaction, your lawyer could charge up to 1% of the purchase price.
4. Mortgage Fees
If you use a Spanish mortgage to finance the purchase of a property, you would be liable to pay for the property survey and valuation, an opening fee of approximately 1% of the value of the mortgage and Stamp Duty (AJD) at 1.2% of the total guaranteed amount (ie mortgage amount, regular interest, default interest, court costs and costs of judicial foreclosure).
5. Ongoing Costs
Council Tax (IBI) – An annual Real Estate Tax based on the Land Registry or Cadastral value of the property. The amount varies between municipalities, however is generally between 0.3% and 1.1% of the land value.
Bin Collection (Escombros) – The amount varies between municipalities, however very rarely exceeds 100 EUR pa.
Utilities – These costs will vary and are dependent on levels of consumption, should you consider upgrading your property to improve its Energy Efficiency Rating, please do not hesitate to get in touch.
Maintenance – The maintenance costs on a property will depend on the size of the property itself and specific requirements, such as size of the garden, type of botany, size of the swimming pool, position (such as font-line, etc), whether the property is rented regularly and various other factors. Should you need a quote for Villa Management, please do not hesitate to get in touch, and we would be happy to help wherever we can.
6. Wealth Tax
This is an annual tax levied on assets over 700,000 EUR, if you do not have your primary residence in Spain. If you do have your primary residence in Spain, there is an additional exemption of 300,000 EUR (thus 1,000,000 EUR in total). The tax is payable on a sliding scale, however as this is an ever-changing landscape, you would be strongly advised to speak to a local fiscal advisor, please let us know should you need a recommendation or indeed introduction.
7. Golden Visa
The purchase of a property over the value of 500,000 EUR without finance allows non-EU buyers to acquire Spanish residency.
Should you have any questions whatsoever, please do not hesitate to get in touch, we will be happy to help
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