LEGAL REPORT

SOME NOTES ABOUT PURCHASING IN SPAIN

The following is intended as a guide to purchase in Spain. It is not an exhaustive list and does not intend to substitute any other legal advice you may wish to obtain.
As in many EU. countries property in Spain is registered on a property register.

1. THE CONTRACT

When you have decided upon the property to purchase, the agreement will normally be contained in a private contract. The document should contain details of the agreed purchase price; payment of deposit; provision for payment of the balance of the purchase monies; any extras that you have agreed to purchase and the intended date for completion together with all other relevant terms and conditions.
Once you have paid your deposit ( usually 10%, depending on time between initial contract and completion) there is then a binding agreement between both - Buyer and Seller. A specific agreement (called: arras) may be entered into between Seller and Buyer, where either party may rescind the contract, the Seller returning double the deposit or the Buyer losing the deposit.

2. THE COMMUNITY OF OWNERS

When there is common ownership or sharing of facilities between owners, in every development in Spain a Community of owners must be established through which community charges can be shared. If your development is contained in an apartment block then the law is that relating to the Horizontal Division ( Ley de la Propiedad Horizontal).
If you are purchasing in a new development it is essential that both the Deed of Horizontal Division and the rules of the Community have been explained to you and approved on your behalf as they are very important contributions to your future enjoyment of the property.

3. CONVEYANCE (ESCRITURA DE COMPRAVENTA)

The sale and purchase of all property in Spain requires to be registered in the Land Registry. They maintain details of the property and record financial charges and other matters which may affect the Title
The Notary – el Notario – prepares the Conveyance – la Escritura – from the information supplied to him by the Seller or his lawyer – el abogado. He will check compliance with Spanish law. However, the Notary does not check the title to the property, although he will make a check at the Land Registry immediately prior to the signing of the Escritura to ensure that there are no undisclosed charges on the property. Before the completion the Notary will check to ensure that no adverse entries have been made beyond those disclosed or to which the purchase may be subject. Once the formalities have been completed before the Notary, the Escritura Pública must be delivered to the Land Registry for the title to be recorded in the Registry of Property – Registro de la Propiedad. Before doing so, however, it is necessary to ensure that all taxes have been paid.

4. PURCHASE EXPENSES

The total expenses incurred in the purchase should not, on average amount to more than 10% of the purchase price. The individual expenses are as follows:

5. STAMP DUTY (TRANSFER TAX)

- If you purchase a new residence from a developer I.V.A. (VAT) is charged at the rate of 7% on the declared price. In addition, the so-called Legal Documented Acts Tax at a rate of 0.5% is also applicable.
- In other cases (re-sale property) the stamp duty is charged at 7% of the declared price.
- If the property being purchased is solely land upon which a property is to be constructed and is bought from an established business the applicable rate is the full I.V.A. rate (currently 16%).

6. PLUS VALIA

This tax is paid to the Local Authority and is a form of Capital Gains Tax that is payable on the increase in value of the land since the last purchase. It should be stressed that this tax is based on the increase in value of the land, and not on any buildings erected upon it. The obligation to pay this tax falls upon the Vendor, but the Vendor may attempt to require the Purchaser to meet this – care should therefore be exercised where the contract refers to the Purchaser paying – todos los gastos – all the expenses of the transaction – which would include the Plus Valia tax.

7. NOTARIAL FEES

A fee is charged by the Notary to prepare and legalize the Escritura. This is also a scale fee on the declared value.

8. LAND REGISTRY FEES

The fees of the Property Registrar for registering your Escritura in the Register will be assessed on a scale fee related to the declared value.

(The above information is to be used for guidance only. The Law in Spain can change quite often. So please, ensure you obtain the correct information from the appropriate authorities or seek Legal professional advice.)