Torcal Estates Fincas and Country property - Málaga, Spain

Fincas and Country property - Málaga Property

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A guide to buying your home in Andalucia



Purchasing a property in Spain need not be as daunting as it may at first appear. It is important however to follow some basic guidelines.

Firstly, you need to make sure you understand the basic process of purchasing a property in Spain – it is, in many ways, similar to the way in which you will buy a property in the UK or Holland but there are some key differences.

It is advisable to obtain books or information from the Internet to gain this information but please be careful as some internet sites are rife with poor quality information and cannot be trusted.

We would recommend a book written by David Searl called “You and the Law in Spain” which gives an excellent level of information to get started with (please be aware that older versions of this book will be outdated and many specific issues are not covered in relation to property matters).

Websites can be a great source of information, however, we would again respectfully remind you that some can be extremely misleading! We have a link on our home page to the Spanish Property website run by Mark Stucklin, a journalist who regularly features in the Sunday Times.

Use a Spanish lawyer

It is essential to find a good quality Spanish lawyer who speaks English. Ideally, they should be in the area you intend purchasing in but this isn’t an absolute requirement

Torcal Estates has absolutely no connection with any local lawyers however, over a number of years we have been able to identify those that appear competent and professional and we have seen plenty that we would avoid like the plague!

If you would like to benefit from our experience, please feel free to contact us and we will be able to give you some guidance on the things you should ask a lawyer and the things that you will need instruct them to do if you find a property you wish to purchase.

Over recent years many Spanish properties have been updated, in terms of the legal paperwork, but there are a number of key documents that need to be in order before you complete the purchase of your new home. These include:

The Escitura Publica or escritura de compraventa

This is the property owners’ title deed.

It is registered at the Property Register (Registro de la Propiedad) and is the only guarantee of title here in Spain. Included within the title deed will be a brief description of the property, the details of the owners and any details on charges that affect the property such as mortgages, rights of way, water wells etc and court embargos.

Ideally, the escritura will describe the property you are buying but it is likely that this description only details the property as it was bought by the current owners so please make sure that you are aware of any significant changes that might have been made by the seller whilst they have owned the property.

Whilst the escritura is a very important document it is a private document and therefore can have inaccuracies (passed on from seller to buyer over a number of years). Therefore it is extremely important to check the public registers for the property you are buying – these include the Property Register and the Catastro (more on both later).

Impuesto sobre Bienes Inmuebles

This is a receipt of the owners’ annual property tax that is known as IBI or “contribución”.

This receipt is very important because it confirms what the owners have paid in the last year on their rates and it also provides information in relation to the Catastro.

  • The IBI bill will show the property’s Catastral reference number which can give you information (via the Catastro website) on the property you are buying (this website has details of the size of the land, the size of the property and there may also be photographs showing the property)

  • The IBI bill will also show the property’s Cadastral value as assessed by the Hacienda (tax office) which in turn dictates your annual rates bill as well as any possible tax due when you sell the property.

Your lawyer (prior to completion) will make sure that all IBI taxes have been paid for the last 5 years so that there are no ongoing liabilities for you.

The Property Register

The Property Register is the public register for properties in Spain.

Once you have bought your property you will have an “escritura de compraventa” which is signed in front of the Notary and this will confirm you as the new owners of the property.

Following the signing at the Notary, your lawyer should then forward the “escritura” to the Property Register for public registration – this register holds information about the legal ownership of the property together with details of mortgages, any other charges and rights of way etc.

A very important document which is obtained from the Property Register is called a “nota simple” which is a summary of the records for your property.

There are often old copies attached to the “escritura de copraventa” and it is extremely important that you ensure that your lawyer updates the Property Register now that you are the new owners (we have seen some properties which have not been updated and this can be a big problem).

Catastro

The Catastro office is the second system used to identify the exact boundaries and the location of the property as well as giving a brief description of the property.

As mentioned previously, the Catastro dictates the amount of IBI (rates) you pay.

It is important to ensure that the property you are buying is described in the escritura, the Property Register and the Catastro in a similar way (there can be minor variations) but this will ensure that you are safe buying the property (because the public records match those of the escritura).

Agreeing the sale

Once you have found your new home and agreed the price you will need to pay a holding deposit (normally €3.000) to the vendors (normally via their lawyer) to ensure that the property is taken off the market immediately (for a period of 15-30 days).

In some cases a small private contract will be drawn up by the buyer’s lawyer to safeguard their client’s money although this can often delay the sale from the start. At no stage should you be paying money to an estate agent (unless they have a clearly identifiable Client Account).

You will then need (with the help of your lawyer) to draw up the private purchase contract that confirms the basis of the sale and any specific terms agreed between the lawyers. Until such time as this contract is signed the property can still be sold to another party. Once the contract is signed and a deposit (normally 10% of the purchase price) is paid then you have effectively exchanged contracts and this now means the house is sold and a completion date is fixed.

Taxes and Fees

There are a number of fees and taxes which will be payable on any property that you purchase in Spain.

These will vary for each property however the general likelihood is that 10% of the purchase price will be needed to cover all costs.

There are two taxes to pay – the first is the Andalucian transfer tax (known as Impuesto sobre Transmisiones Patrimoniales). This is charged on all private re-sale properties and equates to 7% of the declared value within the contract however, this is due to rise in July 2010 to 8%.

If you purchase a brand new home directly from a property developer the tax will be the same as the 7% (increased in July to 8%) charged on re-sale properties although it will be known as IVA (the same as VAT in the UK) as it is referred to as a business transaction rather than a transfer between two private individuals.

The second tax levied is the document tax, which is charged at 1%.

Notary fees are fixed with an official scale of charges. The fees will vary according to the amount of land, the size of the property and the price at which the property is being sold. Generally speaking the fees vary between €350 and €600. The costs of the Notary can be shared although often, the buyer will be expected to pay all Notary costs (especially when buying from the Spanish).

The property Register will be updated with the new buyer’s details once the transfer has gone through and the charges for this will be similar to the costs for the notary.

Who Pays?

Unusually there is no Spanish law that states that any one party has to pay the taxes due on any property transaction.

Traditionally the seller will pay the Capital Gains Tax on the sale together with Plus Valia which is a local authority tax due on any gain in value based upon the Catastro.

Normally the buyer will pay the transfer tax and any document fees as mentioned above.

Spanish consumer regulations advise that this split between the buyers is the normal way in which fees and taxes should be paid however there are instances where the seller will insist that the buyer pays all fees and taxes.

How much to declare?

It has long been common practice in Spain to under-declare the value of the house that you are buying in order to minimise the transfer tax. This also helps the seller to avoid Capital Gains tax.

Over recent years Spanish lawyers have started to advise all clients to declare the agreed price (or very close to it) as the Spanish tax inspectors have been investigating more and more sales where they feel that values have been under-declared.

If you are buying a property and the seller insists on reducing the declared value of the property there is a possibility that the tax authorities will impose a fine once the sale has been completed. In addition when you come to sell the property the Capital Gains Tax will be charged on the profit that you have made since buying the property (the difference between your declared buying price and your declared selling price).



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