Buying resale property in Spain

DOCUMENTATION REQUIRED FROM THE VENDOR

1. For the property
Domestic properties must have the following documents in place, and generally the vendors provide these. In specific cases, some other documents may be needed. Most common situations require the following:
• Copy of Title Deed (“Escritura”).
This document shows the legal and registered owner of the property.
• Copy of the plan to the property (if there is one)
• Copy of the 2 last utility bills for each service connected
• Copy of the receipt showing the last payment of the property tax (IBI).

2. From the Vendor
When all property documents are in order and the parties are in agreement about the price, payment terms, etc, some documents about the parties will be needed in order to proceed. Commonly, these are the following although occasionally others may be requested.
If the Vendor is one or more individuals, then for each of them:
a. Passport card
b. Information about residence, marital status and occupation

If the Vendor is a company:
a. Copies of the Company’s documentation and proof that the representative is duly authorised to represent the Company.
b. Personal document for the representative of the company
If the Vendor intends to be represented by an attorney, then a Power of Attorney (Poder) will be necessary.

3. From the Purchaser
If the Purchaser is one or more individuals, then for each one of them:
a. Passport card
b. Information about residence, profession, marital status and if married, indication of the matrimonial regime.

If the purchaser is a company
a. Company number (CIF)
b. Copies of the Company’s documentation and proof that the representative is duly authorised to represent the Company.
c. Personal documents for the representative of the company

If the purchaser intends to be represented by an attorney then a power of attorney will be necessary. A power of attorney can be signed in Spain before a Notary public or in the UK before a Notary Public and then legalised with the apostille of the Hague Convention. The purchaser’s lawyer should be able to draft the power of attorney and arrange for its signature.

STEPS INVOLVED IN THE TRANSACTION

Reservation
Although not used in all transactions, parties sometimes start their legal relationship by signing a reservation form or “reserva”. This procedure is usually followed when the parties cannot enter immediately into a Promissory Contract for any reason, such as:

a. Legal documents such as those set out above have not been provided or examined.
b. The buyer cannot immediately pay a deposit
c. The buyer does not want to pay a deposit until has been duly advised by a lawyer.

The main purpose of such reservation is for the purchaser to be assured that the property has been taken off the market (usually for a limited period of time) and for the seller to ensure that the purchaser is really interested in proceeding.

The reservation implies that the “purchase agreement” (contrato de compraventa) will be signed within a pre-determined period and if that does not happen, the property will be again placed on the market.

The reservation form should include identification of the parties and the property and define the amount to be paid upon its signature, the total price, payment conditions and the period in which the Purchase agreement will be signed. The amount paid on reservation is deducted from the total price to be paid by the purchaser. The form should also establish the consequences of (i) not signing the Purchase Agreement (ii) any of the parties withdrawing from the transaction.

The reservation form must be dated and signed by both parties. However, in most of the cases the reservation it is usually signed by the estate agent on behalf of the vendor. In that case, the agent will be responsible for the reimbursement of the amount paid should something be wrong with the property.

Purchase agreement
Although not mandatory, normally both parties enter into a purchase agreement identifying the property to be sold and detailing conditions of the transaction: this is the Purchase agreement (Contrato de compraventa). This type of contract is used in almost 100% of transactions in Spain. The “contrato de compraventa” is usually a private agreement and is legally binding on both sides.

Before the purchaser signs the “contrato de compraventa”, his lawyer must make sure of the following:

a. That a proper search has been carried out in the Land Registry Office and a “Nota simple” has been obtained confirming the description, ownership and charges (if any) of the property.
b. If some improvements have been made, a qualified architect
must check the improvements and confirm that these are in order and comply with the Spanish regulations relating to planning laws, building regulations, permits and licences.
c. The purchaser’s lawyer must make sure that all necessary permits have been
obtained. i.e. building permits, no construction limitations, no rental prohibitions, etc.
d. That the property does not have any tenants or occupiers.
e. That there are no outstanding amounts for the utilities services.
f. If the property is part of a condominium or community of owners. The Purchaser’s lawyer should obtain the following:

– Copy of the condominium declaration
– Copy of the condominium regulations
– Certification from the Condominium administrator confirming that the property does not owe any payment to the Condominium.

Flats and some dwelling houses in Spain are organised in Condominiums. An administration company manages the Condominium. The annual expenses are determined according to the size and situation of the property.

Completion
When the above requirements have been completed, the formal act of sale takes place before a Notary in Spain. This act known as the signature of the “Escritura pública de compra venta” takes place in front of the selected Notary.

The “Escritura” is then taken to the Inland Revenue office to pay the taxes and then registered with the Title Registry Office.

TAXES AND COSTS

1. Legal fees
Usually lawyer’s fees average between 1%-2% of the purchase price. These fees usually include the following services: examining the reservation form; requesting and examining all relevant documents regarding the property and the parties; preparing or examining the purchase agreement; signing the purchase agreement; assisting the purchasers on completion; dealing with the post completion formalities.

Purchasers must check with their lawyers what service is provided with their fees.

2. Surveyor.
His fees depend on the object of the sale. The cost would be around 600 €, depending on the size of the plot. The surveyor is not always necessary. The purchaser lawyer will inform his client whether a surveyor is necessary or not.

3. Transfer taxes
Taxes must be paid before registering the purchase at The Title Registry.
The transfer tax when buying a re-sale property is approximately 7% of the declared Purchase Price. Please note that in Spain there are still some vendors who do not want to declare the full purchase price on completion. Do not accept it as it is illegal and risky.

4. Notary fees and Land Registry fees
These may vary depending on the area and the value of the property.
However, a good way to estimate the approximate total costs involved in buying a re-sale property is to apply 10% over the purchase price. This amount usually should cover transfer taxes, Notary fees and Land Registry fees although it may not in certain cases.

5. Plusvalía Tax
The Plusvalía Tax is the tax on the increase of the value of the land. It should be paid by the Vendor but in many occasions vendors try to impose this tax into the purchaser. The tax is fixed by the Council taking in consideration the year when the property was acquired and the year when the property was sold.

If you would like legal help buying a property in Spain you can contact Kobalt Law LLP