Buying property in Spain
Buying property in Spain differs in important respects from buying property in other countries. Private agreements can already create binding legal obligations. The legal review should therefore, whenever possible, take place before a reservation, arras or purchase contract is signed and before a substantial deposit is paid.
What should be checked before buying?
Before becoming contractually bound, the buyer should verify that the seller is entitled to dispose of the property, identify any Land Registry charges and compare the actual, cadastral and registered description of the property. Documents normally reviewed include an up-to-date Land Registry extract, cadastral information, recent municipal property tax receipts (IBI), details of mortgages and other charges and, where relevant, a community certificate and the minutes of the most recent owners' meetings. Existing leases or other rights of occupation must also be considered.
Reservation and arras contract
A private contract and deposit are commonly used before execution of the public deed. An arras contract is particularly common, but its legal consequences depend on its wording. A deposit of around ten per cent of the purchase price is common in practice but is not a statutory percentage. More information: Arras contract when buying property in Spain
Taxes and purchase costs
Tax treatment depends in particular on whether the buyer acquires a used property or a new property directly from a developer. A used-property purchase is generally subject to the regional transfer tax. In Catalonia the current general system is progressive, applying rates of 10, 11, 12 and 13 per cent. Special and reduced rates may apply where their specific requirements are met. Where a transfer is subject to VAT, the public deed is generally also subject to stamp duty (AJD). In Catalonia the general AJD rate for a transfer subject to and not exempt from VAT is currently 1.5 per cent. Other rates can apply in specific circumstances. Notarial, Land Registry, financing and professional costs should also be taken into account.
Notary and Land Registry
Before execution of the deed, payment of the purchase price, representation, taxes and the treatment of existing charges should be organised. After completion, the relevant taxes are dealt with and the acquisition is registered with the Land Registry. Foreign buyers may also require a Spanish NIE number and, where appropriate, a power of attorney.
How we can help
Höhne, Prieto & Partners assists with Spanish property purchases from the initial legal review through completion and the subsequent tax and Land Registry process.