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Should I buy a new property or a resale property?
If you want to move quickly, we recommend you look at resale properties, and we have a wide selection. If you can afford to wait a little longer, new-build properties offer a 10-year building guarantee (which is not available on properties more than 3 years old). Off-plan or custom-built properties are perfect for those who are making longer-term investments.
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Will the property be freehold?
Almost invariably - yes.
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I've definitely decided to buy in Spain.
What's the first thing I need to do?
Choose a specialist real estate agency. They should be the ones guiding you through the entire process and holding your hand every step of the way. Ideally the agency should be a well established international property company, preferably with offices both in your country of residence and locally in Spain.
The next step is to visit the area to decide if it really is for you. You can either make your own arrangements or take advantage of an inspection trip organised by your chosen agency. Ideally this agency should be independent and therefore able to show you the widest variety of properties, both new and resale.
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What next?
Once you have decided on a property you must first (regardless of intended residential status) apply for a fiscal number (NIE - Número de Identificación de Extranjeros). Without one, you won't be able to finalise your property purchase, maintain a bank account, arrange credit terms, or register a property in your name. You can apply at any national police station with a foreigners' department, obtain the forms via a Spanish lawyer, or get them from the website of the regional government for the area you are moving into. Your lawyer will normally provide this service for you.
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Do I need a lawyer?
Yes. Early on, choose an independent solicitor, preferably a local, English-speaking Spanish lawyer, who undoubtedly will be very familiar with local customs and, more importantly, local problem areas. You can, of course, use one of the many specialist UK-based law firms dealing in overseas property, but these will usually be a little more expensive as they will work through a locally chosen Spanish lawyer. The Law Society in the UK (www.lawsociety.org.uk) will have a list. The cost of a lawyer ranges between 0.5%-1.5% of the total sale price depending on the company and level of service you require.
You will also need to use a Spanish Notary Public to record the fact that the purchase has taken place, not to offer any legal advice. The notary will be chosen by the seller, and your lawyer will normally accompany you to the chosen notary where the deeds to your purchase will be prepared and issued. |
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Do I need a visa or residence card?
All foreigners need a residence card to stay in Spain more than 183 days a year, and you should carry your foreign identity card, passport or residence card with you at all times. Applying is easy and can be done at the local police station. |
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Do I need a bank account in Spain?
Yes. This is necessary so that any money transfers are not delayed. For any stage payments where letras are being used (which are essentially direct debits), these must be assigned to a specific account prior to the signing of the main purchase contract. If you are transferring large sums in sterling, you can normally receive a far better exchange rate by using any of the currency specialists, like Moneycorp. However it should be stressed that many of these are not banks and therefore do not offer the same guarantees. |
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How do I organise a mortgage?
Establish how you will pay for the property; will you want a euro mortgage, or will you finance your purchase by re-mortgaging your home in Britain to release the cash? Generally, it's best to take out a mortgage in the currency of the country in which your asset is, thus avoiding the risk of exchange rate fluctuations. Make sure the terms of your mortgage allow letting of the property if that is what you want to do. Most Spanish banks offer mortgages of up to 80%, although non-residents can usually only get 70% of valuation; for this you need to provide proof of income and outgoings. The normal term is 15-20 years, although mortgages can sometimes be paid off over up to 25 years.
Most lenders will also levy an arrangement fee of up to 1.5%. As the interest rate in Spain is currently lower than that in the UK, it is often well worth exploring this route first. However, there is a notary fee of approximately 2% on any Spanish mortgage. Thus, if you are only intending to keep the property for 2-3 years it may be better to raise the finance in the UK and effectively purchase in cash. A third option is to take over a developer's mortgage, which is increasingly popular in Spain. This requires little or no proof of UK income but is only usually available for approximately 60% of the property's value.
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What happens once I've decided to buy?
You will usually be asked to pay a "reservation deposit" of between €3000 to €5,000 which is refundable if you have not yet seen the site and will become non-refundable once you have visited the project or decided to purchase "site unseen" (without visiting). Once this has been processed, contracts are drawn up by the selling agent, by the developer or by a solicitor acting on behalf of the seller. These contracts will be forwarded to you and your solicitor for approval before any further payments are made. Your solicitor then ascertains if there are any debts such as mortgages or loans against the property, and confirms that the person offering it for sale is the legal owner. He should also confirm completion times and what you consider to be included in the price e.g. furniture and fittings etc. If you withdraw from the purchase after signing the purchase contract, you will lose the deposit and often any other monies paid. If the seller changes their mind and withdraws from the sale you may be entitled to twice the amount of the money paid back, depending on the contract. We strongly recommend that you don't sign any contract without having your solicitor view it first.
If this is a property under construction you will have to pay stage payments as laid out in the purchase contract.
At completion the Escritura de Compraventa (title deed) is then produced which is to be signed by you (or your solicitor if he/she has your power of attorney) and the seller, in front of a Spanish Notary Public. If a mortgage is required a bank representative will also be present. The balance of the purchase price is now due for payment. On completion, the title deeds must be sent to the local Land Registry, so that details of your new ownership are registered in the Land Registry book. The official Escritura will be returned to you in about 3 months once it has been checked and registered, although you will be able to get an early copy after signing (termed a "Copia Simple").
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What extra charges can I expect?
Allow an extra 10% of the purchase price for taxes and other costs (more if a Spanish mortgage is being used). These will include:
• VAT (IVA) of 7% plus Legal Document Tax of 1% if you are buying a new property from a developer OR transfer tax of about 6% if you are buying a resale property from an individual.
• Land tax or "plus valia" - a sort of municipal capital gains tax, usually between 5 and 10% of the notional gain in the land-only value since the last time the property changed hands. It should be paid by the vendor, but is invariably a charge meted out to the buyer. Unless the property is very old and has not changed hands for a good number of years it is normally a small amount.
• Notary's fees, which are fixed by law and based on a sliding scale from €320 to €700, and can vary with the number of pages of legal documentation.
• Land Registry fees of about 0.25% of the purchase price.
• Legal fees, which should cost you between 0.5 -1.5% of the total purchase price.
• Utility fees: if you buy a new property you may have to pay for electricity, gas and water connections. For resale properties you will probably have to pay for the cost of new contracts, especially water (approx €300). |
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What if I'm buying off-plan?
If you are buying off-plan, you will usually have signed a reservation contract. The most common way to proceed is to sign a sale of purchase contract agreeing to make stage payments as building work advances. Among other things, this contract should lay out what the terms are for each stage payment, when they are due, and the date for signing the deed of sale and completion.
Have your lawyer check that the property has the correct planning permissions and appropriate licences, and that the building company has supplied bank guarantees to protect you if they go bust. Often copies of these guarantees can take a couple of months to be obtained so be prepared to wait. |
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What taxes and running costs will I have to pay after I've bought the property?
The Spanish tax system is complex, as taxes are levied by three tiers of government: central government, autonomous regional government and local municipalities. Four main taxes are applicable: Income Tax, Capital Gains Tax, Wealth Tax, and Succession (Inheritance and Gift) Tax. Whether and how much you have to pay depends on your residency status.
Community fees are invariably paid on most properties in Spain with the exception of fincas and villas in non-urbanisations. All apartment and town house complexes will normally have a Community of Owners which approves an annual budget for the complex, covering all communal areas and facilities. On buying your property your deeds will show exactly what percentage of the community is yours; this is termed "Horizontal Division". Thereafter you will be responsible for meeting that percentage of the annual community budget. These budgets vary in their nature of coverage, but normally the scope of the budget is consistent with the cost of the housing. Thus, you are unlikely to find, for example, the cost of a 24-hour manned security guard on properties costing €150,000. Community law in Spain is very fair and very well documented.
Also, because of the structure of Spanish residential complexes, there will often be a community fee payable to the urbanisation, because the urbanisation takes care of its own communal areas. This of course means that your property tax (rates) are lower than you would expect. This charge is normally included in the complex budget but individual villa owners will have to pay it directly to the community.
Property tax (I.B.I), based on the "valor catastral" or rateable value of a property, is payable by residents and non-residents, and goes towards local services. This tax is rendered by the local town hall and is payable annually at set times. Early payment will incur a discount and late payment a fine. Payment dates are advertised in all public buildings.
Another municipal tax is rubbish collection (basura) and this is often included in community budgets for complexes because there is a central collection point. Where this is not charged communally it needs to be paid once again at the Town Hall and not always at the same time as the I.B.I. It too is announced in public buildings.
Sewerage tax is paid to the local town hall on an annual basis. Water is supplied by the local water authority and is usually metered.
Income tax in Spain is below the EU average. You are liable to pay it if you are resident in Spain for more than 183 days during a calendar year, or if your spouse and dependent children reside in Spain.
Property income tax for residents is payable at the standard rate. Non-residents are liable for tax at a flat rate of 25% on income from letting. All non-resident property owners or residents who own more than one property in Spain who claim not to rent are deemed to receive an income of 2% of the "valor catastral" of their property, and must pay 25% on this e.g. if your property is valued at €100,000 your tax liability will be €500 per year.
Wealth tax is levied on residents and non-residents, and is calculated by totalling your assets and deducting your liabilities and any allowances. Normally non-residents are unable to claim any allowances.
Capital Gains Tax applies on disposal and for non-residents is 35%, but residents under 65 are partially exempt if they have lived in their principal home for at least 3 years and plan to buy another home in Spain within 3 years, in which case they are taxed only on the amount that was not re-invested. Residents over 65 are exempt from CGT if they sell their principal home.
Inheritance tax again is not a general running expense but can be as high as 34% depending on the beneficiary, so bear this in mind at the beginning of the purchase process and amend your will if necessary. This is often a service that many lawyers will offer you at the time you instruct them to act for you in your purchase. |
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How will I educate my children?
Areas of Spain with high ex-pat numbers have developed a multi-national infrastructure, including international schools. The National Association of British Schools in Spain (NABSS) represents the interests of about 40 schools throughout Spain. See www.nabss.org, www.ecis.org or www.cobisec.org. If you can read Spanish, see the Spanish Ministry of Education website at www.mec.es. The cost of private primary school education is about €3,000 to €6,000 per year. |
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Can I still receive my pensions or benefits while I'm in Spain?
Your UK retirement benefit or other benefits can be paid directly into your bank account in the UK or Spain. More details from:
The Benefits Agency,
Customer Service Unit,
Dept. of Social Security,
Pensions & Overseas Benefits Directorate,
Room TC109,
Newcastle upon Tyne
NE98 1BA
Tel: 08459 154811 |
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Can I get a job in Spain?
If you have a valid passport, become a Spanish resident and obtain an NIE number, you can work in Spain without a permit. |
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Can I use my electrical appliances in Spain?
The supply in most of Spain is 220v AC with a frequency of 50Hz, so you will need to either use an adapter or buy new appliances in Spain. |
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