[A purchaser’s guide from a Legal perspective]

Before purchasing a property in Spain, we would strongly advise you to do some research and find out how this transaction should be done, what you should look for and what you would better avoid in order to play safe and keep well away from the problems and pitfalls that others have experienced in the past. We will give you some helpful information and tips. However, as every case is different, we strongly advise you to take legal advice as they can assist you throughout the process and ensure that your money and rights are fully protected.

Choosing the property, making a down-payment and signing the reservation document

Good estate agents know the best positioned properties in the developments, the different areas that might better suit your expectations, the facilities, distance to health or leisure centres, safety, security, and the best prices, all of these things need to be considered when choosing a home.

Developer 

You must also be aware that when you sign a contract with a developer you are undertaking to complete and pay the whole price once the property is completed. Transferring your rights to a third party prior to completion is legal and may be allowed by some developers, but they might request that the investor and the new purchaser prove that the transfer has been legally done and the transfer tax on the value of the property paid. Therefore it is not recommended to buy off plan with the intention to “flip” the property before completion.

Re-Sales 

If you are buying a second-hand property, it is advisable to get a technical survey done by an architect or technical surveyor to ensure that the property does not have problems or hidden defects that might affect you later. Vendors are responsible for any defects or problems that were not visible or apparent, which they were aware of, but the claim would need to be done through a court case. Therefore, a survey will save you time and money. When getting a mortgage, the bank will typically send its own surveyor to evaluate the property but generally speaking they will not be looking for technical problems.

Reservation Contract 

Once you have selected a property, it is advisable to pay a deposit and sign a reservation document. The deposit, or down-payment, is usually a small amount (between 6.000 € and 10.000 €) that is held by the seller’s lawyer [or Developer with new properties] and which is used to guarantee the purchase and take the property off the market, as well as freezing the price. It is important to stress that, should the purchasers decide not to proceed with the purchase, they will not get the deposit back, except where there is express written agreement otherwise, such as where the purchaser does not obtain the necessary financing or where problems arise of a legal or urban development nature that advise against the purchase.

We strongly recommend that before signing a reservation document with a Developer or directly with an individual seller, you always send the said document to a solicitor so that they can check it and give it their approval from a legal point of view. Although the specific conditions of the agreement will be fully defined in the private purchase-sale contract, some fundamental aspects will already be set out in the reservation document, such as deadlines, price, expenses and who is responsible for them, etc. and these must be respected thereafter. The deposit is normally paid by credit card or bank transfer, cash is not recommended as it leaves no legal record.

Ownership

Before exchange of contracts you need to decide in who’s names will be the title deed and it is always advisable to discuss it with your lawyers to find out the advantages and disadvantages of the different options. The property can be in the name of a single person or several people [spouse and or with children], or it can be purchased in the name of a company [either Spanish or foreign]. In all cases, that buyers must prove the source of the funds to be invested.

However, in principle, we think it is advisable to buy in the name of individuals instead of doing it in the name of a company. We come to this deduction considering the new bilateral tax agreements between Spain and other countries [such as the UK] that have put an end to certain tax advantages that existed when buying in the name of companies. Finally, registering the property in the name of a foreign company does not prevent its beneficiaries from paying the inheritance tax in Spain.

FAQ. Property Purchase in Spain

What legal guarantees should I get from the developer of a property under construction?

Mainly two. On one hand the developer is required to contract a liability insurance for structural damage that covers a period of ten years from completion of the works. In addition, the developer must guarantee the amounts paid in advance for the purchase of properties under construction by means of a bank guarantee in favour of the purchaser or an insurance policy. The insurance policy or the bank guarantee covers the eventuality that the house is not completed.

Do I need to enter into a private [sales] contract before signing the purchase title deed?

There is no obligation, but it is advisable to do so in order to confirm in writing the conditions of the agreement (price, payment schedule, expenses, etc.) and ensure they do not vary before the signing of the deed.

Do I have to attend the signing of the private contract and the title deed?

No. In fact, it is common practice that clients grant power of attorney to their lawyers to entitle them to sign the documents in their name and right.

How can I grant a Power of Attorney in favour of my lawyer?

You can sign a power of attorney before any Notary Public in Spain, at any Spanish Consulate abroad or before a Notary Public in your home country. In the latter case, it must be translated into Spanish by a sworn translator and legalised with the Apostille of the Hague Convention.

What documentation do I need to provide my lawyer with to meet his obligations relating to the control of money laundering?

Such that gives evidence that you have the financial capacity to invest the amount you intend to invest and that certifies the legal origin of the funds, such as tax returns, official reports from your accountant or auditor, payrolls, inheritance documents or deeds of sale of properties.

Can I settle the acquisition of a property with another property and some cash?

Yes. That is known as “permuta” (exchange). However, for tax purposes this is considered a double sale and therefore both parties are obliged to pay Transfer Tax.

Can I sell a storage unit or a garage that I do not use and keep in my name the apartment to which they were attached on the original purchase?

Yes, but only if the storage or garage appears in the Land Registry as an independent entry. It cannot be sold separately if these elements are attached to the apartment and thus integrated in the same registered property.

The surface area of the property I want to purchase does not match the square metres stated in the Land Registry extracts. Is it something I should worry about?

It is important that the real surface matches the actual area recorded in the Property Register. Sometimes, alterations or additions made to the original property are not reported through a public deed and therefore are not accordingly incorporated into the Land Registry. In these cases, it is desirable that the property owner rectifies this situation prior to the sale by legalising the actions that have led to changes in the property-built area.

Can I use my own money to buy a property for my children?

The problem is that the Spanish Inland Revenue [and your home country’s inland revenue] may consider that there has been a gift, that is, you have given your children the necessary funds to purchase the property. Therefore, you will be taxed separately for each transaction, first, for the donation and then, for the purchase, which may incur immense expenses.

Due to the control policies on investment and the obligation to certify the payment methods and the source of funds, it is often difficult to pretend that the invested funds belong to the children, especially when by their age or personal circumstances you do not establish any income, or the one you prove is insufficient.

When the private purchase contract has been signed, is there any room for gazumping?

No. In Spain the contracts are binding to the parties. The seller cannot change the price after the private agreement has been signed.

What is a complementary tax assessment?

When the Administration believes that a self-assessment tax has been calculated taking as reference a value below the official value, they will issue a receipt for the difference between the amount paid and the correct tax amount. That receipt is what is known as complementary tax assessment.

Do I need to apply for a permit to carry out renovation or reform works in my home?

Yes. According to the characteristics of the project, permits will be for major works (enlargement of surface area, plant or housing height, modification of structural elements, comprehensive reforms, etc..) or minor works (partial reforms, changes in bathroom or kitchen, rearrangement of partitions or walls, etc.). The requirements for obtaining a building permit and the time it takes to be obtained vary in each case.

If I buy a property from a person of the same nationality, could I pay the price directly in my country using my currency?

Yes. However please note that it is compulsory to justify in the title deed all payment means used to settle the price and therefore you are bound to produce to the notary a copy of all drafts, transfer orders, cheques, etc, that have been exchanged matching exactly the price reflected in the deeds. On the other hand, it would hardly ever be possible to pay the full price abroad as in most cases you will have to withhold funds to the vendor in order to settle taxes, cancel existing mortgages or pay outstanding debts on the property.

My house is part of a community of owners. Does my insurance policy need to cover damage to the property or simply secure the contents?

Yes, it is necessary to ensure not only the contents but also the property itself. Community insurance covers damage to the building and common elements, but not accidents or damage inside homes that have their origin in them, nor the damage caused to third party owners.

If I do not use communal facilities (pool, tennis courts, etc..), could I request to reduce my maintenance fee?

No. Community fees are calculated according to the share coefficient assigned to each property and related to the building and common elements and depends, in most cases, on the square metres of the property. Community fees are not related to the use of common elements.