Golf & Country Home considers the information hereafter to be current and accurate at the time of writing, but it is nevertheless by its very nature abbreviated and intended to serve only as a guide and subject to errors or omissions.
Golf & Country Home always recommends purchasers or sellers of property to consult qualified Lawyers and Tax Advisors.
Legal formalities & costs involved in purchasing property in Spain
Golf & Country Home always recommends that purchasers of property in Spain retain a qualified solicitor to represent them and qualified financial advisors to deal with tax issues.
Purchasing property in Spain is a relatively straightforward procedure. The “last word” in property ownership is the property registry, which will show immediately if the seller owns the property free of liens and encumbrances. Most frequently, unless an immediate payment of the full purchase price is made, a private contract of purchase is drawn up wherein the details of the purchase are reflected – the legal description of the property, purchase price, form of payment, date of completion, date of possession, etc. Upon signing the private contract, a payment on account of the purchase price is always made which can vary substantially according to the terms of the sale and the date of completion. A quite normal deposit for completion within 30 to 60 days would be 10% of the agreed purchase price.
New properties which are unfinished obviously are paid for over the construction period, and all payments on account before finishing must be guaranteed, according to the BUILDING ORDENANCE LAW (LOE), LAW 38/1999, by a bank or insurance company: if the property is not finished by a certain date, a purchaser has the right to reclaim the monies paid, plus legal interests. Additionally, this law obliges the property developer to arrange a TEN YEAR insurance policy with respect to any basic building defects with the purchasers as beneficiaries. When the entire purchase price is paid for the property, the seller will issue the public deed of conveyance (escritura) to the purchaser, free of liens and encumbrances. This deed is issued before a Spanish Notary, is passed from the notary to the tax office to be assessed for stamp duty if the property is a resale or second hand property, and then presented to the Property Registry for inscription. A provisional inscription in the registry is made immediately upon issuance of the deeds.
Property purchase costs
7% TRANSFER TAX (I.T.P.) payable by the buyer for the purchase of any Real Estate (villas, flats, land, commercial premises, garages), provided the vendor is not a developer or normally trading in the business of resale properties.
8% (7% VAT and 1% STAMP DUTY) for any VILLA or APARTMENT, or GARAGE that is annexed to an apartment, where the vendor is a developer, promoter or habitual trader in these generally new properties.
17% (16% VAT and 1% STAMP DUTY) for PARCELS OF LAND, COMMERCIAL PREMISES or COMMERCIAL GARAGE SPACES, where the vendor is a developer, promoter or habitual trader. This covers virtually all NEWLY URBANIZED LAND PARCELS and NEWLY BUILT COMMERCIAL PREMISES. This only covers resale properties when the vendor falls into one of the above categories.
Notary fees and property registry inscription fees
Notary fees can cost up to approximately €1.750 although the cost increases according to the number of pages or complexity of the title deed (e.g. transcription of statutes, payment in stages, property partially finished, etc.). As an example, an apartment costing €300,000 will cost around €546 in notary fees, whilst a property costing €600,000 will cost around €678 in notary fees. Any higher than this amount, the fees go up marginally.
The property registry inscription fees also depend on the complexity of the transaction. For example, fees for an apartment costing €600.000 to be registered in the name of one person and purchased without a mortgage loan, will cost around €300. For an apartment with the same sales price to be registered in the name of 2 persons and purchased with a mortgage loan, will cost around €800.
Added Value Tax (Plus valía)
This is an “added value” tax based upon the increase of the Town Hall index value of the land only, from the prior (vendor’s) purchase to the present sale. It is usually not a significant amount with respect to apartments or townhouses – less than €1000 for the most part for an apartment or townhouse which last changed hands five or six years ago – but can be more in the case of villas with a large tract of land. This tax corresponds, by its nature, to the vendor who is responsible for its payment, unless otherwise negotiated. As there are several variable factors used in calculating this tax, especially the length of time of ownership of the property, the amount payable can vary substantially and should be verified before proceeding with the purchase.
The total official costs involved in purchasing property should be less than 8% if it is a resale property or less than 9% if VAT is paid on the purchase price, plus lawyer’s fees.
Local Rates or Annual Property Tax (IBI)
Local rates are payable annually, and are calculated from the cadastral or rateable value of the land assigned by the Spanish Tax Office. The cadastral value takes into account the value of the land plus the value of the building, according to type, location, and usage. Upon this value, each municipal Town Hall decides on the percentage to be charged in respect of local rates.
Rubbish collection & (Basura)
The rubbish collection rate is applied by the Town Hall according to the property and payable every 6 months. For an apartment rubbish collection is approximately €160 and a villa approximately €240 per year.
Water rates (Agua)
Water consumption is calculated by the water meter consumption in cubic meters and is payable every 3 months. Payment can be made directly at the Town Hall or by bank with direct debit instructions.
Generally speaking, the Community of Co-Proprietors or Homeowners’ Association is a legal entity comprised exclusively of the owners of the apartments in a building, or villas on an estate. The purpose of the Community is to own and maintain the common elements of the building or estate in question, and each homeowner is obliged to participate in the expenses of the upkeep of the community areas and services on a prorated basis with the other owners. Usually, a homeowner’s percentage of the costs is fixed by the size of the apartment, or plot, divided by the total area of all the apartments or plots.
A budget for the annual community expenses is presented at the annual general meeting of the homeowners, and they or their authorized representatives must approve the budget by majority vote of those present at the meeting. Expenses can vary substantially according to the services provided, and normally include salary and social security of the hall porter, common garden maintenance, lift maintenance, repairs to common elements, rubbish collection, water for watering community gardens, electricity for lighting communal areas, insurance, security, and administration fees. The President of the community must, by law, own a property within the complex itself and is chosen by way of vote by the co-owners. The President has no remuneration for this role.
A typical 2 bedroom apartment in a building or area with a hall porter, swimming pool, and a small garden, could cost between €90 to €200 per month in community fees In the case of an individual villa in an estate of villas, community fees are often less since the private gardens and exteriors of such properties are generally not maintained by the community.
A standard insurance cost for a €200,000 apartment with contents valued at €30,000 would be €280 per year. One should note that in an apartment building, the Homeowners’ Association is required to insure the building for its reproduction cost. Therefore, the individual’s insurance policy for the apartment need not cover the entire value of the apartment, but only damages to the interior of the apartment, its contents, and third party liability. It is also advisable to insure the building at first risk in case the Community insurance is not comprehensive.
The upkeep of a private garden is essential to the maintenance of your property and its cost will, of course, depend on its size. As a rough guide, the hourly rate is about €16.
Cleaning service is generally available on a full-time salary or hourly basis. Full-time salaries range from €700 to €900 per month plus approximately €140 per month social security contributions. Part time help is usually charged by the hour with rates varying from €8 to €12.
Electricity is billed bimonthly. Minimum rates are applicable whether you are in residence or not, and the minimum varies according to the amount of electricity your house could potentially use with all power and lights turned on. The minimum charge for an apartment might be between €25 and €35 per month. Charges for a villa are from about €60 to €90 per month, depending largely on the extent of the electrical installation. General usage is €0.08 per Kwh plus tax. All rates are exclusive of taxes.
The telephone bill is also charged bimonthly. Standard rates vary according to the equipment installed, but can be of €18.50 per month including a touch dial telephone. There are many local and national telephone companies that can offer substantial savings to those who wish to spend some time studying the market. ADSL broadband services are available virtually anywhere and ADSL "packages" cost approximately €40 per month (plus VAT), including all local and national calls to fixed lines.
What if I want to buy a plot and build my own home?
Providing that a building plot is situated within an urbanization, or an area zoned within the Municipal Plan for such use, outline planning permission will already have been granted for the construction of a detached home. However, building regulations, which vary considerably, dictate the permissible size of the villa according to the size of the plot. Care should therefore be taken before proceeding with the land purchase that one will be allowed to construct one’s chosen home on it. Golf & Country Home will be pleased to provide a list of bilingual architects, and to arrange viewings of some of their previous work.
Are technical surveys available?
A building survey is not necessary in Spain for mortgage purposes. It is nonetheless advisable when purchasing an older property. Common things to check for are the condition of the plumbing and electrical installations, waterproofing, roofing, and so on. These checks, as well as a full structural survey, can be carried out by a Spanish technical architect (aparejador). Any fees involved would be to the account of the prospective purchaser.
Is financing available?
Spanish banks are highly competitive when offering mortgages on both new properties and resale properties. It is now common practice for most Spanish banks to offer mortgages to non-residents, although some banks do offer a wider variety of financing packages than others. Common terms offered are mortgages from 5 to 15 years, often of up to 80% of the purchase price, at around 1 point over current EURIBOR rates. The applicant must of course qualify for the loan, especially from the standpoint of having sufficient income to afford the monthly payments, and the bank must appraise the property value. The appraised value, generally speaking, coincides with the market value of the property.
Is it better to take out a mortgage in Spain or in my home country?
For a property in Spain it is better to take out a mortgage with a Spanish bank. The process is much quicker as valuers can visit the property on short notice and the competition between banks is resulting in very favourable terms for foreign buyers. In any event the Spanish property that is the security for the loan, needs to be inscribed in the local property register and Spanish banks are better placed to do this.
How do I open a bank account in Spain?
Opening an account in Spain is very easy and we will be pleased to assist you on your initial visit. At the early stages of your purchase you will be introduced to a bank of your choice, or if you prefer, one recommended by us, so that you can open an account. With the internet you can access your account in English at all times, to check statements, transfer funds and generally keep an eye on the account, all without speaking a word of Spanish.
Who pays estate agency fees in the sale of a property?
The seller always pays agency fees, unless you come up with a different agreement with your agency. Although the seller remunerates his agency, the agent has an ethical obligation to see that the purchaser gets fair value for money, and at the end of the day, a good agent’s job is to bring the buyer and seller together in harmony. This highlights the importance of working with an established estate agency with a strong reputation.
How will I deal with standard bills, e.g. electricity, water, telephone, rates, etc.?
Frequently the administrator for the Community of Homeowners will settle these bills, but, if not, it is common practice in Spain to issue standing instructions to your bank to pay them on your behalf.
What is an urbanization?
An urbanization is a planned community which has met the standards of the various governmental agencies with respect of the use of the land (residential, commercial, sports area, green zones), and to providing a specific set of services and a minimum level of quality in the construction of roads, sidewalks, drainage, sewage systems, electricity and water installations, and so on. Obtaining permission to develop land into an urbanization can take a developer up to several years and several million euros of expense. The most obvious advantage to the owner of a property within an urbanization is the fact that the land usage is strictly controlled. If one decides to build a house on a plot in a section of an urbanization zoned exclusively for single-family dwellings, you are assured by law that neither an apartment block nor a rabbit farm can be located on the adjacent single-family plot! There are several zoning classifications for rural land outside of urbanizations, and great care should be exercised in purchasing land outside of an urbanization: under most circumstances, one may not be able to build upon land which is not within an urbanization.
How do planning rules affect my prospective property?
Most of the property you will view on the coast will be on urban land, that is included in the town hall plans as urban with a completed infrastructure of roads, electricity and water. The planning that applies here varies from municipality to municipality but for Calpe for example, a villa's wall needs to be a minimum of 5 metres away from a neighbour's boundary and construction height can not exceed 7 meters with the villa not occupying more than 25% of the plot area. Currently the minimum plot size to construct is 800m2.
The much discussed LRAU applies only where the land is zoned as Urbanizable.i.e. the town hall is inviting promoters to present urbanisation plans. When one is approved, a new modern urban area will be created with streetlights, pavements, underground cables etc. and the existing owners will have their land incorporated in the plan and be asked to pay their share of the urbanisation cost. This can be a real burden, but of course their land is worth a lot more than it was previously.
Can I put in a pool?
The answer is almost always yes, and it can go up to your neighbour’s wall. You will need an architect’s project and a building license but your builder will usually arrange this for you.
Information about Spanish schools, both state and private, can be obtained from Spanish embassies and consulates abroad, and from foreign embassies, educational organisations and government departments in Spain. Information about local schools can be obtained from town halls (ayuntamientos). The Ministry of Education and Science (Ministerio de Educacion y Cienco) provides a general information service at their central office: Servicio de Information, Iniviativas y Reclamaciones, C/Alcala, 34, 28014 Madrid (Telephone 0034 917 018 000).
Most British schools in Spain belong to the National Association of British Schools in Spain (NABS), whose members are visited and approved by British school inspectors. Advice about British English-language schools in Spain can be obtained from the British Council, Paseo Martinez Campos, 31, 28010 Madrid. Alternatively consult ECIS (European Council of International Schools www.ecis.org).
Are there medical and health insurance facilities?
The quality of health care and health care facilities in Spain is considered to be equal, if not better, to any country in Europe and is improving every year. Spanish medical staff is highly trained and major hospitals are equipped with the latest high-tech equipment.
Private medical insurance is available through various groups such as SANITAS. This could cost from €30 to €130 per person per month, depending on their age and the state of their health. Spain's social security system now allows E.U. residents access to the health network via a special form (E-101).
For residents who are self-employed, own a company, or are employees, your social security contributions automatically entitle access to the Spanish health network.
Do I need medical insurance or am I already covered in Spain?
E.E.C. nationals need to obtain a E-121 form before leaving permanently for Spain to allow them to transfer their national rights to equivalent rights under the Spanish social security system. With this form and a residence permit "Residencia" they can use the social security system in the same way as the Spanish and have their existing years of pension contributions count towards a Spanish pension.
Members of private pension schemes are not entitled to use the Spanish social security system and are advised to join one of the many Spanish private health insurance schemes such as Adeslas.