You’ve Found The House Of Your Dreams….What Next

Once we have agreed the sale with the vendor we start to prepare the paperwork in order to secure the sale and ultimately take it to the notary for completion. Points which need to be negotiated at this stage include the terms and conditions of the purchase such as sale subject to mortgage, payment terms and exchange dates.

• What we do to prepare the sale
  
  Paying for your property
  
• What is an contract of sale and purchase?
  
• Buyers Financial Responsibilities
  
• What is an contract of sale and purchase?
  
• Buyers Financial Responsibilities.
  
• What happens after the sale.
  
• Now I own a house in Spain what further expenses are there
  
• Wealth Tax
  
• Fiscal Declaration
  
• FAQ´s
  
  
• 
  
  

What we do to prepare the sale

We will conduct a full background check to ensure that the property is free from debts which is one of the most important tasks that we will perform. In Spain the debt is carried by the property, not the owner, so you will be liable to pay for any encumbrances discovered at the point of sale, and thereafter. We will request this  by getting a copy of the Nota Simple (a summary of the title deed) from the Land Registry (Registro de la Propiedad). This document shows any charges against the property, such as unpaid mortgages, or loans, or associated taxes.

We will request a copy of the escritura which describes the property, specifies the current owner, provides information about the location and records any debts or court embargos (the Nota Simple provides up to date figures) so we can ensure that everything is in order.

We will get SUMA receipts (annual property tax), these will be checked to make sure that the taxes have been paid up to date and it will also show the Referencia Catastral and Valor Catastral.

The Referencia Catastral details the property’s physical description and boundaries. The certificate itself comes in two parts, one being a description in words and the other a graphic representation with either a plan or aerial photo. The document also quotes the Valor Catastral, the Spanish tax office’s (Hacienda) assessed value of the property used to calculate taxes.

We will request the receipts for community fees, this assures you that the previous owner has paid all of the maintenance fees due. If the property is part of a community you become a member and you will incur any remaining debts.

When we have performed all the relevant checks on the property we will advise you to go ahead and pay the 10% holding deposit. If charges or encumbrances are discovered, we will then be able to advise how easily it is to resolve the problem (which will be done prior to signing at the notary) or whether you should pull out from the sale.

A deposit is paid and a private reservation contract is drawn up between seller and buyer.

 

If you need a little more time to finalise your finances (obtain a mortgage etc) a holding deposit is paid in order to take the property off the market for an agreed amount of time. Normally this is between 1,000€ to 3,000€ and this reserves the property for a period of 2-4 weeks. All deposits are paid in cash so you need to make sure before you start viewing that you have access to funds.

Once your finances are sorted you are expected to pay the balance of the deposit which is normally 10% of the agreed asking price. At this point a private contract is drawn up between the seller and buyer in order to protect both parties. The typical agreement in Spain is if the buyer backs out of the contract, they lose the deposit paid; if the seller backs out, they have to pay double the deposit. Once the contract is signed then the deposit is handed over.

What is a private reservation contract?

The reservation contract is used as the standard format for reserving the property until a notary date can be set. Typically the contract describes the:

1. Identity of the seller
2. Identity of the buyer
3. Exact location of the property
4. Description and details of the property
5. Agreed sale price
6. Date within which we will sign at the notary
7. Details of the relevant documentation needed for the sale
8. Outline of laws that the contract is subject to
   
   

Paying for your property

Before the notary date we will contact you to discuss the payment for the property. You will need to ensure that you have sufficient funds in your Spanish bank account on the day of the sale and it is standard on the morning of the sale to go to the bank and collect the bankers draft (ordered a few days before) and cash to cover purchase costs as previously agreed.

Please note – Spanish banking is not free and you will be charged for raising the bankers draft.

Before you transfer money to Spain think about using a currency broker to save you paying a fortune in commission or losing out on exchange rates.

Link to relevant page goes here

A notary date is set.

When both parties are ready to complete the transaction, they and their representatives will attend the Notary’s office to sign the escritura de comparaventa (title deed of conveyance). The notary will undertake his own search of the Land Register (Registro de la Propiedad) and see if there are any undisclosed charges on the property. He will then prepare the title deed of conveyance from the information supplied by the vendors representative and check compliance with Spanish Law.

On the day of the sale you will need to take the following to the notary:

1. Original NIE number and passport if non resident in Spain
2. Original resident  card or resident certificate and passport if resident
3. Original Power of Attorney (if applicable)
4. Balance of the payment

 

Your representative will translate the deeds for you and the notary will then read the whole document in Spanish to you and the vendor, and you will both sign the deed along with the translator and the notary. The balance of the final monies owed will be settled and details of this balance will be noted in the sale deeds.

Unlike in the UK, it is not unusual for the same person to represent both the seller and the vendor and in fact this actually makes the sale go more smoothly as there are fewer parties to co-ordinate.

What is an contract of sale and purchase?

The Contracto de Compraventa is made between the purchaser and the vendor and sets out the terms under which the property will be purchased, such as:

1. Current owners name and details
2. Purchasers name and details
3. The exact location of the property
4. The exact dimensions and features of the property you are buying as demonstrated by the referencia catastral
5. Details of any building work
6. Details of an community which governs the property
7. Cancellation of mortgage (if applicable)
8. Any debts on the property
9. Agreed purchase price
10. How the purchase price is to be paid
11. Tax responsibilities
12. All terms and conditions negotiated between the seller and the vendor
13. A declaration that the purchaser and vendor are legally in a position to buy or sell the property respectively

Buyers Financial Responsibilities.

On top of the agreed sale price the buyer has extra financial costs of approximately 11% which cover the following:

1. I.T.P Tax
2. Fiscal Representation
3. Legal Fees
4. Notary Fees
5. Registro Fees
6. Conveyancing Fees
7. Mortgage Fees (if applicable)

But what does that actually mean

I.T.P. Impuesto Sobre Transmisiones or Transfer Tax - payable for the purchase of any real estate where the vendor is not a developer payable at 7% of the declared value on the escritura.

Fiscal Representation - in order to ensure that all the taxes are paid on the property purchase an accountant needs to be employed to prepare the paperwork so that it can be paid at the hacienda (Spanish tax office).

Legal Fees - these cover the work of the person doing the conveyancing on your behalf which includes checks on the property, preparation of the deeds, translating and general assistance on the day of the sale.

Notary Fees - the notary charges a fee based on the declared value of the property and this covers their time in verifying and finalising the paperwork, overseeing and witnessing the signing and preparing copies of the escritura (house deeds).

Land Registry Fees - once the deeds have been signed and the taxes paid then all the paperwork needs to be presented to the Land Registry in order for the change of ownership to be officially registered.

Mortgage Fees - generally the full cost of setting up a mortgage is between 1%-2% in Spain.

What happens after the sale.

At the point of sale a fiscal representative will be appointed to you (normally the representative who has dealt with preparing the sale to go to the notary) and it is their responsibility to ensure that all taxes on behalf of both the seller and buyer are paid within 30 days from the date of signing the deeds.

Once all the taxes are paid the new deeds are presented to the Land Registry and the ownership of the property is transferred into your name (this can take between 4-6 months).

All the utilities will also be changed over after the sale into your name and direct debits set up from your nominated bank account.

Now I own a house in Spain what further expenses are there."

Obviously you will have to pay for the utilities that you use:

Iberdrola (electricity)       bills come every 2 months
Aguagest (water)            bills come every 3 months
Telefonica (telephone)     bills come every 2 months
SUMA (council tax)           this is paid once a year around September time
Community Fees (if applicable - Community charges apply when you buy a property on a community development. These cover things like maintenance, swimming pools, gardens etc.) - these are normally paid twice a year

As a rough guide to your yearly expenses for a non resident in Spain (based on a two bedroom property without communal pool in the year 2007):

Utility services

Also there will be tax implications according to your residence status:

Wealth Tax

If you are not a resident in Spain you will have to pay wealth tax, this tax is payable regardless of how many weeks you spend in the property and is based on the value of the property and a property owners income tax based on your income from the property (even if you do not rent out your property the tax office calculate a percentage of income that you could earn from it).

The tax is divided between the number of owners - if only one person is named on the deeds they pay 100% of the tax, if two or more are named they pay the relevant percentage i.e. 50%, 25%.

Wealth tax is paid each year in arrears normally towards the end of the year depending on your fiscal representative.

Fiscal Declaration

If you are a resident in Spain you have to do a fiscal declaration to declare any income you have. If you pay taxes in the UK there is a treaty between the two countries so that you only have to pay tax at one source so you will need to supply a P60 or equivalent for each taxed income received, as each case is individual it is always best to check whether or not you have to do a declaration.

F.A:Q.s

 

Why do I need a non resident fiscal certificate for the bank

Banks in Spain by law have to request certificates of fiscal residence for all non resident clients so they will ask you to sign a document giving details of your permanent address in your country of residence. This document is valid for a period of two years, and your bank will send the renewal once this period has expired.

What if I don’t have an NIE number.

Recent Spanish legislation makes it compulsory for anyone selling or buying property in Spain to have a NIE - Numero de Identidad de Extranjeros which, translated, means "Identity Number for Foreigners".

Link to how do I get an NIE number goes here

What if one of my party is unable to come to Spain to sign before the notary.

A power of attorney can be done in the UK, valid for a house purchase in Spain. We find out the notary closest to where you live and contact them on your behalf to see if they are happy to prepare the paperwork for you.
We fill in the paperwork with all the personal information of the person who is unable to sign and the personal information of the person who they want to give power of attorney to and them we e-mail over the document to the UK notary and make an appointment for you to go in and sign in front of the notary.

The notary will then send the power of attorney to the Spanish consulate in order to have it apostilled - this normally takes about 2 - 3 weeks.
Once returned it will be accepted by a Spanish notary and the person appointed can sign on behalf of the person giving power of attorney.

Should I make a Spanish will

A UK will is not valid in Spain so although it is not obligatory to make a will in Spain it is highly recommended as the inheritance process is long and complicated with a will, let alone without one. If you have no will your assets will go to your next of kin but it will take a long time and they will be unable to sell your house without the inheritance procedure being completed.

What about inheritance tax

Inheritance tax is payable in Spain and unlike the UK there is no ceiling below which you do not have to pay. The inheritance tax is calculated on the value of the assets to be inherited and the kinship but you would need to appoint a representative to sort this out for you.

Should I become a resident in Spain

Each person should consider all the aspects of becoming a resident and make an informed decision based on their individual circumstances.

What insurances do I need

Fire Insurance is compulsory by law when taking out a mortgage. Comprehensive Household Insurance is available to protect your home and contents. Life Insurance can be taken out to guarantee payment of the loan in the case of death. There are a variety of companies offering insurance policies but many of them are only in Spanish so make sure that you understand what you are paying for.