Okay.... so we have done our job properly and found you a property....

WHAT NEXT?

1. AGREE WITH THE VENDOR
We will, as your agents determine whether the vendor is inclined to accept an offer when you find a property that suits yours requirements. The culture is, in the UK to ‘make an offer’ on a resale property, however the acceptance of this varies depending on the vendor’s nationality as different nationalities have their own property/investment cultures. In many cases offers are unacceptable however, we will advise you on this. In the case of new developments the published price is binding.

Once we have submitted an offer on your behalf and this is agreed a binding agreement is born. It is normal practice in Spain to include with the offer a sum of money (reservation deposit) to reserve the property prior to the exchange of a Private Purchase Contract (PPC), in order to show the vendor that there is a real intention to purchase. We will retain this amount on your behalf and inform the vendor that we are in possession of this deposit. Should the vendor pull out at any stage prior to signing the PPC or there is anything suspect about the property that we did not discover in our original searches and it is felt you should not proceed with the purchase on the account of the property being unfit for sale, then we will refund the reservation deposit to you in full.

IMPORTANT NOTE: All the properties we or our associates represent are deemed to be legal and all titles/permits in order. IF by any chance there is a property that does NOT have full and proper titles/permits (i.e. the property has been built without building permission etc.) this will be made clear to you BEFORE you are shown the property. There are many cases in Spain where the building permission was not applied for before building. In most of these cases the building permission is granted at a later date. This is, believe it or not, very normal in many areas. For a small fee a lawyer can have the necessary documents drawn up and the necessary permits put in place. This discrepancy will always be reflected in the price.

The main problem to look out for is not the building but the land. The difficulties start when the land on which a property has been built does not have full title. i.e. it is part of a larger piece of land. The more rural the property, the more this could be the case. In urban areas smaller plots are allowed and the amount of land will be owned outright (i.e. not be a % of a larger piece of land). THIS is something that we work very hard to avoid. We try our utmost not to take on any properties where the land does not have full title. Again, if this is the case, and we are fully aware of it we will make it clear to you BEFORE you are shown the property. We will make you aware of the full implications that purchasing a property of this nature could imply.

Many properties in Spain are excellent buys. Some of these ‘excellent buys’ may come with a few ‘catches’ (as mentioned before). These are...
1. Reflected in the price.
2. With patience and our guidance almost always surmountable.

2. APPOINT A LAWYER
Before signing anything or paying any full deposits, you will need an Abogado (Spanish lawyer). The Abogado will safeguard your financial interests, generally for a fee of 1-2% of the purchase price (plus VAT currently charged for legal services at 16%). This is not prohibitive because in return you will have peace of mind, an invaluable commodity.

To avoid a conflict of interest, we recommend you do not use the same lawyer as the vendor.

The legal systems and land registration procedures in Spain are unique. It is advised that you do not try to do this yourself as you can avoid all the common pitfalls by using professionals.

At propertiesabroad.com we have a panel of lawyers for you to choose from. The idea is to remain independent. We will be happy to recommend you to an English speaking lawyer from our panel or appoint a lawyer for you. You are, of course, more than welcome to appoint a lawyer of your own choosing. Lawyers on our panel specialise in house purchases and will do all the necessary searches.

3. SIGN THE PRIVATE PURCHASE CONTRACT (PPC)
When all is well, your lawyer is satisfied and the PPC has been drawn up ensuring that all negotiations are covered, namely:

The purchase price.
The declared price (which can be different from the purchase price).
The method of payment and currency.
The fixtures and fittings.
The furniture (with inventory).
The taxes and which party is liable for which tax.

Include every detail in the offer; do not make any assumptions or verbal agreements. Cover all angles so you only need to negotiate once and there should be no surprises/delays.

The private contract should include all the points covered in the negotiations and it should also state that:
• The property is sold free of all debts (including mortgages), collateral and embargoes.
• All bills are paid up to date.
• Listed items of household equipment are in working order.
• It is a good idea to have funds available at this time to assure the vendor of your serious intentions. We will call upon our vast experience to bring about a mutually acceptable agreement between you and the vendor.

Your Abogado will check:
• The plan parcial (which shows all the plots) to find out if the property is on an urbanization and that the urbanization is legal and registered with the Town Hall.
• For plans of any new roads and developments in the area.
• That the vendor has the final Escritura Publica (Title Deeds), if not, you are advised to rethink about going any further into agreement.
• That the IBI (a small local tax payable on owned property) receipts are all up to date.
• A certificate of Valuation (Referencia Catastral) the number should be on IBI receipts.
• Make sure all community fees are paid up to date.
Ensure electricity, water and telephone bills are paid.
• Rubbish collection fees are paid, these are usually charged as part of the IBI fees but in some instances they are charged separately. Bills can have built up and are subject to additional fines and surcharges.

Secure your property:
When your lawyer has written and endorsed this private contract, you must be prepared to deposit 10% of the purchase price. Your lawyer will forward this deposit to the vendor's lawyer. Only when this is done, both parties have completed and signed the contract and the 10% deposit paid does the private contract become legally binding, your deposit at this stage is non-refundable, and the vendor is bound to sell you the property at the agreed price. The rights of both parties involved are secured, it is a very impartial system, and works extremely well. The contract will specify the completion period (usually one month) and the penalty for not completing in time (usually loss of your deposit).

IMPORTANT NOTE: The property will not be withdrawn from the market until the 10% deposit is paid.


More things to be aware of...
Only persons named on the Escritura (title deed) of a property can own that property.
Only those persons or person approved by a power of attorney (or Poder) can sell the property.
Your lawyer should always deal directly with the vendor's lawyer.
Documents and contracts need to be in Spanish to be fully legally binding in Spain.
Never sign anything until your lawyer has approved it.
Value of Property: - Often properties have a declared value lower than the sale price. This is done in order to reduce transfer and capital gain's taxes. However, there can be penalties for both the seller and especially the buyer if it is considered the declared price is grossly undervalued. Your Abogado will advise you on what you should declare. This will normally be 20 - 30% lower resulting in a tax saving of the same percentage.
The percentage of tax payable as capital gains on the sale of properties purchased since 1995 reduces annually in line with inflation.
This is good news for residents who sell a property, which is their primary residence in Spain. As long as the property has been owned for at least 3 years, and all the capital is reinvested into a more expensive property, and the new property is also the resident's primary residence in Spain, then any capital gained from the sale will not be taxed. This is designed to prevent property speculation. From the year 2000 the law states that resident pensioners over 65 years of age, who have owned a property for at least 3 years, which is their primary residence in Spain, will not have to pay any tax on the capital they gain from the sale of the property.
To make sure a non-resident pays this tax when selling a property the taxman, known as Hacienda, requires the buyer to deposit 5% of the purchase price with them. Upon a future sale of the property, the individual can then claim back this money minus any taxes due.
To reduce the value on the Escritura, furniture, carpets, curtains etc. can be sold separately.

4. COMPLETE THE SALE
Final document: - The Escritura de Compraventa is the final document for the sale. It must be signed by both parties in the presence of a Spanish Notary in order to make it legally binding. It is possible to allow another person to sign instead by establishing a power of attorney (Poder) with that person.
The Spanish Notary: - The Spanish Notary (Notario) is a public official. He will certify that the contract has been signed, the declared money transferred, and will advise both parties of their tax liabilities for the purchase.
Title Deeds: - Once the Escritura de Compraventa is registered with the Spanish property registry the Title Deeds (Escritura Pública) are produced and this fully installs your title to the property. Your lawyer should have this within 5 -6 weeks of the purchase, if not follow it up it with your lawyer (you will have paid 0.2% for the registration). Until you have the Escritura Pública you do not have full title to your property and you are not the registered owner.

Taxes, Fees and Stamp Duties
It is prudent to allow an additional 9 -10% of the purchase price to cover most taxes and fees. VAT (known in Spain as IVA) is 7% on old and new property. A tax that is normally payable by the seller is often up for negotiation. This is called the "Plus Valia" and is based on the increase in value of the land since the last sale. The town hall decides on the exact amount. Your lawyer will advise you how much it is before you make your offer.

Mortgage, Life Assurance, Lawyer, Notary and Land Registry Fees:
Mortgage lender's fee: depending on lender and amount of loan allow 1 - 1.5% of loan.
Life assurance: to cover value of loan, premium dependant on age and health status.
Lawyer's fee: from around 1%.
Notary's fee: depending on land and size of house, allow 0.2% - 0.3%.
Registry fee: allow approx. 0.2%.
Napoleonic Law: - Napoleonic law still exists in Spain. We strongly recommend that you to make a Spanish will, which costs approximately 150 – 180 €. Property in Spain is subject to Spanish laws which take precedence over wills made in your country of domicile. Talk to your lawyer about the differences between what you can will in your own country as opposed to here.

Inheritance Tax: - Your lawyer or tax consultant will be able to guide you on inheritance tax and how to minimize it. If you are buying a retirement home and are in your golden years, it is advisable to get this information before you decide in whose name or names the property is to be registered.

Another point to remember:
When you purchase a property in Spain as a holiday home/investment and you do not become a resident, you will be charged a tax on an annual basis known as the WEALTH TAX. This tax assumes that as a non resident you will let your property out for rental purposes.

This tax is calculated at 0.5% of the official rated value. For example if the official value of your property was £75,000 you would pay £375 per annum. This is all calculated and handled for you by the solicitor within their fiscal representation on your behalf.

SUMMARY
This is not a do-it-yourself guide and should never be used as a substitute for professional legal advice. The general information given here is designed to make you aware of the potential pitfalls, so that you can avoid them, and not to give you the impression that you will encounter endless problems. Buying a property abroad is such an exciting experience, and in Spain you can enjoy more personal freedom and a fabulous lifestyle, which is one of the reasons Spain is such a great place to live and spend time in on a regular basis

By being aware of the areas where mistakes can be made, by using one of our lawyers and other professionals you will protect your interests, we will try and ensure that making the purchase of your home in Spain will an enjoyable, risk and stress free experience. All of the unfortunate property related stories you have heard could have been avoided if buyers followed the above guidelines or bought with propertiesabroad.com!!!

Are you ready? - With a general understanding of what is entailed in buying a property in Spain, and before you start looking at properties; your own common sense can be your guide.

When asked what is our golden rule about buying a property our answer is always “use your gut instinct”. It works most of the time for all of us.

Should you have any questions or require more information please don't hesitate to ask.

If you have enjoyed reading this guide and have found it useful please let us know.
sales@propertiesabroad.com


If you have any questions then you can always call us or have a chat ‘live’ with one of our experts in the office (click on the yellow ‘ONLINE CHAT’ – top right hand corner) a very friendly an immediate way to get answers to your questions.

Let us make your dreams a reality - safely