Guide to buying a property in Spain.
- Documents
- Deposit
- Contract
- Deeds
- Expenses
- Handover of keys
INTRODUCTION
Purchasing a property is one of the most important investments we will make in our lives, and if the buyer is a resident from outside of Spain, certain aspects have to be given special consideration.
Spanish law established a series of guarantees that enables buyers of verify a company’s integrity. When buyers purchase a property, especially property based on architects ‘plans, as a company we need to assure the buyer that the property will be built, that it will be finished on time and that it will comply with the agreed characteristics, facilities, services and features.
Over the next few pages, this guide will explain to you all the legal information, documents and procedures witch buyers like yourself should be aware of when purchasing a Dayas & Partners Real Estate agency in Spain.
DOCUMENTS REQUIRED TO FORMALISE A PURCHASE
INDIVIDUALS
If a non-resident individual or legal entity (eg company) wishes to purchase property in Spain, depending on their nationality they will be required to satisfy the requirements and procedures outlined below:
- Valid passport
- I.E. (Foreign ID number): essential on the day contracts are signed. We recommend you apply as soon as you pay a property deposit.
- Provide proof of the payments made to purchase the property: essential on the day public deeds are signed. It is
- Also required to provide details of the bank account used to execute all the bank transfers made.
- A tax representative: essential for signing the public deeds and paying tax.
- Translation service and deed management.
- Valid passport
- I.E. (Foreign ID Number): essential on the day contracts are signed. We recommend you apply as soon as you pay a property deposit.
- Spanish bank account: required for direct debit payment of the property tax (I.B.I.), water, electricity and other bills.
- Provide proof of the payments made to purchase the property: essential on the day public deeds are signed. It is also required to provide details of the bank account used to execute all the bank transfers made.
- A tax representative: essential for signing the public deeds and paying tax.
- Translation service and deed management.
- Military permit: Just for properties located in Orihuela Costa. The following documents must be submitted for the processing of these properties:
- A copy of your passport authenticated by a notary and translated.
- Criminal record check, translated into Spanish by a sworn translator and bearing The Hague Apostille stamp.
Note: Dayas & Partners Real Estate Agency will process any Military permits required at no additional cost to the client.
LEGAL ENTITIES
- Valid passport of the entity’s representatives.
- I.E. (Foreign ID number) of the representatives: essential on the day contracts are signed. We recommend you apply as soon as you pay a deposit for a property.
- The company’s Tax ID Number or supporting documentation, duly translate and stamped.
- Spanish bank account: required for direct debit payment of property tax (I.B.I.), water, electricity and other bills.
- Provide proof of the payments made to purchase the property: essential on the day public deeds are signed. It is also required to provide details of the bank account used to execute all the bank transfers made.
- A tax representative: essential for signing the public deeds and paying tax.
- Translation service and deed management.
- Valid passport of the entity’s representatives.
- I.E. (Foreign ID Number): essential on the day contracts are signed. We recommend you apply as soon as you pay a property deposit.
- The company’s Tax ID Number or supporting documentation, duly translate and stamped.
- Spanish bank account: required for direct debit payment of the property tax (I.B.I.), water, electricity and other bills.
- Provide proof of the payments made to purchase the property: essential on the day public deeds are signed. It is also required to provide details of the bank account used to execute all the bank transfers made.
- A tax representative: essential for signing the public deeds and paying tax.
- Translation service and deed management.
- Military permit: Just for properties located in Orihuela Costa. The following documents must be submitted for the processing of these properties:
A copy of your passport authenticated by a notary and translated.
Criminal record check, translated into Spanish by a sworn translator and bearing The Hague Apostille stamp.
Note: Dayas & Partners Real Estate Agency will process any Military permits required at no additional cost to the client.
DOCUMENTS TO BE SIGNED BY THE BUYER(S)
As part of a property purchase, and before the public deeds are signed, two private documents are normally signed: the reservation or deposit contract and the purchase contract. The law considers a purchase contract a perfectly valid way of executing a deal, meaning that both parties are legally bound to abide by all of its content so long as said content does not infringe the law.
Therefore, the parties may not refuse to comply with the contract simply because the agreed terms do not suit. In the case of non – resident clients, we provide the purchase contract in Danish, English, German, and Russian or Swedish, however, it should be remembered that, legally speaking, these translations are merely informative and no legal value. The text in Spanish always takes precedence under Spanish law. Only Dayas & Partners Real Estate Agency employees may sign the deposit contract and purchase contract.
Reservation contract or deposit
A document known as a reservation or deposit contract is usually signed before the purchase contract and a sum of money handed over as a reservation. Our deposits are called “Withdrawal deposits” as they allow the buyer to withdraw from the purchase in the knowledge that if they do so then they forfeit the sum handed over. Equally, if the seller withdraws then the seller has to return twice the reservation deposit. It is customary, at the same time the deposit is signed, for the estimate to be signed concerning the furnishings, white goods and the other fittings chosen for the property. We recommend that, at the same time and before returning to their home country, the buyer also applies for an N.I.E. Number and have their passports authenticated. If they also require a military permit they should also provide us with a translation of their authenticated passports and criminal record checks for all holders.
Purchase contract
Signing the purchase contract represents both parties´ formal consent; the buyer agrees to transfer the amounts at the time and in the way agreed and the seller agrees to build and deliver the property within the agreed conditions and timescale. The contract may be signed in any of our sales offices or, as is usually the case with foreign buyers, sent by registered courier to the buyer´s home so that they can sign them and return them for signing by Dayas & Partners Real Estate Agency In the case of “key ready” properties, it is essential that the buyer signs the contract before returning to their country, especially if they live outside the European Union. The documents signed by both buyer and seller include:
- 2 copies of purchase contract;
- 2 sets of plans (overall project plan, floor plan, individual property floor plan and, where applicable, a plan showing the parking space location);
- 2 lists of the fixtures, fittings, furniture & white goods chosen by the client (if applicable).
Payment methods and delivery dates agreed in the purchase contract between the buyer and dayas & partners real estate agency
Both parties are required to comply strictly with the commitments outlined in the signed contracts. Any change must be agreed between the buyer and Dayas & Partners Real Estate Agency. Only the buyers who sign the contract may make the payments to Dayas & Partners Real Estate Agency account on the dates agreed in the contract. Furthermore, to facilitate the process, we send buyers an SMS reminding them of the agreed payments and thereafter confirming receipt of said amounts.
As regards to hand-over dates for “key ready” properties, at least two weeks are required to furnish and clean the property and set up connections for electricity and water supplies. If the product is “Key ready” and the transferred amounts is below 10.000, utility companies will be contracted and household furnisishing and equipment purchased after complete payment is received and/or the public deeds signed.
It is important to remember that keys will not be handed over or public deeds signed until all amounts have been paid for the property, building work, fixtures and fittings. Therefore, it is essential that you contact Dayas & Partners Real Estate Agency lawyer, Abogados@dayas.org, before organising travel to Spain to pick up your keys. This department is the only valid point of contact for the hand-over of the property.
Public deed of sale
Although the private contract – the purchase contract – is fully valid, the public deed is required to register the property in the Property Register and to apply for a mortgage from a bank. The public deed supersedes the private contract in several ways:
- Irrefutability: it validates the sales as it is witnessed by a third party– the notary.
- Legal security: the notary’s work provides legal security through different checks: he requests information from the Property Register (simple note) specifying who is the owner, if the property is under embargo or other encumbrances; once signed, it is automatically sunmitted by fax to the Property Register; he checks the t the property is up-to-date I the payment of Joint Property expenses; and he requests information from the land Register using the most recent I.B.I (property tax) receipt.
- Expert advice: notaries are public legal professionals and their functions include providing expert legal advice. Furthermore, they are impartial and are required to provide assistance to those who need it most.
The notary will ask the buyer for the following documents and requirements: original valid passport, N.I.E., military permit (if necessary), proof of all payments made, a translator (if the buyer does not understand Spanish), and for a tax representative to be appointed.
SALE AND MORTAGE EXPENSES
General Costs
Who should the buyer pay?
- To the seller, i.e. Dayas & Partners Real Estate Agency: The price of the property and VAT (Value Added Tax) into the corresponding Dayas & Partners Real Estate Agency bank account. The general tax rate in Spain is 21%; however, for the sale of new-build properties being transferred for the first time, this tax rate is reduced to 10% of the sale price. This figure appears when the deposit document and/or contract are signed. The client can purchase one property and a maximum of 2 parking spaces at 10%, if they purchase a third the tax rate is 21%. If the client only purchases parking spaces or business premises, VAT is also set at 21%.
- Please also bear in mind the water and electricity bills. Your client Department has a note on file of the exact amounts. Depending on where the property is located, the payment is made to the commercial seller when the keys are handed over or charged directly to the buyer´s bank account.
- To the notary: Varies depending on the value of the property and the fees set in advance; this applies to both the purchase contract and the mortgage, where applicable. The buyer is required to pay the notary fees in full. This is expressly stated in the purchase contract.
- To the agents: The price of their services, if hired, if a mortgage is required, all paperwork will be arranged by the financial institution’s agency.
- To the Tax Authority: Spanish Stamp Duty (Impuesto De Actos Jurídicos Documentados), corresponding to Regional Authorities, the value of which ranges from 1% to 1.5% of the purchase Price and is stated on the deeds. If a mortgage is required, between 1% to 1.5 % of the total mortgage amount will need to be paid.
- To the Property Register: The fees for the registration of property rights and the mortgage, where applicable. The price of registration feed is established by regulation and varies depending on the property’s value.
- To the translator: if the buyer is a non-resident, they will require the services of a translator to sign the deeds before the notary, unless they state and demonstrate that they understand Spanish.
- To the translator: if the buyer is a non-resident, they will require the services of a translator to sign the deeds before the notary, unless they state and demonstrate that they understand Spanish.
- To the representative: in the event the buyer is a non-resident they require a tax representative to meet the tax requirements of owning property in Spain, this includes applying for an N.I.E. Number.
- Legal Fees: It is common practice (as a general rule) for legal firms handling real estate to charge between 1% and 1.5% of the price paid for the property. However, as there is not set rule, this may vary and will depend on each legal firm’s individual policy. Hiring the services of a legal firm is not essential but is usually advisable in the case of Russian clients.
An agency or lawyer usually deals with these procedures until the deeds of sale are actually registered with the Property Register (if a mortgage is required, the bank’s agency always processes this). The normal processing time is between 1 and 2 months, approximately.
Annual expenses
Once you have purchased your property, you should take account of the following annual expenses:
Property Tax (I.B.I): this is a local tax charged by the Local authority of the municipality where your property is located. It is calculated based on the value the Local Authority assigns the property (assessed value) and each Local Authority applies their own coefficient.
The deadline for payment also varies from town to town but a notice is generally sent to the property. It is advisable for you set up a direct debit via a bank account to pay this tax, guaranteeing that it is paid in good time thus avoiding late charges. This tax is paid by the property’s owner on the 1st of January each year.
Income Tax on Non-Residents: non-residents who own an urban property in Spain are required to pay this tax. The taxable base to be declared is calculated by applying a percentage to the property’s assessed value (indicated in the I.B.I. receipt). This percentage is:
- Generally set at 2%
- In the case of properties who assessed value was modified after 1 January 1994, it is 1.1%.
The resulting amount covers a full calendar year. Consequently, if you have not owned the property for the full year amount should be calculated proportionately based on the number of days you have been owner.
A tax rate of 24.75% is due on the resulting amount. The accrual of this tax is the 31st of December each year and the declaration (using the 210 Form) should be filed at any time over the following year. The declaration should be filed in the Tax and Customs office corresponding to the property’s location.
Community Fees: If the property is part of a project with a community of owners, the corresponding fee has to be paid periodically (monthly, quarterly, every six months, annually etc). The most comfortable way to do this is simply set up a direct debit payment from a Spanish bank account.
Water and electricity bills: You require a bank account to set up direct debits for utility bills: if you do not pay the bills the utility companies will quickly cut off supplies to the property.
DOCUMENTS REQUIRED TO FORMALISE THE MORTAGAGE & INITAIL EXPENSES
If you wish to apply for a mortgage to finance your property you are required to show that you are financially able to meet the repayment of the amount borrowed. The recommended debt limit on your net monthly income is normally around 30-35%.When analysing the viability of a mortgage application, financial institutions normally take the following into account:
- Employment stability: This determines your ability to take on bebt over a long period.
- Annual income: wage slips or equivalent.
- Credit history: the client’s history is taken into account, such as if they have defaulted or delayed payment in the past… Financial institutions require clients to submit a bank certificate with information on their credit history and any debts they have, allowing them to ascertain if the client is in position to take on more debt based on their income.
- Assets: Property other than the real estate they are going to buy.
- Guarantors: Other people who undertake or re-pay the loan if the buyer is unable.
- Other complementary guarantees: savings accounts, pension plans, investment portfolios…
If the buyer is legal entity (company), in addition to providing all of the company’s documentation, duly signed and stamped, financial institutions need to know:
- What type of company it is: a public limited company, private limited company, holding company, etc.
- Its corporate purpose and activity: what does the company do?
- Amount of time in business.
- Shareholders: who is the valid contact person and who is responsible for managing the real estate acquisition?
- Information on the company’s financial status: Level of turnover, net income after payment of all expenses, approximate profits, how they are distributed, etc. Possibility of the partners guaranteeing the transaction personally.
- Assets in the company´s name and debt level.
It is essential that you provide:
- Articles of association and power of attorney duly translated (by a sworn translator) and stamped.
- Tax certificate.
- Most recent balance sheet and profit and Loss Account (all pages).
- Proof of the assets in the company’s name.
In the case of non-resident companies, most financial institutions require the mortgage holders to be individuals; companies only appear as mortgagers, and not as bebtors. As the board of directors has to authorise the mortgaging of any asset held by the company, said authorisation should be translated and stamped. The proportion of financing available will depend on the client’s country of origin, but will in no case be more than 65-70% of the sale price.
Initial mortgage expenses
In addition to notary fees, stamp tax, registration, translation and management fees and their processing, purchasing with mortgage involves other expenses:
- Valuation: approximately 300 Euros
- Mortgage fee: Between 1 – 2%
- Cancellation fee: as established by law
- Mandatory insurance: as established by law, you are only required to have fire insurance; but, in practice, home insurance and loan repayment insurance is also required.
- Other products: cards, direct debits, etc.
SIGNING THE SALE & MORTGAGE DEEDS
The first requirement before deeds can be signed is for the property to be paid in full or for the remaining amounts to be duly guaranteed. The deeds will be signed on a weekday morning. All of the parties must attend: the buyers (or, where applicable, empowered representatives), an empowered representative for the commercial seller, a translator, and the bank’s representatives (if purchased with a mortgage).
After the deeds have been signed the buyer should go to the property where staff from our customer Service Department will accompany them to their home.
HANDING OVER THE KEYS
The keys are handed over at the property in the presence of staff from our Customer Services Department, who will provide you with the property’s keys and give you important information. They will also provide you with a copy of the User Handbook for your property, as is required by law.
SUMMARY OF KEY ASPECTS TO BE CONSIDERED
- Only documents signed by Dayas & Partners Real Estate agency employees are valid.
- The amounts transferred as payment for property must be paid directly into the account of the corresponding development’s commercial seller.
- Visits to “Key ready” properties or properties “under construction” will be accompanied by Dayas & Partners Real Estate agency employees.
If the buyer wishes to visit the property before the key handover they should arrange an appointment with the sales Administration staff at info@dayas.org
- Not belongings may be left in the property before it has been paid for in full.
- Only building work and/or modifications accepted by Dayas & Partners Real Estate agency in writing and prior to payment of the amount agreed in writing will be carried out.
- The keys to the property will not be handed over without the owner’s prior authorisation in writing.
- Information will only be provided to third parties (lawyers) if the owner sends us their authorisation in writing.
- The buyer should address any complaints or claims regarding the property directly to: info@dayas.org
CONTACT Dayas & Partners Real Estate agency
Email address:
Telephone:
- Torrevieja Office: +34 96 670 03 03
- Orihuela office: + 34 96 530 33 06
WWW.DAYAS.ORG
