– Verifying that everything is right with the property
Once you have decided what property you would like to buy (either with a real estate agent or with an individual selling his/her property), the first step is employing a lawyer for verifying the following:
- Checking if the property is legal, its ownership and that planning permits are in order
- If there are extensions or a swimming pool for example, making sure that there are planning permissions. This is important in order to avoid receiving fines if the alterations have been made illegally. Unfortunately, this is very common in this area.
- Making sure that there are no tenants
- Checking if there are mortgages, seizures or charges against the property
- Checking that there are no unpaid taxes as the IBI (tax on real estate paid every year) or that there are no debts with the Community of Owners (if the property is part of a community development)
- Checking that all bills for utilities have been paid for the last few years
– Signing the reserve contract
Normally this is the second or first step, even if you can sign the conveyance Deeds (escritura de compraventa) without one.
This contract is signed to reserve the property and is a security for the seller and the buyer. Once this contract is signed, the buyer will also have to pay a deposit for securing the property.
We advise to have the contract drawn up by a lawyer. Many times, those are standard contracts drawn up by the real estate agents. In such cases, they should be revised and approved by your legal advisor before being signed to safeguard your interests.
The contract will reserve the property for a specific term agreed between the parties. Normally, if the buyer doesn’t sing the conveyance deed in the agreed term, the buyer will lose the deposit paid.
If the contract obliges you to pay a deposit, you should be sure that this is the property that you wish to buy, because if you change your mind, you will lose the deposit paid.
At that point you should consider requesting your NIE Number. This is a foreigners Id number required for buying a property in Spain, for paying taxes and many other things.
– Paying a deposit
After deciding what property to buy and signing the contract, you will have to pay a deposit. In Spain it can be referred to as fianza, arras, reserva and depósito.
The amount is often agreed between the parties. It can be a fixed percentage, but normally it is between 1,000€ and 6,000€. The amount will be agreed in the contract as well as the conditions for refunding or losing it. You should always make sure that you are aware of the refund conditions in the event that there are problems with the property. You should always do it under the supervision of your lawyer.
-Buying an off-plan property
If you have decided to buy an off-plan property which will be built or which has not been completed, you should bear in mind very important points.
a) The contract:
In this document you will find the schedule for the property’s completion, method of payment and payment dates, clauses for covering your deposit in the event of non-completion, the plans and technical specifications with full description and its characteristics.
It is important to make the payments on time or you could lose the amounts already paid, and the property could be sold to another buyer interested on it.
In Spain there have been many problems with off-plan properties that were never finished and the buyers lost their deposits because they didn’t request a bank guarantee. It is very important to ask for a bank guarantee when you pay a deposit. You should keep the document with you until your property is finished. The bank guarantee will protect your deposit in the event that the property is not completed or if the Occupancy Permit (Licencia de Primera Ocupación) is not obtained.
– Before completing the purchase at the Notary Office
It is important to be sure that the property is in the same condition as when you visited it. In Spain you “buy what you see” regardless of what it says in the Land Registry Certificate. Therefore, you will have to make sure that the property includes every item you saw when visited the property. If you are buying the property with furniture, make sure to have a list with the items included with the property. If you find that there are any damages, you should ask the owner to repair them immediately before completing the sale.
-Completing the purchase at the Notary Office
c) The Notary in Spain:
In Spain, the purchase of a property can only be completed with a Notary.
The Notary will prepare the Deeds that will be signed. He/she is also in charge of making sure that everything is right regarding possible tax debts linked to the property and is responsible to check that the price is paid to the seller.
The Notary will also check that the seller is the actual owner of the property and will also check the description with the Land Registry and if there are any charges (mortgages, seizures…) or encumbrances registered against the property.
Normally, Notaries can also be hired to register the new Deeds in the Land Registry and to pay taxes on your behalf.
d) Signing the Deeds:
This will be the last step when buying a property. As we mentioned before, it will be done at the Notary Office. The Notary will check the identities of everyone, that the property has no charges against it and that the payment method is clear. Normally, before the Notary starts reading through the Deeds, you will receive a draft of it. It will be in Spanish so the translator and your lawyer will read it for you and translate it. You should make sure that your personal details are right (the Notary will check your names and if the passport and NIE number are correct). You should be present this day or you could sign a power of attorney on behalf of your lawyer. If you are a couple buying, you could also give power of attorney to the other, in case only one of you can be present at the Notary.
Buying with a power of attorney is very common amongst foreign buyers.
Your lawyer will draft the POA in English and Spanish and send it to you. You should print it and take it to a Notary in your country for signing it. Once you have signed it, you should authenticate the document by requesting the Apostille Certificate (your Spanish Lawyer should inform you on how to do it).
Once the Notary has read through the Deeds and checked that everything is correct, he/she will ask the seller and buyer to sign the Deeds. At this moment you should pay to the seller and you should receive the keys of your new property.
e) Final Payment:
The outstanding amount for the property price should be paid when signing the Deeds. In Spain the common way to do it is paying by banker’s draft. This type of draft blocks the amount in the account so the draft will always have funds. Other way of doing it is by bank transfer. When paying by bank transfer, you should bring to the Notary the transfer receipt to prove to the Notary that you paid. The seller will also have to acknowledge receipt of the property price.
If you are buying the property from a non-resident, you have to withhold the 3% of the price and pay it to the Spanish Tax Office.
Once you have signed the Deeds you will receive a copy from the Notary called copia simple. This document will be unsigned but it will be an exact copy of the signed Deeds. The original signed Deeds will be ready to pick up once the Land Registry has changed the ownership title on their records (this can last up to 3 months since the Land Registry received the document).
Before you leave the Notary office, you will receive an invoice with a provision of funds that will include the Notary Fees, Land Registry Fees, Taxes and Management Fees. You will have one month to pay this. If you don’t complete payment in 30 days, you will receive a fine for not paying taxes on time.
The Notary will immediately inform the Land Registry that you are the new owner and the Land Registry will block the property so no charges can be registered against your new property (charges against former owners). However, you will have to send the signed Deeds to the Registration Office to register ownership. After that, you will be the legal owner of the property. The Deeds cannot be registered in the Land Registry until every tax is paid. Once this is done, the Deeds will be returned to the Notary, and, as we mentioned before, the Land registry can last up to three months.