UN International Properties

Defining your needs
Researching your options
Choosing an agent
Creating a shortlist
Visiting Spain
Choosing a lawyer
Due diligence
Legal formalities
Taxes and other costs
Ownership structure
The cost of owning property in Spain

The following information is general and has been provided only for information or orientation purposes, and cannot be deemed as legal and/or tax advice in any way.

Defining your needs:

Clarifying your needs makes your property search easier and reduces the chance of you buying a property that doesn't suit you.

The sorts of questions you need to ask yourself are as follows:

Will this be a holiday home for a few weeks a year, or will it be a main residence for spending all or part of the year?

A holiday home means you should think about property that is easy to look after in absentia, and perhaps choose something with good rental potential to earn income and avoid leaving the property empty most of the year.
A more permanent home requires greater thought. You plan to spend large parts of the year living there, so you need to be somewhere that offers you the best quality of life. This means considering the local infrastructure and facilities, community, security, accessibility, and so on.

What do the family need?

Generally speaking, if you have young or teenage kids, your life will be a lot easier if you a buy property that allows them to have fun without you having to drive them everywhere. Residential estates that attract families are ideal, as both parents and kids are happy.

Is investment a primary or secondary concern?

Many people have bought Spanish property in recent years primarily as an investment, both in terms of rental income and capital gains. If you are buying as an investment then you have to focus on the type of property with the greatest potential in these terms. A good property agent will be able to advise you on the factors that drive property investment returns, along with the tools to help you analyse them. If you are buying primarily as property for living in and enjoying, then you will find you have a wider choice of properties.

How much effort do you want to put into maintaining the property?

In many ways it is just the end of the beginning when you complete the purchase. Property in Spain, as anywhere, doesn't look after itself, and maintaining property in a foreign country can be more of a challenge than at home. Depending upon what you buy, you may find yourself having to deal with local government, local builders, cleaners, plumbers, gardeners, and what have you, and all in Spanish. This is the case if you buy a property that is neither part of a residential estate (urbanizacion) or a community of owners.

What sort of maintenance budget do you have?

You need to be clear about the maintenance costs that different properties involve, and budget for them before you purchase. Otherwise you may find yourself owning a property that is too expensive for you to maintain. A good agent will give you a guide to the maintenance costs of different properties. For more detail on the sorts of costs you will face see the 'Owning a property' section of this guide.

What sized property do you need?

Be realistic about the size of property you need. Don't buy a property on the assumption that extended family will always be staying, as you may end up with something too big for you. Focus on your own requirements.

What kind of property do you need?

Different kinds of property (for example new build/resale, villa/apartment, on- estate/off-estate) suit different needs, and it is important that you are aware of their relative merits before deciding what to buy. This is one of the most important questions that you need to answer. Again, a good property agent will be able to advise you on the different aspects to consider and the (dis)advantages of different kinds of property.

Which regions best suits your needs?

Whereabouts in Spain to buy is another important question. You may have personal reasons for choosing one region, such as family or friends located there. However bear in mind that each costal region of Spain has a different set of advantages and disadvantages, and it helps to know which one best suits your needs.

How important is accessibility?

Convenient access will be important to you if you wish to travel regularly. As an expatriate you will probably find that you need good access, both for you and for the convenience of family and friends who may wish to visit. Good access means a choice of international airports that can be reached within an hour or two by car. It could also mean proximity to a TGV/fast train terminal or motorways that give easy access to the north of Europe .

What is really important to you in terms of surroundings?

Some properties offer rural charm whilst others offer urban glamour. Being in the centre of town or right on the beach front will have advantages and disadvantages, as will being out in the countryside. What to choose depends on the qualities you value the most at this time in your life. You also need to think about the infrastructure you would like to have around you, such as hospitals, schools, shopping, leisure activities, and so on. A good agent should be able to advise you on all these issues.

What kind of community would you like to be living in?

Some people may prefer the solitude that comes with a house in the woods far from anywhere. Others may like the idea of a vibrant international community that you find on many of the best residential estates. Think about what you would like from a social life if you are going to spend a lot of time in Spain.

What will you need from the property in 5 years time? In 10 years?

Never forget how quickly the years pass by. If you are buying a property for the long term then bear in mind how it will suit your needs as they change over time. As always a good agent should be able to advise you on this matter.

Researching your options:

One option is simply to turn up in Spain and start looking around. However you will make your search much more effective, and increase your understanding of the options that face you, if you do some prior research before coming to Spain .

The internet is undoubtedly the best place to start your research. As a medium it is perfectly suited to searching for property and agents, as it is both information-rich and interactive. Never before has it been so easy to get so much useful information with so little effort, wherever you are in the world. In fact there is almost an over abundance of information given the hundreds of websites dedicated to selling property in Spain . Bear in mind that if a company has an amateur website and poor standards online, it may be fair to assume that they also have poor standards offline. Focus on quality.

Choosing an agent:

You will find that most of the estate agents selling property in Spain to foreigners are actually foreign owned and run. This means that you will not have a problem finding an agent that can take care of you in your own language.
Having said that some of these companies may lack professionalism and quality of service. You need a highly professional company that protects your interests both through its own standards and its market expertise. Look for companies that focus on what you need rather that what they have to sell, that provide you with detailed information and expertise, that have professional customer-service procedures and documentation, and that NEVER attempt to pressurise you. Some companies, UN International Properties included, can provide you with a total purchasing solution that helps you with all aspects of buying a property in Spain (legal, fiscal, financial, relocation, travel, etc). Seek out a company that provides this comprehensive service rather than those companies that limit themselves only to selling you a property.

After a while you realise that all the agents you talk to are handling many of the same properties. So at the end of the day it all boils down to SERVICE, and this should be the determining factor in your choice of agent.
There is no good reason in this day and age of information technology why you should not have selected one or more agents before you visit Spain. This allows you to focus on looking for property when in Spain rather than looking for agents.

Creating a shortlist:

With the help of a good agent that helps you clarify your needs and conduct an initial search, you should be able to draw up a shortlist of properties that match your requirements before even coming to Spain. A good agent should provide you with considerable details and pictures for each property. This will allow you to focus your energies on property that really interests you, rather than having to see property that your agent wants to sell you for whatever reasons.

Once you have drawn up a shortlist that you are satisfied with it is time to visit Spain and see the properties for yourself. During your visit there will always be the opportunity to refocus your search, or see properties that were not on the shortlist. However it does help to have a shortlist and a plan before visiting Spain.

Please bear in mind that the interval between the creation of a short list and the actual visit should not be too large, otherwise one runs the risk of finding the selected properties sold or the prices adjusted. Especially in a fast moving market like Barcelona it is very difficult to create a shortlist weeks in advance as on average properties tend to be on the market for a shorter period of time.

Visiting Spain:

Beware the cheap inspection trip! Many companies offer inspection trips at absurdly low prices. If you take one of these the chances are that you will be herded around in a large group with other buyers, visiting properties that it suits the agent to sell rather than you to buy, and all the while subjected to different forms of pressure selling.
Be prepared to return empty handed. Better to try again later- than to buy and live to regret it.

Don't let yourself be manipulated by any agent whilst you are visiting Spain. They are there to help you, and the moment they let their own interests interfere with your decision they are letting you down. Your interests are paramount and it should be clear from the beginning that your agent understands this. Don't think twice about walking away from an agency if you are not happy with the service.

Once in Spain you will have a chance to visit the properties or developments that interest you. Be sure to take notes of the good and bad points of each property, and any other distinguishing features, so that you have access to all the relevant information when the time comes to make a decision. Bringing a digital camera with you is another good idea, so that you can take photos of the properties and developments you visit.

Consider including time for leisure and fun in your visit. Viewing properties can be hard work and you will appreciate the opportunity to unwind whilst in the lovely surroundings of Spain. It is also a good way to get a feel for the place if you have not spent much time there before. We can help you organise the travel arrangements for your visit.Â

Choosing a lawyer:
Estate agents may not be able to give you adequate legal advice when buying property as it is likely that they are neither trained lawyers nor sufficiently independent from the seller to represent you true interests.

Some estate agents have been known to recommend the services of a “Gestor” for dealing with the legal aspects of buying a property. A “Gestor” is an administrative agent who specialises in carrying out a wide range of bureaucratic and administrative tasks for clients in Spain. However they are not trained lawyers, so it is strongly advised that you use the services of a trained lawyer to draft or review contracts, perform a due diligence, or provide any legal advice.

So there is no getting away from the fact that you will need to hire an independent Spanish lawyer to make your purchase legally sound and secure. Ideally you should hire a lawyer who can provide you with an integrated service that not only protects you in the purchase but also optimises your fiscal situation as a result of the purchase. Of course you will also need a lawyer who speaks your own language and can provide you with translated documents. This is important as you HAVE to read all documents before signing them, no matter what anyone Final responsibility always rests with you.

Given that foreigners have been buying property in Spain for many years it is not difficult to find a good Spanish lawyer who will look after your interests and deal with you in your own language. However it is less easy to find a lawyer who can provide you with the integrated service mentioned above that optimises your fiscal situation. This is because providing such a service requires expertise in international tax issues on top of local knowledge of property law.

The best way to find a lawyer is by recommendation, either from a friend or a good agent. Agents should recommend independent law firms rather than in-house lawyers. Be sceptical if you are offered an in-house lawyer, as their independence may be compromised. Whichever law firm or lawyer you choose, ask for some background information that allows you to verify reputation, independence, etc.

UN International Properties can recommend the services of various local, reputable law firms that will be able to help you in your own language and provide you with an integrated solution. To contact our office for more information.

Due diligence:

Before signing any contracts that commit you to buying property it is important to confirm that the property belongs to the seller in its totality, and that it is free of debts and charges (in Spain mortgages, tax obligations, and other charges are ascribed to property rather than individuals). It may also be prudent to carry out a number of other checks related to land classification, urban development plans, the condition of the property, maintenance costs, and community obligations.

Your agent and lawyer can advise you on the appropriate level of due diligence in any particular case. However never accept advise to forego due diligence entirely, especially not when purchasing resale from a private individual.

Due diligence can involve some or all of the following checks:

Property Registry Report

Obtained from the Property Registry ( Registro de Propiedad ) for a small fee this certificate - know as a Nota Simple Informativa - states who owns the property and indicates if there are any debts and/or charges, such as a mortgage, attached to the property.

Title Deeds

Check that the seller has the title deeds, know as the Escritura Publica.

Property Survey

There is always the option of having a chartered surveyor evaluate the property. This is advisable if there are any doubts as to the condition of the property. A survey can also be carried out on new build property to confirm that it is delivered in the condition promised.

Tax Check

The seller can be asked for the latest municipal tax certificate to demonstrate that there are no unpaid municipal taxes associated with the property which would become a problem for the buyer. The municipal tax is know n as the Impuesto sobre Bienes Inmuebles , or IBI for short.

For resale property a check can also be made on the local capital gains tax (Plusvalía) that will become due when the property changes hands. In theory this tax is paid by the seller, however sometimes it is assumed by the buyer. It is important to know how much it is and who will pay it before committing.

Utilities

When buying resale property it may be prudent to ask the seller to demonstrate that all utility bills are up to date, and to have specified in the deposit or private contract (if you enter into any such contracts) that they will be up to date at the time of granting of the public deed of sale.

Community by-laws and fees

When buying property that is part of a community of owners (Comunidad de Propietarios) it is important to know what the by-laws governing the workings of the community are, and what the financial obligations are per period. A copy of the community by-laws can be obtained from the land registry. It may also be necessary, in the case of resale, to obtain confirmation from the president or secretary of the community that the previous owner is up to date with community bills.

Developer’s insurance

Developers that sell property under construction are legally required to have a bank guarantee or insurance policy that protects any payments you make to the developer before the property is completed. This ensures that you get your money back if for whatever reason the developer fails before completion. If there are any doubts about the developer it may be necessary to see proof that the appropriate insurance is in place. Note that developers are also required by law to hold an insurance policy which guarantees for 10 years eventual damages occurring due to defects affecting ground work, supports, beams, reinforcement bars, retaining walls, or other structural elements.

As has already been stated, each due diligence should be considered on a case by case basis, and should be managed by a lawyer. Depending upon the circumstances some or all of the checks may be required, along with further checks in special cases. Your lawyer will advise you as to what is appropriate in your case.

Legal formalities:

When purchasing property in Spain certain steps are required by law. There are also steps you can take which are legally recognised and binding, but are not mandatory. The following list explains some of the usual steps that are followed.

Deposit Agreement or Contrato de Arras

A simple contract that involves a deposit paid by the buyer to the seller and reserves the buyer the exclusive right to buy the mentioned property at a specified price and within a certain period of time. The contract can specify, and it is strongly recommended that it does, that if the buyer withdraws from the transaction the deposit is lost, and if the seller withdraws from the transaction double the deposit has to be returned to the buyer. This agreement is not mandatory but is very common.

Option To Buy Agreement or “Contrato de Opcion de Compra”

This type of agreement gives the buyer the exclusive right to buy a property within an agreed time frame. The option does not have to be exercised, but it is usually agreed that if the option is not exercised the buyer looses the money paid for the option. Very similar to the Contrato de Arras but less common.

Private Sales Contract or Contrato Privado de Compraventa

A contract that specifies, in as much detail as possible (price, dates, contents, etc.), the terms under which the transaction will take place. Several scenarios can be foreseen in private sale contracts. For instance the payment of an initial deposit of 20% of the price at the moment of signing of the private sale contract, and payment of the remainder at the moment of signing the public deed of sale. In this scenario the parties may agree that the deposit of 20% is lost if the buyer fails to grant the public deed. This contract should specify when the public granting of deeds - known as Escritura - will take place. This contract is common, especially in off-plan developments, but not mandatory.

Public Deed of Sale or “Escritura Pública” de Compraventa

The Escritura de Compraventa is a mandatory contract if the sale is to be registered publicly in the land registry. By law this document must be authorised by a Spanish Notary (Notario) and must also be signed by the buyer and seller (or their representatives with power of attorney) in front of the Notary. The Notary guarantees, by virtue of his public office, the legality of the transaction, and explains to both parties the terms of the transaction. At this moment the full price, or any remaining payments (should any exist) on the purchase price are made. Effectively this is the moment when the new owner takes possession of the property.

This act, known in Spanish as the “Escritura Pública”, results in the “Escritura Pública” de Compraventa , or title deeds, which state who the new owners of the property are. It is impossible to inscribe property in the land registry without the “Escritura Pública” de Compraventa , and inscription with the land registry is the most secure form of ownership.

Certain documents should be provided by the seller, at the very latest, at the time of the Escritura. The precise documents required vary case by case, and you lawyer will be able to advise you on the documents required in your case. However documents could include, amongst others:

• Original title deeds
• Proof of payment of the most recent local property tax (IBI)
• Proof of up to date payment of utilities
• Certificate from the administrator of the community of owners showing that payments are up to date

The title deeds will be in Spanish. Always have a legal representative with you to confirm that the final deeds you sign are what you are expecting to sign, and be sure to check the details of the property and the names of the parties just before you sign. Your lawyer will need to be there with you to confirm, in your own language, what you are signing.

After signing the Notary will give the buyer both the original title deeds and simple copies of the deeds. These documents are required to pay the appropriate taxes and for inscription in the land registry. Your lawyer should help you carry out these formalities.

Registering the property

Your lawyer should help you to register your new property with the land registry IMMEDIATELY after the Escritura. Once you have submitted the Escritura for registration, it may take 1 - 2 months for the process to be completed. Your lawyer should also register you as new owner of property with the Catastro which is the local government's registry of property and owners. This will ensure that you receive all correspondence relating to the local property tax.

Other formalities

In some special cases, such as residents of tax havens purchasing property in Spain, or non-residents buying property for more than 3,005,061 Euros, there are a number of other legal formalities to comply with. Again, to be properly advised on such specific issues UN International Properties recommends to consult with a good solicitor or fiscal expert.

Taxes and other costs:

As a buyer of property in Spain there are a number of costs and taxes over and above the property price that you will have to pay. Depending upon whether you are buying a new property from a developer, or a resale property from a private individual, you will either have to pay VAT & Stamp Duty, or a transfer tax. The different cases are explained below, along with the other costs and taxes that are common to both cases.

NEW BUILD FROM DEVELOPER

VAT & Stamp Duty ( IVA & Actos JurÃdicos Documentados - AJD )

These taxes apply if the property is being sold for the first time, and the seller is a property developer. The VAT (known as IVA in Spain ) is 7% on the price of the purchase in the case of built residential property (villa, apartment, etc), and 16% in the case of plots of land (without built property) and commercial premises. The Stamp duty is fixed between 0,5% and 1% on the price of the purchase, depending on the Spanish Autonomous Region in which the property is located. Both VAT and Stamp Duty are paid by the buyer, and if any deposit is paid before completion of the sale, such deposit will be subject to VAT at the moment of payment of this deposit. In this scenario there is no transfer tax to pay.

RESALE FROM PRIVATE INDIVIDUAL

Transfer Tax ( Impuesto sobre Transmisiones Patrimoniales - ITP )

This tax applies if the property is deemed to be a second or posterior transfer. The Transfer Tax is 6% or 7% on the price of the purchase, depending on the Spanish Autonomous Region in which the property is located. The transfer tax is paid by the buyer. If any deposit is paid before completion of the sale it is not subject to the transfer tax. However the full amount of the transfer tax still has to be paid upon completion. In this scenario there is no VAT & Stamp Duty to pay.

Income Tax Provision When Buying From Non-residents

If the seller is not a Spanish resident, the buyer has to withhold 5% of the purchase price and pay it to the tax authorities (application form 211). If this is not done the property will be considered by the tax authorities as the asset backing the capital gains tax liability of the seller. This condition is very unlikely to apply when purchasing from a developer.

OTHER TAXES AND COSTS

Agency Fees

Estate agency fees or commissions are paid by the seller, unless otherwise agreed. They may be anything from 2 - 15%. If the buyer uses a search agency then search fees are paid by the buyer.

Lawyer Fees

A lawyer - Abogado in Spanish - will charge you according to the service you require. This will vary according to the complexity of the purchase. Some lawyers charge a fixed fee based on a percentage, usually 1%, of the purchase price. In case of a complicated transaction or a low purchase price, this may result advantageous, however in a straightforward transaction such as buying a new built property from an established developer one can find that it is best to have a sollicitor charge by the hour or service required.

Notary Expenses

When buying resale property it is common practise for the parties to agree that the Notary expenses corresponding to the granting of the public deed of sale are born by the buyer. The amount of Notary expenses is determined basically by the sale price. It is usually around 0.1 - 0.3% of the sale price.

Price of sale (Euro)	Approximate Notary expenses (Euro)
300.000 €	425 €
360.000 €	490 €
600.000 €	600 €

Property Registry Inscription FeesÂ

Expenses related to inscribing the sale with the land registry are also usually paid by the buyer, and the amount of these expenses is determined by the sale price.

Price of sale (Euro)	Approximate Notary expenses (Euro)
300.000 €	210 €
360.000 €	255 €
600.000 €	420 €

Other Costs

Bear in mind that it may be prudent to carry out a survey of the property and that this will have a cost.
A special reference should be made to the local capital gains tax - known as PlusvalÃa . This is a local / municipal tax that only applies to the increase in value of the land upon which urban properties are built, and that is levied at the time of transfer of such properties. It is calculated on the basis of the “Valor Catastral” (an administrative value that is usually lower than the market value) of the property. The amount to be paid is calculated by multiplying the “Valor Catastral” with a percentage determined by the municipality to which the property pertains. The height of the percentage will also depend on how long the seller has owned the property: the longer the period of time during which the seller has owned the property, the higher the percentage.

This tax should be paid by the seller, though it is possible for sellers of resale property to try to shift the burden of this tax to the buyer. This practise is unheard of in regions such as the Costa Brava and the Costa Dorada, though quite common in the Costa Del Sol.

In Summary, allow for up to 10% of the purchase price in taxes and other costs…

Ownership structure:

When you purchase a property in Spain you have decide on the best ownership structure. For instance you can buy only in your name, or jointly with one or more family members such as your spouse and children. Or you may choose to purchase through an intermediate vehicle such as a company. Whatever you choose to do it will have important consequences in terms of the taxes you pay in your lifetime, inheritance taxes, and the claims of your family or other people to the property. It is a very important decision and you will probably need specialist advice if you are to determine the optimal ownership structure for your circumstances.

The cost of owning property in Spain:

There will of course be costs associated with owning a property in Spain . Some of these will be maintenance costs, such as cleaning, repairing, reforming, utility bills, rubbish collection, and so on. These will be determined by the size and type of the property you buy. Obviously a large villa with a garden and pool will require much more effort and cost to maintain than a small apartment. Please consult with your agent to have you an idea as to the maintenance costs you will face for different properties.

Apart from the general maintenance costs referred to above, there are a number of costs in the form of taxes and fees that property owners in Spain face.

Property Ownership Tax ( Impuesto Sobre Bienes Inmuebles - IBI )

A local tax on the ownership of property in Spain , irrespective of whether the owner is a resident or not. Calculated on the basis of the “Valor Catastral” , the tax rate goes from 0.4% - 1.1% of the “Valor Catastral” , depending on the location of the property.

Annual Wealth Tax ( “Impuesto Sobre Patrimonio”)

Both residents and non-residents have to pay an annual wealth tax on the net wealth they own on 31 st December of each year. For non-residents this tax only applies to assets located in Spain . Non-residents who only own property in Spain (and no other types of assets) can expect to pay a wealth tax based on the value of the “Escritura Pública” or the “Valor Catastral” , or a value assigned by the tax administration for the purposes of other taxes - which ever being highest. The tax rate varies between 0.2 and 2.5%.

Personal Income Tax (Impuesto sobre la Renta de No Residentes - IRNR)

Non-residents who own property in Spain have to pay an annual income tax. The tax will vary according to whether the property is rented out or not.

In certain cases, non-resident property owners must appoint a fiscal representative who is resident in Spain. This representative proves very helpful as personal income tax is self assessed and submitted.

Residents have to pay annual income tax known as the Impuesto Sobre La Renta De Las Personas Fisicas.

Community Fees

Owners of property that is part of any development, building, or complex in which common zones are shared with other owners are by law obliged to be members of the community of owners, known as the Comunidad de Propietarios. This will entail paying community fees for the upkeep of the common areas, and any other services that the community votes for. The fees will vary according to the magnitude of the common areas, the costs of maintaining them, and the services that the community votes for. A budget for annual community expenses is approved by majority vote of all owners (or representatives) who are present at the annual general meeting of the Comunidad de Propietarios.

Insurance

Household insurance will vary according to the status of the owner and the type of property. However it should be born in mind as a cost that all property owners will face.