Buying a House in Spain

The following guide is intended as a brief introduction to some of the terminology in Spain and we hope it gives you a good basic idea of Spanish legal procedures for buying property.

It is a good idea to take time to explore the region before deciding to buy. Take a couple of weeks holiday and try and get to know what it’s like out of season when the tourists have left. In July and August the beaches are full and so are the car parks, it’s wall-to-wall people, hustle and bustle, and usually quite hot. Try visiting in the winter, autumn or spring time and discover what life in Spain is about. Do you want to be in the town, just on the edge of town or away from it all in the countryside?

A good source of information for buying property in Spain is http://www.spanishpropertyinsight.com.

We highly recommend that you consult with an independent solicitor before purchasing a property.

NIE Number

If you intend to buy a property in Spain you need an NIE number, which is simply a unique indentification number for taxation purposes. This number is needed before a property can be purchased and before a bank account can be opened. This application requires the completion of numerous application forms, written in Spanish, so the safest way to ensure that this is done correctly is to give power of attorney to a reputable solicitor in Spain.

Once you have decided on the property that you want to buy, the process is this.

Nota simple informativa

With this document from the Property Registry (Registro de la Propiedad), you'll find out if the property is free of debt, the owner of the property and if the description of the property matches what the buyer has been told (to avoid surprises about missing square meters).

The pre-agreement

Between the seller and the buyer there has to be a contract in place until the public deed of purchase is ready. It's usually a simple document in which the seller expresses their intent to transfer the property to the buyer, and the buyer expresses their intent to buy at the price and conditions agreed upon. At this time, the buyer also gives to the seller a percentage of the agreed-upon price usually 10%. The typical agreement in Spain (called arras) is if the buyer backs out of the contract, they lose the deposit; if the seller backs out, they have to pay double. Of course, the buyer and seller may choose another type of agreement if they prefer.

Certifying the transfer of property

The property transfer must be certified by a notary. The deed of purchase will be given to the buyer after the notary reads it and the parties present agree to the contents of the deed. The following must then be presented: proof of identity (or power of attorney) of both parties, the seller's title of property (a form that reports the investment to the Central Register), and the buyer's payment. The buyer and seller sign the contract; beneath their signature, the notary signs using his firma protocolizada and the deed is ready for taxes.

Taxes

For the buyer: transfer tax (impuesto de transmisiones patrimoniales) and stamp tax (impuesto de actos jurídicos documentados)

If the seller is an individual, the buyer pays a tax of 7% of the price specified in the deed. If the seller is a real estate developer and the building or land to be built on represents a first-time transfer, then the buyer pays VAT tax instead, meaning 7% for housing, 18% otherwise. If for housing, you have to add a stamp tax.

For the seller: a local tax called the plusvalia

With a copy of the deed in hand, the seller must go to the City Hall (or wherever local taxes are paid). After filling out the form, the seller will receive in the mail a notice of how much they have to pay. This amount is calculated based on the number of years the property was held, and on the property's valor catastral. Be aware that each town has a different procedure regarding payment of this plusvalia. It's best to ask at the notary's office about this payment.

Property Registry