Buyers Guide

Property Buying Process in Spain
 

The reservation agreement is a contract that takes property off the market for, usually, 30 days on payment of a fee between €3,000 and €6,000. If the full private contract is then signed within the reservation period, the fee is deducted from the purchase price agreed. If not, it may be forfeited.

Next, an option contract gives the buyer the “option” to buy a property. Many sellers of resale properties now use options instead of a full contract. It specifies a period within which completion must take place, usually 30 days from the date of the option contract. If the “Escritura de Compraventa” (Title deeds/Conveyance) is not signed within this period the buyer will forfeit the sum paid under the option contract, often in the region of 30 per cent of the full purchase price. The option Contract makes it easier for a seller to rescind the agreement in the event of default, and does not afford a buyer the statutory protections normally given when signing a “contrato de arras” or full private contract.

The arras contract or full private contract will usually require a 10 to 20 per cent deposit to be paid. If the seller pulls out of the transaction he must return double the amount of the deposit received by way of compensation. If the buyer pulls out he will lose the deposit paid.

Before the main contract is signed and a full deposit paid, it is essential to complete all searches and legal enquiries, confirming that the sellers own the property being sold, there are no mortgages or charges and that planning consents are in order. Once both parties sign the main contract, it is binding.

The buyer is then committed to pay the balance of the price, and the seller (once the money has been paid) must transfer ownership to the buyer.

Legal ownership is transferred in the office of the Notario – a public official appointed to perform certain legal duties in the district – who prepares the conveyance document (“Escritura de Compraventa”). Once the Escritura de Compraventa has been signed before the Notario, all taxes must be paid and the Escritura presented to the Land Registry for registration.

Buying costs

Allow for 10 and 11 per cent of the purchase price to cover the costs of buying your property in Spain. This includes Transfer tax, equivalent to stamp duty, calculated on the property purchase price and 7 per cent in most parts of mainland Spain. The Notario’s fee is between €550 and €700.

Land Registry fees in Spain are between €400 and €600. Legal fees are usually a percentage of the purchase price – generally 1 per cent – but with a minimum fee. VAT on new-build properties in Spain is currently still reduced from 8 per cent to 4 per cent to stimulate sales

Buyer Beware

Laws protecting buyers of off-plan properties in Spain are in place but they should be invoked at an early stage for them to be effective. Some general tips are:

1. Ensure that the plans and building specifications are agreed in advance with the builder and that these are attached to the contract and signed by the parties.

2. By law a bank guarantee or insurance policy must be provided to ensure that if the developer becomes insolvent prior to delivering the property it would be possible for buyers to get their money back.

3. The contract should provide that the property would be delivered only after all the appropriate licenses for occupation have been granted by the town hall.