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Buying a Resale Property on the Costa del Sol

This guide was written by Manzanares Abogados S.L. (info@manzanaresinternational.com) in collaboration with Guides.Global (office@guides.global).

It was written on 15 June 2016. The law and practice in Spain change all the time. Our guides are updated as frequently as possible - typically every three years - but may be out of date.

Our guides are prepared by professionals from many countries. They are, of necessity, both brief and general and can take no account of your personal circumstances. They are intended to be a good introduction to the subject BUT ARE NO SUBSTITUTE FOR PROPER PROFESSIONAL ADVICE, which our contributors will usually be happy to provide upon request.

The advice and opinions contained in the guides are those of the author and are not necessarily those of Guides.Global.

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Index

The scope of this guide

This guide is mainly about buying a resale residential property in Spain in general and in the area of Andalusia/Andalucía – which contains the Costa del Sol - in particular. See a map here. Please note that certain aspects of the law in Spain vary from one "autonomous community" (comunidad autónoma) lightbulb image - click here for more information on this subject to another. It covers everything from finding a property to closing the deal and looks at the legal framework that operates when you buy a property in Spain.

It's worth remembering that Spain is a country made up of various 'Autonomous Communities', each of which has the right to make its own laws about certain subjects. Add to that the fact that, in every country, local practice varies from place to place and you will find that the process of buying a property on the Costa del Sol can be quite different from the process of buying one in Madrid, Barcelona or the Spanish islands.

If you want to buy a new property, see also our Guide to Buying a New Property in Spain.

If you're interested in buying a commercial property (shop, office, restaurant etc) see our Guide to Buying a Commercial Property .

Introduction

This is one of our most popular guides. In all of the Guides.Global guides we stress that the guide is only a summary of the law and practice that apply in relation to that topic and that is nowhere more true than it is in the case of buying a property - whether that's on the Costa del Sol or anywhere else.

The purchase of a property is always an expensive purchase. It is also a process that has been happening for hundreds, if not thousands of years. Because of the amounts of money at stake, the process has become complicated and very detailed; but also safe.

It is likely (unless you've come from Southern Europe) to be very different from the process of buying a property that you are used to in your own country. More than ever, this guide is an introduction to help you understand some of the issues that arise when you're buying a property on the Costa del Sol and to let you have a sensible conversation with your professional advisors: estate agents, lawyers, the Notary etc.

Can a foreigner own property in Spain?

Yes. Spanish law makes no distinction between the rights of a foreigner and the rights of a local person when it comes to owning property. It does not matter from which part of the world the foreigner comes. They have the right to acquire any property of their choice.

Is buying a property on the Costa del Sol a good idea?

marbella old townFor many clients, buying a property on the Costa del Sol is a great decision. Quite often the person buying a holiday home sees a huge lifestyle benefit – and sometimes becomes so comfortable in the area that they later decide to relocate or retire there.

You may enjoy a better climate, a lower cost of living and, often, a more active social life than you experienced at home.

Of course, there may also be all sorts of career and business opportunities on the Costa del Sol.

There's a chance of making money, too, as property values can increase substantially. In fact, following the great property crash of the late noughties, such are the investment opportunities on the Costa del Sol that many people are buying property solely for that purpose.

You probably need no reminding that there is no guarantee that properties increase in value. You will have seen, over the last few years, that in bad times their value can fall dramatically.

Buying a property on the Costa del Sol as an investment is not for everyone – none of us have a crystal ball to see whether the property market will improve or deteriorate. If you're buying for investment, see our Guide to Buying Property for Investment.

Making sure you get expert guidance can reduce your risk and increase your chances of a good experience – whether you're buying a holiday home, investing or relocating to a new country. In fact, one thing that all of the experts agree on is that buying a property in Spain really does require some specialist advice from a lawyer.

Ignore them at your peril.

Is the process of buying a property in Spain the same as it is at home?

No. The systems in Spain are likely to be very different from those in your own country.

Sometimes the procedure for buying a property in Spain may be better, simpler and faster than the procedure in your own country. Sometimes it may be worse or a little complicated. But it is always different.

On the Costa del Sol, you should be safe to buy property if you take some basic precautions – just as you would in your own country. Just remember that this is a different country, where they speak a different language and have a different legal system. You may not be familiar with either of these.

If it's any consolation, a Spanish person buying an apartment in (say) Paris or New York would probably be just as confused and baffled as you are!

What about the horror stories I've heard?

Generally speaking, as long as the appropriate checks are carried out, on the Costa del Sol there is no more need to worry than there is when buying at home.

Unfortunately, some people buying property on the Costa del Sol (and in other foreign destinations) take little or no legal advice and are far too casual about the purchase of property and about the signing of legal documents. If they go about things this way it can turn out badly.

They may find that there is no title to the property, that it was built without planning permission, that it is subject to a legal dispute - or, sometimes, that it does not even exist!

Don't become one of these people!

For your own safety, insist on taking proper, independent, legal advice.

Remember that for every 'horror story' you hear, thousands buy property safely on the Costa del Sol and elsewhere in Spain.

Finding property - what is the role of the estate agent/realtor?

estate agentMost buyers will use the services of a real estate agent (realtor) to help them find a property. Most estate agents on the Costa del Sol are honest and competent, but there are some who are not.

More dangerous is the fact that many people operate as 'estate agents' on the Costa del Sol in a completely illegal way - without any of the licences or qualifications required. These are often foreigners who set themselves up as intermediaries 'helping' people from their own country who may be more comfortable dealing with one of their own people instead of facing the language and cultural issues that can sometimes arise when dealing with a Spanish estate agent.

When it comes to choosing an estate agent, it is always a good idea to seek out a personal recommendation from friends or family who have been through the process – or even from your lawyer.

Do not expect much by way of fancy printed sales particulars or information about the property on the agent's website. Being an estate agent in Spain is a pretty hands-on experience and, if any description of the property has been prepared, it is likely to be no more than some photographs and a few words of general information.

It is likely that the estate agent or an employee of the estate agent will accompany you when you visit the property.

Note that it is not usually necessary to find the estate agent who has the 'mandate' - the authority from the owner to sell a particular property. Agents cooperate and often know all of the properties for sale in a particular area and so, even if they may not have the property you want on their books, they are likely to be able to introduce you to the estate agent who does and to hold your hand through the process. They will usually be rewarded by receiving a percentage of the official selling agent's fee but it is worth checking, if you are going to use an agent in this way, that you will not be expected to pay anything extra.

Once you have found a property that you would like to buy you will almost certainly be asked to sign some form of reservation or preliminary/promissory purchase contract (contrato preliminar or contrato privado. It is far better to sign nothing until it has been checked by your lawyer, if you have seen one before finding a house. This can, usually, be done quickly.

However, it is very common for Spanish estate agents to produce these simple contracts themselves. This is particularly so in the case of reservation contracts. Reservation contracts are simply contracts under which the agent agrees (with the buyer's consent) to take the property off the market for a certain period of time so that you can take the steps needed to check that everything is in order and then sign a contrato preliminar or contrato privado. The contract should contain little more than the details of the buyer and seller, the description of the property to be sold, the price agreed for the property and how long it will be taken off the market for you to complete your enquiries and sign a proper purchase contract. See the sample reservation contract.

Sometimes an agent may suggest that he prepares that contrato preliminar or contrato privado. These are (or should be) much more complicated contracts. See the sample. The exact clauses in them can make a huge difference to your rights and obligations. So even if the agent prepares a first draft of this contract, you should not sign it until you have taken proper legal advice and your lawyer makes sure that it contains everything needed to protect your position.

How do I find a lawyer?

Ideally, seek recommendations from people who live/have bought property in the area. Such lawyers will usually be experienced in dealing with people from your country and will often speak your language.

Find somebody who you are comfortable working with, who speaks your language and has experience of dealing with foreigners buying property in Spain. In busy places such as the Costa del Sol almost all lawyers will have some experience in this field but some will be much more focused on it than others and it does help if you use a specialist - a lawyer who spends much or most of his time dealing with property transactions rather than doing criminal cases in the morning, divorces in the afternoon and property work in the evening.

Always make sure that you agree, in advance, a fee with the lawyer. This will, typically, be an all-inclusive 1% of the price of the property, with a minimum of €1,500; plus any direct expenses that they incur on your behalf.

What if I buy directly from a private seller or developer?

Some people buy property directly from a seller or developer, without the intervention of an estate agent. Large numbers of private individuals (around 25-30%) sell their property themselves – advertising on the internet, by signs on the property and (sometimes) in specialist press. Buyers are often attracted by the idea that they will save some money because there is no estate agent's fee involved. As estate agents fees can be anything from 3-10% of the price of the property, this saving could be substantial.

However, in reality, things seldom work out this way. The seller often asks the same price for the property as he would if offering it via an estate agent - with the obvious intention of keeping the benefit for himself. In addition, some properties offered directly by sellers can be properties beset by various legal or technical difficulties that have previously made the property impossible to sell via an agent. Generally, we do not think that buying directly from a private seller is a good idea unless it is somebody you already know and trust.

If you do decide to take this route, you still need to take all the same precautions. In fact, you probably need to be even more careful as you will not have the professional estate agent to make sure the rules are being followed.

Some developers also sell property without using an estate agent. Instead, they market it through their own in-house sales team. There are now fewer of these than there were in the boom years of the early 2000s but there is absolutely nothing wrong with developers selling property in this way. However, you should not assume that just because the property is being sold by a well-known developer, everything is going to be in order.

Even some major developers will sell property that is illegally constructed or not safe to buy. Sometimes they will not even be aware that this is the case.

If you're buying directly from a private seller or developer, it is absolutely essential that you use the services of a good lawyer.

Are there other sources of property on the Costa del Sol?

Yes. There are a growing number of ways in which you can find your home.

Following the recession of the late 2000s, many banks have repossessed properties to sell. Such properties sound attractive, especially if the bank will grant you a mortgage to buy the property. However, remember that many of the properties are in undesirable locations and that many will have been neglected pending repossession. Finding a property through a bank can also be more time-consuming than when you're using an estate agent as the estate agent will be able to help you filter the large number of areas and properties down to a few that you might really want to buy.

In fact, more and more banks have realised that selling property requires skills outside their area of expertise and so put any repossessions in the hands of local estate agents.

Some properties are sold by auction. It is rare for a seller to sell via auction voluntarily but some properties are being sold upon the orders of the Spanish courts. Once again, the idea of buying property at auction can be superficially attractive but - unless you speak fluent Spanish and have the time to view lots of properties and attend lots of auctions - this approach is not, generally, a good idea for a foreign buyer.

What is the role of the Notary (Notario)?

In Spain the Notary plays a major part in the process of buying and selling real estate. He or she also plays a large role in lots of other legal transactions in Spain - including dealing with wills and inheritances and authenticating all sorts of important documents. See our Guide to Notaries on the Costa del Sol.

In your country, the Notary may play little or no part of the process of transferring the ownership of property and so you will need to adjust to the situation in Spain.

The Notary is an official who is there to put on the public record the fact that the formal documents recording the sale/purchase have been signed in his or her presence and understood by the parties concerned. Their position is a slightly strange one in that although they are in private practise and makes their living from the fees that they charge, they are an official part of the apparatus of the state.

The Notary will have started their professional career by taking a law degree but then, instead of becoming a practising lawyer, he or she will have continued with her studies and taken some special Notarial exams.

The Notary also carries out a number of checks as to the status of the property and/or the buyer and seller. The Notary may act for both buyer and seller.

Many Notaries are skilled and diligent. They take the trouble to explain the documents that you are signing. Some will speak your language to a greater or lesser extent.

The Notary has a duty to act fairly when dealing with both parties to the transaction.

However, it is important to bear in mind that the Notary is not there to give you legal advice or to promote your interests at the expense of the other party. He or she is much more a referee to make sure the process is followed properly than a lawyer acting on your behalf.

If you come from a country (such as France) where the Notary is required to make extensive enquiries about both the legal title to a house and the physical condition of it you should note that this is not the case in Spain. There are various checks that the Notary is required to undertake but they are very limited in scope.

The Notary will usually know nothing about the law in your own country. Therefore, a Notary is no substitute for your own independent legal advice.

Can I get a mortgage in Spain?

Mortgages may, depending on your circumstances, be available in Spain.

Some people take a mortgage on the Costa del Sol – even if they don't really need the money – because it can be tax-efficient to do so. The interest charges and, in some cases, part of the capital repayment can be set off against any income you generate from the property and so reduce your tax bill.

People also take mortgages in Spain because the bank lending you the money will carry out its own checks to make sure the property is safe to lend on, so ensuring that there is a second pair of eyes checking the safety of the purchase. Remember, though, that they are only looking to see whether the property is good security for their loan. They are not interested in many of the other things that would be important to you and your future enjoyment of the property. In short, just because you're taking a mortgage it does not mean that you can save a bit of money by not taking your own independent legal advice!

Should I arrange a structural survey/inspection for a property on the Costa del Sol?

Wherever you buy a property, it is often sensible to have the property surveyed (USA: inspected). We strongly recommend a survey, especially in the case of older or unusual properties - or properties that have been extended or modified. Whilst surveys are still not in wide-spread use when people are buying properties in Spain, this does not mean that it is not a good idea to have one.

It's also worth noting that it can be complicated to carry out a survey on an apartment, where the main walls and services can belong to the group of owners rather than to one individual apartment. A local surveyor or your lawyer will be able to tell you whether a survey would be realistic in your particular case.

Structural surveys typically take between 7-10 days. The time and cost does vary, but on the Costa del Sol a survey of a typical three-bedroom house will usually cost around €1,200.

Strangely, surveys are relatively uncommon in the case of locals buying local property. As a result, it can – especially in a sellers' marketlightbulb image - hover here for more information on this subject lightbulb Sellers' Market
When the property market is skewed in favour of the seller - i.e. when demand is higher than supply. This means it is easier to sell a property, and to do so at a higher price.
– be difficult to persuade the seller to wait for a couple of weeks before you sign some form of contract.

Where possible, if you want a survey, the best way is to persuade the seller to include a clause “subject to satisfactory outcome of the survey” in the Reservation or Preliminary Purchase Contract (see below). However, many sellers are reluctant to do this because of the complexity of specifying what is a satisfactory report (meaning that the contract must go ahead) and what is an unsatisfactory report (giving you the right to cancel the contract).

What is the process of buying a property in Spain?

Preparation

villaGoing to look at houses should be among the last stages in the exercise, not the first. The process of buying a property – whether it is for your personal use or for investment purposes – should start with thorough preparation.

This will save a lot of wasted time and money.

It is a good idea (though quite rare) to go to your lawyer before you go to look at any property. That way they will be able to take you through all of the key issues (such as those listed below) calmly and clearly, before you get involved in the rush and pressure always associated with buying a property anywhere in the world.

Preparation checklist

Who should own the property?

Getting this question of ownership wrong is probably both the most common and the most expensive mistake people make when buying property overseas. There are many people who could be made the legal owner of the property or, possibly, the shareholders in the company that owns the property. The best choice is often not obvious.

Making the wrong decision can cost you lots of money in totally unnecessary fees and taxes – during your lifetime and on your death. Ask your lawyer for advice. It will be time and money very well spent.

Some local lawyers will be unable to help you make this decision as it involves an understanding of both the local and your own legal, tax and inheritance systems. In this case there will be lawyers in your own country who will be able to help.

So, what are my options?

There are many ways to purchase a property in Spain. These include:

Each of these methods has advantages and disadvantages. The one that will be best for you will depend entirely on your individual circumstances.

The choice is NOT obvious. Just because a husband and wife are buying the property does NOT mean that the best choice is always to put it in both of your names. Just because your best friends or your neighbours bought their property in their joint names does NOT mean that that will be the right solution for you.

A lawyer can advise the most advantageous method for you.

What kind of contracts are there in Spain?

The ‘Reservation Contract’ (Contrato Preliminar)

A Reservation Contract (see sample contract) is usually short. Under this contract you pay a small amount of money (typically, in the Costa del Sol, €6,000) to take the property off the market for a short time (typically 2-4 weeks) During this period your lawyer can carry out their checks to make sure that the house is safe to buy.

If everything is OK you then sign a Preliminary/Promissory purchase contract (the Contrato Privado) committing yourself to the purchase, and pay a full deposit. In the case of a resale property this is typically 10%. The form of payment for properties under construction is different. There are legal differences between these various types of contract but, for the purposes of this guide, they don't matter very much. Your lawyer will advise you in more detail if they are relevant in your case.

Ideally, the reservation contract should be written in Spanish. with a translation into your language or for the contract to be in a two-column format (one column in Spanish and the other in your language).

In this case, the legally binding version of the contract will be the version in Spanish.

Although having the reservation contract written in Spanish is desirable, in many cases they will be written in only your language. This will be particularly the case if you are dealing with an estate agent of your nationality or who focuses on the international market. Although this is not as good as having the two-language version of the contract it is probably acceptable because the contract is usually very quickly followed by a more formal and detailed contract.

If your lawyer finds any problems before you sign the Preliminary/Promissory contract and you do not want to go ahead, you stop the process. Usually, if you stop the process due to legal problems you will be entitled to the refund of your small initial deposit. If you simply change your mind you will usually lose that deposit.

An Offer to Buy (offerta)

This is an alternative to the reservation contract. An Offer to Buy is a formal written offer to buy a property.

The difference between the Offer to Buy and the Reservation Contract is that by making a formal written offer to buy you are committing yourself to the purchase if the seller accepts your offer. You cannot - as is the case with a reservation contract - simply decide not to go ahead and walk away losing only the small reservation deposit that you have paid.

Your lawyers or a qualified estate agent should, ideally, draft it.

If there are any conditions to your offer you will need to make sure it contains the clauses needed to protect you. There are lots of possible protective clauses – for example, a clause saying that the contract will be cancelled if you do not receive a mortgage offer within a certain number of days; or if your survey shows defects in the property; or if the seller does not produce adequate proof of ownership and legal title.

The Offer to Buy will contain a closing date by which time the buyer must have accepted your offer. If she does not do so, the offer automatically lapses and the document is no longer of any legal effect.

However, it is very important to note that, if the vendor does accept your offer, it creates for both of you a legally binding obligation to go ahead with the sale and purchase.

Usually, in Spain, the Offer to Buy is followed by a formal contract of sale. Although the acceptance of the offer is legally binding, a fuller version of the contract is signed in the same form as any other Preliminary/Promissory contract (see below).

If you do not go ahead with the purchase you will almost certainly lose any deposit and may face further action from the seller.

‘Preliminary/Promissory Purchase Contract' ( Contrato Privado)

Sometimes you will sign the Preliminary Purchase Contract after you have signed a reservation contract or you have made an Offer to Buy which has been accepted by the seller. On other occasions you will dispense with those initial steps and proceed directly to the signing of the Contrato Privado.

The Contrato Privado (literally, 'Private Contract') is so called not because it is private in the sense of being secret but to distinguish it from the formal public contract of sale which you will later sign to finalise the transfer of the ownership of the property into your name.

These contracts are called different things by different people but the essence of a Contrato Privado - whatever it's being called in your case - is that it sets out all of the terms of your agreement with the seller.

There are legal differences between these various types of contract but, for the purposes of this guide, they don't matter very much. Your lawyer will advise you in more detail if they are relevant in your case.

Signing a Contrato Privado creates a full, legally binding obligation on your part to buy the property for the price stated and on the seller's part to sell the property as described in the contract.

If either of you do not live up to your obligations you will be liable to pay full compensation for the loss suffered by the other party.

You should, therefore, only sign a Contrato Privado once you are sure that everything about the property is in order.

If everything is OK you sign the the Contrato Privado committing yourself to the purchase, and pay a full deposit. In the case of a resale property this is typically 10%. If you've already paid a small reservation deposit, the amount you've paid will be deducted from the full 10%. The form of payment for properties under construction is different.

These contracts must, for purely practical reasons, be in Spanish. This is because, if there is a dispute about the contract, it will have to be dealt with by the Spanish courts and to have them interpret a contract that is not in Spanish is going to be risky and maybe impossible. However, it is common for you to be supplied with a translation into your language or for the contract to be in a two-column format (one column in Spanish and the other in your language). Different agents and lawyers support different languages. You should, at least, be able to obtain a version of the contract in English, French, Italian and Russian.

The legally binding version of the contract will be the version in Spanish.

If your lawyer finds any problems before you sign the Contrato Privado and you do not want to go ahead, you stop the process. See above for the consequences of stopping the process if you've already signed a Reservation Contract.

These - Reservation Contracts, Offers to Buy and Private Contracts - are all types of Preliminary contracts but it is not legally necessary to enter into any Preliminary contract before buying a house in Spain. You can proceed directly to the formal public contract of sale and purchase (Escritura de Compraventa or just Escritura). See below.

Which contract should I choose?

Whichever type of document you are signing, it is a good idea to get your lawyer to have a look at it before you sign. They are not always what they seem. It is all too often that a contract proudly headed 'Reservation Contract' contains all of the words needed to make it an unlimited agreement to buy the property.

It is sensible to start your purchase with a Reservation Contract or an Offer to Buy. It is the safest way.

Often, however, people come under pressure to sign a fully binding contract (Preliminary/Promissory Purchase Contract or Private Contract) at this very early stage – before anything has been checked. Try to resist this.

If there is truly no alternative, always get a lawyer to check the Preliminary/Promissory Purchase contract before you sign it. Consider signing it subject to conditions (USA: contingencies) stating that if various things do not happen (e.g. if you don't get a mortgage or permission to build a swimming pool) the contract will be cancelled and you will be entitled to your money back.

What should I do before I sign the Preliminary/Promissory Purchase Contract?

A lawyer should carry out, or arrange, a variety of checks on the property. This would usually include:

If you want a survey (which is recommended) and you've not already obtained one, this will be the time to do it.

This will also be the time to obtain an approval, in principle, of a mortgage.

If you wish to make alterations to the property (e.g., to put in a swimming pool) this will be the time to check that the authorities are likely to agree to it.

If you wish to use the property for any special purpose - for example, as business premises or as tourist accommodation - you should make sure that this will be permitted.

Once all of the steps appropriate in your case have been taken, your lawyer should produce a written report setting out their findings, their general observations and their opinion as to whether they think that it is, from a legal point of view, safe to proceed with the purchase.

If you decide to go ahead, you then sign the Preliminary/Promissory Purchase Contract and pay over a deposit, typically in the case of a resale property 10% of the price. For property bought off-plan (not yet built) the deposit (often 30% of the price) is usually followed by a series of stage payments as the building work progresses.

What do I do after I have signed a Preliminary/Promissory Purchase Contract?

In many cases your lawyer will prepare a power of attorney authorising someone on the Costa del Sol to sign the Final Contract of Sale/Formal Contract of Sale/Title Deed (Escritura) on your behalf. They may need to apply for a tax number (Número de Identidad de Extranjero or NIE) for you, to open a bank account and/or to obtain other documentation needed to buy a property in Spain.

If you are taking out a mortgage in Spain, your lawyer may need to liaise with your lender. They will certainly have to liaise with your Seller and, when everything is ready, they will arrange for the Notary to prepare for the signing of the Final Contract of Sale/Formal Contract of Sale/Title Deed (Escritura).

Is there a cooling off period in Spain?

There is not a 'cooling off' period when you buy a property in Spain. Once you have signed the Preliminary/Promissory Purchase Contract you are committed and you can only 'escape' from the contract for good legal reasons – those stated in the contract or laid down by the general law. It is, therefore, VITAL that you are entirely happy with the terms of the purchase before you sign any contract.

Signing the Formal Contract of Sale (Escritura) without any earlier document

Some people omit all their earlier stages and proceed directly to the signing of the Formal Contract of Sale.

This is usually when the sale is going to be finalised quickly or when the property is of low value.

If you're going to do this it is important that you and the seller really have agreed all the details so that you don't get into an argument when it comes to the Notary preparing the formal contract.

Buying a house in this way can save you time but it leaves you very exposed; the seller can change their mind or move the goalposts at any point. It can then become a very expensive saving!

Generally, we recommend that you should sign a Private Contract (Contrato Privado) before you sign the Formal Contract of Sale (Escritura).

What should I do before I sign the Formal Contract of Sale?

The Notary will carry out, or arrange, a very limited range of checks on the property.

She will also require formal proof of your identity and other personal details. These are not only needed to prepare the various contracts but also to comply with international anti-money laundering regulations.

The Notary will then also prepare the Formal Contract of Sale document (Escritura) for signature by the seller and the buyer. The word Escritura means a document in writing.

Whilst all of this is taking place, you and your lawyer will make arrangements with your bank for any mortgage funding to be made available on the day the formal contract for sale is signed. In order to do this, a deed of mortgage will have to be agreed.

You do not need to be present in person for the purchase of a property, even if it involves a mortgage. If you are not going to be present, you and your lawyer will need to prepare the Power of Attorney, which allows your lawyer to sign on your behalf. See below.

Once all these things have been done and you and your lawyer are happy that everything is in order, you (or your lawyer) can sign the Formal Contract of Sale (Escritura).

Signing the Formal Contract/Deed of Sale (Escritura)

The Formal Contract/Deed of Sale (Escritura) is the document transferring ownership to you. This must, by law, be prepared by and signed in front of a Notary, who must carry out various tasks before doing so. When everybody is ready to proceed, the Final Contract of Sale/Title Deed is signed.

You usually pay over the price of the property, the Notaries and other fees when you sign the Formal Contract of Sale/Title Deed (Escritura).

Once the Escritura is signed, your lawyers will pay all of the necessary taxes arising from the purchase. The Notary will then make sure the change of ownership is registered at the Land Registry (Registro de la Propiedad). Depending on the exact circumstances of your purchase, there may also be a few other steps that need to be taken at this stage.

Registration of title

Once the Final Contract/Deed of Sale has been signed your lawyers will arrange for your title to be registered at the Land Registry (Registro de la Propiedad). This is the main protection of your right of ownership and must be done without delay in order to safeguard your position.

How long does it take to buy a property on the Costa del Sol?

The whole process up to the signing of the Final Contract of Sale will (in the case of a resale property with no mortgage) typically take about four weeks, though this can vary enormously. In the case of a property under construction, the pace is usually determined by the speed of construction – typically, perhaps, 18 months.

What else do you need to do when you buy property in Spain?

There are a number of things that you or your lawyer should attend to at the same time that you buy a property:

What are the fees and expenses when buying a property on the Costa del Sol?

The total of the fees and expenses is typically from approx 10.2% - 16.7% of the price paid for the property, depending on price and type of property. See the table below.

The largest component of this is the property tax paid to the Government of Spain.

Your lawyer will calculate the exact amount that is required and collect it from you at the same time that he asks you to send him the price of the property.

The size of the total bill depends upon a number of factors. The most important is the price of the property as both the taxes and the Notaries' fees vary depending on this.

There will be additional fees if you're taking out a mortgage (typically 3-4% of the amount borrowed).

Tax on resale property

A resale property is defined as a property that had a previous owner, as opposed to a property bought directly from the original developer.

For resale dwellings, the transfer tax is calculated as follows:

 Property value Transfer tax rate 
€0 - €400,000 8%
€0 - €400,000 8%
€400,000 - €700,000 9%
€700,000 and above 10%

Tax on new property

A new property is defined as a property that is bought directly from the original developer.

For new dwellings, the transfer tax is 11.5%. This is made up as follows:

 Tax type Tax rate 
IVA lightbulb image - hover here for more information on this subject lightbulb IVA
IVA (Impuesto al Valor Agregado) is the Spanish VAT (Value Added Tax)
10%
Acto Jurídico Documentado lightbulb image - hover here for more information on this subject lightbulb Acto Jurídico Documentado
Acto Jurídico Documentado is Stamp Duty: tax on the title deed and Notarial documents.
1.5%

To compare the fees and taxes between a new and a resale property, we have prepared some examples:

Example 1: property purchase price of €100,000

New property

 Type of expense Percentage of property price 
Taxes 11.5%
Notary & Land Registry 1.9%
Lawyer 1.8%
Additional costs 1.8%
Total costs 16.7%

Resale property

 Type of expense Percentage of property price 
Taxes 8%
Notary & Land Registry 1.9%
Lawyer 1.8%
Additional costs 1.5%
Total costs 13.7%

Example 2: property purchase price of €250,000

New property

 Type of expense Percentage of property price 
Taxes 11.5%
Notary & Land Registry 0.9%
Lawyer 1.2%
Additional costs 0.6%
Total costs 14.2%

Resale property

 Type of expense Percentage of property price 
Taxes 8%
Notary & Land Registry 1.9%
Lawyer 1.2%
Additional costs 0.6%
Total costs 10.7%

Example 3: property purchase price of €400,000

New property

 Type of expense Percentage of property price 
Taxes 11.5%
Notary & Land Registry 0.7%
Lawyer 1.2%
Additional costs 0.3%
Total costs 13.7%

Resale property

 Type of expense Percentage of property price 
Taxes 8%
Notary & Land Registry 0.7%
Lawyer 1.2%
Additional costs 0.3%
Total costs 10.2%

Utilities (water & electricity)

Your lawyer will make the necessary arrangements to change the utilities for the house - such as water and electricity - into your name and set up direct debits for their payment through your Spanish bank account.

In order to avoid problems with the supply companies or the Town Hall, it is important that, from the moment of the handover of the property, you hold enough funds in your Spanish bank account - as the relevant companies will not make second attempts to charge you.

As a general note, it is always important that you have money in your bank account in Spain. The Spanish treat payments that 'bounce' very seriously and if you don't have enough funds it can create huge ongoing problems with the electricity company etc concerned and with your own bank.

Special types of property

Building your own property

Not surprisingly, there are lots of requirements if you want to build your own property on a piece of land that you are buying.

They are outside the scope of this guide. To find out more, talk to your lawyer and consult an architect.

Ruins

Lots of people on the Costa del Sol, especially as you go inland, go down the route of restoring a ruin - usually, in Andalucia, an old farm building. It is desirable for some as it can produce a unique and charming property.

However, restoring a ruin is nearly as complicated (and expensive) as building a new property. In fact, in many cases, it can be more complicated and expensive. The main reason is that, after a certain period of time (which seems to be pretty random) a ruin can be reclassified with the planning authorities. In effect, it ceases to be a house or barn and becomes just a pile of stones.

Your lawyer will be able to find out whether this has happened in your case.

If it has, you will need to apply to rebuild the ruin as if it was a brand new building (see above).

This often leads to the problem that the size of the plot being sold to you (with the ruin on it) is smaller than the minimum size upon which you are permitted (these days) to construct in rural areas. Your lawyer will tell you which applies in your case. This can make it impossible to obtain a building permit to rebuild a property that has, perhaps, been there for hundreds of years.

The second major complexity when restoring a ruin is that some people will tell you that this is a great opportunity and that you can simply extend it (unofficially) whilst you restore it. In other words, your 50m2 ruin magically becomes an 80m2 house. Whilst you used to be able to get away with this, this is no longer the case. If you wish to extend the ruin, you will need to go through the necessary planning application and, once again, you may be limited by the size of the plot.

Commercial property

If you're thinking of setting up a bed and breakfast, bar, hotel, shop, warehouse or other commercial property in Spain you will - without any doubt at all - need expert advice.

The individual requirements vary depending on what you're trying to do, but they can often be very obscure and, just as importantly, it can take a long time to obtain the permissions that you need.

See our Guide to Buying Commercial Property on the Costa del Sol for more information.

Agricultural property

Special rules apply to the purchase of farmland or buildings in rural areas. The position will be checked by your lawyer and the Notary but it's important that you understand the basic concept behind them.

What are the main dangers when buying property on the Costa del Sol?

The important thing to understand is that there is no simple list of dangers that you need to check. For different people and different types of property or for people who are buying for different purposes the dangers will be different.

However, there are some dangers that arise in every country and every transaction. For example:

In addition, in Spain there are other issues that often need special attention. These include:

There will usually be other issues that arise in the special circumstances of any particular transaction.

Do I have to be in the Costa del Sol to complete the transaction?

As we have already said, the Seller and the Purchaser do not need to attend in person to sign the Final Purchase Contract/Deed of Sale as long as arrangements are made for a Power of Attorney to be granted, enabling another person (your lawyer) to attend on their behalf. See our Guide to Powers of Attorney on the Costa del Sol.

How do I get the money to Spain?

There are important decisions to make when obtaining the currency to buy your property.

Should you buy it now or later? Should you take an option contract to make sure you can buy in a certain rate in the future; or should you “forward buy” (committing yourself to the purchase at a set rate but paid for largely on delivery)? Who should you use to transfer the funds?

Getting all of this right can save you a lot of money! See our Guide to Foreign Exchange (FX) for more information.

What taxes will I have to pay as the owner of a property on the Costa del Sol?

As a non-resident of Spain you will have to pay certain property taxes on the Costa del Sol and you will also have to declare any income you generate in Spain and any capital gains you create in Spain - both in Spain and in the country where you are tax resident. In most cases, there will be a treaty between your country and Spain (a so-called 'Double Taxation Treaty') to avoid you having to pay the same taxes both in your country and in Spain.

What other ongoing obligations will I have in Spain?

These will vary depending upon who becomes the legal owner of the property. Your lawyer should advise you on these.

You will need to insure your property and its contents.

If you are thinking of letting (renting out) your property, see our Guide to Letting (Renting Out) Your Property on the Costa del Sol.

What happens to my property when I die?

This is a complex subject. Please read our Guide to Inheritance on the Costa del Sol.

Expats' Tips

Have you got experience buying a property in Spain? Tell us about it by emailing office@guides.global.

Other guides of interest

 Description Link 
Buying a New Property on the Costa del Sol
This guide is about buying a new house or apartment in Spain. By a 'new' property, we mean one that has already been finished but which has not yet been lived in.
Buying a Resale Property in the Costa del Sol
Buying a Commercial Property on the Costa del Sol
This guide deals with the extra things that you will need to take into account when buying commercial property in Spain. By commercial property, we mean things such as offices, shops, bars, restaurants and warehouses.
Buying a Commercial Property in the Costa del Sol
Buying an Off-Plan Property on the Costa del Sol
This guide is about buying off-plan property. By 'off-plan', we mean any property which you buy before it has been physically completed and where you pay more than 10% of the price before you take delivery of the keys and legal title.
Buying an Off-Plan Property in the Costa del Sol
Buying an Investment Property on the Costa del Sol
This guide is about buying property on the Costa del Sol for investment. It looks at different methods of buying property for investment, the risks involved and some factors to consider when deciding whether and what to buy.
Buying an investment Property in the Costa del Sol

Readers' Comments

 

Further information?

We hope you have found this guide useful. If you need any further help, please contact us.

Manzanares Abogados S.L.

15 June 2016


 

This guide was co-authored by John Howell (Email: John.Howell@Guides.Global or John@jhco.org. Web: www.jhco.org or www.Guides.Global)

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