• BUYING A PROPERTY IN SPAIN

From our Spanish Lawyer,

Ignacio Barcelona

The purchase of a property in Spain is basically a simple and standardised procedure. However, many problems can occur if any steps are missed or if any details turn out to be incorrect. This is why you should get professional advice by a Spanish Lawyer.

Let´s study the paperwork, proceedings and possible costs involved:

Before you can carry out any financial transactions in Spain you will need a Número de Identificación de Extranjeros - NIE. This is similar to an identity card and will allow you to carry out many tasks in Spain, often substituting for a passport for identification purposes. You will need to present yourself in person at a Comisaría in the first instance, to fill in forms and supply passport-sized passports. The NIE number is normally given to you on the spot and there is usually a 4-6 week wait for the card, which can be picked up by another person if need be.

This is an ident

• A.- PAPERWORK

1.- The sellers title:
The first thing is to check if the seller is the legal owner and to verify whether or not there are any outstanding charges affecting the property, such as mortgages or debts.

There are two essential documents to review:

a) Escritura Pública de Propiedad (Title deed):

This is the basic document which determines the property. It is a public document signed by a Notary Public, and contains all the important details about the property and the owner. It will include the price paid by the owner for the property or the aquisition price, if the property was received by inheritance, donation or another type of aquisition. It also includes the identification of the former owner and a full description of the property. This includes the size, boundaries, water rights, urban rights, number of floors and rooms. It also includes outstanding charges such as mortgages, debts, rights of way (not always registered), etc.

b) Nota Simple del Registro de la Propiedad (Property Registration Certificate):

This is a certificate provided by the Land Registry, containing a summary of all data related to the property, usually the same data as stated in the title deed. This certificate is confirmation that the title deed is fully operative against any other party that could claim any rights in regard to the property. It could happen that the size of the property is different from that stated by the Registry in the title deed. This is important to get right at this stage, as any third party (ie.- banks if finance is needed,) will only accept what the Registry states, not what the title deed says.

2.- Other important documents:

a) IBI receipts: (Impuesto sobre bienes inmuebles.)

These show that the current owner has paid his annual local property tax (Council rates in the UK,) and it states the size and boundaries of the property according to this tax. It also has a description of the property in case of differences with the Registry. Obviously, the Registry information is the more valid, but it can be modified by IBI receipts in cases when the measurements of the property vary by no more than 10% of that stated in the Registry. In rustic properties, it is also very important in verifying the existing irrigation rights, although there are many other ways to prove these rights. It is important to check if this tax has been paid, since debts are against the property, not against the owner.

b) Other local rates:

If the property is urban, you will probably (depending of the City Hall) be liable to pay a subscription towards rubbish collection, drinking water supplies, street lighting and sewerage. Again, it is the property which is liable for unpaid rates.

c) Irrigation rights:

These are very important in rustic properties, since they will determine the value of the property. Irrigation rights should be stated in the title deed and in the Registry, but this is not always so. The most important thing to do is to check the files of the local Irrigation Community, and also what is stated in the IBI. Our advice is to get these rights registered, if possible, and double check that the payments to the Irrigation Community are updated.

d) Building rights:

If the property is urban, the City Hall will provide a certificate of the urban conditions, such as the maximun building surface, maximun number of floors, contributions for public spaces, etc. In many cases, you may find that when you come to restoring an existing house, limitations apply in getting the building license. Or you could find you can build more than you thought possible (ie.- you could built two floors instead of the existing single floor.) Ensure that you are well-briefed when buying a rustic property, as there are many limitations to building these kinds of houses. The first thing to check is the classification of the property, since it could be in a highly protected zone, which will certainly mean that you will not be able to build anything. To get a license to build in a rustic area, you will face a bureaucratic proceeding that can last not less than six months. Usually, the City Hall will give details of the possibilities describing the minimum permitted size of the property and will distinguish irrigated properties from non-irrigated ones. An irrigated property will require less surface area of land to get a building licence. The decision to provide building rights will be taken by the Provincial Urban Commision, and the proceedings start by formally asking the City Hall.

c) Other possible limitations:

It is important to double check if the property is subject to any other limitations, like expropiations proceedings (ie.- a projected new road, new gas pipelines to be laid, electric pylons, etc) Usually you can get this information at the City Hall. It is also very important to check water and electricity facilities, and other urban conditions; and also what rights of way or other obligations (right of view, right of lights, etc) are involved.

• B) PROCEDURE:

Once everything is checked and you are ready to buy the property, you will usually take the following steps:

a) Reserve document:

At times, in order to reserve the purchase and to gain time to check the paperwork, it is necessary to sign this document. Normally the obligation is on the seller, not the buyer, who can resign before a dead-line date stated in the document. It is a simple document that states that the buyer is interested in buying the property and reserves the right to purchase subject to a check of all relevant data. For this purpose, the buyer will give some money as deposit (usually a very small amount). You may lose the deposit if you do not sign before the dead line date. This is not a purchase contract, it is only a reserve for a future purchase, and will lead to the following.

b) Private PurchaseContract:

This is a binding contract between the parties and is usually the one that you will have to sign once you have decided to buy. There are many ways to deal with a property purchase, but the most usual ones contain the following clauses:

i.- Full desciption of the propety. It should include anything that affects the property according to the information obtained from a study of the paperwork; especially any limitations, like mortgages, rights of way, irrigation, urban facilities, etc

ii.- Price and method of payment: Usually you will pay not less than 10% of the total price on the moment of signing this document.

iii.- Non-transfer of possession clause: Usually, the possession of the property will be retained by the seller until the price has been fully paid and the title deed is signed (usually this is done at the same time.)

iv.- Dead-line date for title deed. Stating the final date for paying the remainder of the purchase price, getting the title deed, transferring the possession and the full rights of the property.

v.- Penalty Clause: Usually, if the public purchase document cannot be completed on time because of the buyer, they will lose the money paid up til then. In the case that he is responsible for delay or failure, the seller will be obliged to give back twice the amount paid by the buyer,

vi.- Expenses: Usually the parties will decide who pays all expenses related to the purchase. If nothing is said, according to law, the seller will pay Notary´s fees, and the buyer will pay for the original copy of the new title deed. The rest of the expenses (registry, purchase tax) will be paid by the buyer. Normally the seller will impose that the buyer will pay all expenses.

c) Escritura Pública de Compraventa (Title purchase deed.)

This is the final act and the completion of the purchase. It must be signed at the Notary Public's Office. The Notary will do the final checks regarding the purchase. He will ask the Registry to confirm that the property is as certified, and make sure that the Registry doesl not accept any document related to the property before the registration of the purchase. He will also double check the title deed and IBI information. Both the seller and the buyer will have to be present and sign in front of the Notary Public, unless they have been given a power of attorney to someone to sign on their behalf (usually the lawyers involved)

• C) POSSIBLE COSTS:
  
  a) Lawyer´s fees: The freedom of fees is the main rule for Lawyers´fees. However, if the purchase paperwork is not specially complex, 1% of the total price, with a minimum of 1.200 €, could be a reference.

b) Notary Public´s fees: depending of the price and complexity, usually it will be between 350 € and 700 €.

c) Purchase Tax (Impuesto de Transmisiones Patrimoniales- ITP): Is 7% of the declared price. Be aware that if you are less than 30 years old, you are Spanish resident and the new house is going to be your permanent adress, you could save 3,5% of this tax.

d) Property registration: Usually, but depending on the price and complexity, between 50 and 700 €.