So you have decided to buy a property in Spain, have visited numerous possibilities and have finally settled on what is hopefully your ideal home. Your next step is to appoint an independent lawyer who is experienced in Spanish property law and has a good knowledge of the area and of your language if you do not speak Spanish. In order to buy a property in Spain you will need a NIE number (foreigner´s identity number). Your lawyer can arrange your NIE residency application and Spanish bank account as appropriate.

If the property is a resale the lawyer will check that the property belongs to the seller and that it is all legal. An important part of the lawyer´s responsibility is to check the seller is free of debt because under Spanish law any debts will pass to the new owner. For new construction the same checks will be made on the land along with a background and financial check on the builder.

When everything has been checked over, a contract (opción de compra) will then be signed between the buyer and the seller and a non refundable 10% deposit paid. If the seller pulls out he will have to pay double the amount of the deposit. This is to stop the practice of gazumping, which fortunately does not normally happen in Spain. If you cannot be present to sign the contract or indeed the final completion contract in person, you can grant your lawyer power of attorney (poder) so that he can complete on your behalf.

The contract will state the dates for payment of the balance due which needs to be carefully observed if you do not want to lose your right to the property or indeed your deposit. On completion day both parties (or their representatives) will appear before the Notary, a government official responsible for the execution of public documents. The Notary acts for neither party and does not replace the need for your own lawyer, he spimply witnesses the signing of the transfer deed (Escritura de Compraventa). At this time the balance of the purchase money will be paid to the seller and any remaining purchase tax and fees will be paid. You will then have the keys to your new property and a copy of the title deed (Copia Simple) until the formal deed (escritura) comes to you from the land registry.

Either you or your lawyer should now set up accounts for utility services such as water, electricity and telephone as well as Spanish resident taxes which can be paid through your Spanish bank.

Although property, particularly rural houses in Spain, are generally cheaper than in the UK the cost of buying is higher. The main reason for this is the purchase tax of 7% on all property sales, this is known as IVA and is the Spanish equivalent of VAT. Added to this are land registry fees, legal costs and notary charges which in total add up to around 10% on top of the purchase price. This should be taken into account when working out your budget.

Once purchased, there is an annual tax called the IBI ( "Impuesto sobre Bienes Inmuebles") which has to be paid. This is a municipally levied tax and varies widely from one municipality to another and from one type of property to another. You might for instance, pay as little as 50 € per year for a simple property in a rural area, while a luxury home in an expensive urban neighbourhood might cost as much as 1,500€ to 2,000€ year.

Both residents and non-residents in Spain may now obtain loans and mortgages for properties in Spain. Mortgages from Spanish banks have some of the lowest interest rates in Europe tending to be between 4.5% and 5% and can take anything from 2 to 6 weeks to arrange. Lending is based on the valuation of the property, your residency status, the purpose of buying as well as your income. For urban properties 70% - 80% can be achieved although for ´rustic´ property only 50% is available. Normally the maximum term for a Spanish mortgage is up to 30 years although there are some mortgages available for up to 40 years depending on your age.

The final consideration when you buy your home is inheritance. In Spanish law there is something known as the Law of Obligatory Heirs “Ley de Herederos Forzosos” which means that in the event of death your property may be divided up equally between your partner and children. Inheritance taxes can also be very high. To avoid any unwanted surprises in either case, we therefore recommend you seek professional legal advice from a specialized lawyer.

Eastlake Mallorca Properties

Posted on  04/06/2008

Category: Buying a Property in Mallorca, Spain