Once you've decided to buy a property with Zahara Villas, there are some legal requirements you should be aware of.
Acquiring real estate in Spain involves certain legal obligations.
GETTING THE N.I.E. [Foreigner Identification Number]
The N.I.E. is the Foreigner Identification Number for tax purposes, necessary to engage in any economic activity in Spain. Its issuance takes between 1 day and 2 weeks, depending on the time of year it's processed, and it's essential to be subsequently registered with the Tax Agency using form 036.
The Property Price and Additional Costs
Once you've chosen the property you want to acquire, ZAHARA VILLAS performs an initial check of the legal situation and any potential encumbrances on the property. In many cases, we recommend due diligence (legal audit) to gather key details about the property and, most importantly, to assess its legality.
The purchase of properties in rural areas often involves constructions without municipal licenses, which requires a detailed analysis of their legality or possible legalization.
Additionally, we examine the documentation required from the seller to complete the sale with the execution of the public deed of sale. In parallel, we investigate the existence of encumbrances or liens on the property.
We recommend to our clients, prior to signing any private contract and, especially, before making any payments, to entrust a law firm to conduct this study, as it may lead to the conclusion that the purchase is not advisable.
In Spain, it's not mandatory to have a public deed (formalization before a Notary) to acquire a property; however, it's necessary for registration in the Property Registry. And, as we'll explain later, registration in the Property Registry is of utmost importance, although it's optional.
Once the seller and buyer agree on the price, payment conditions, and other agreements, a purchase option contract or a private purchase contract with deferred payment is signed.
If both parties agree, and the buyer already has the necessary financing, the deed of sale can be executed directly before the Notary chosen by the buyer. In most cases, however, a purchase option contract is signed, and in a minority of cases, a private purchase contract with deferred payment is used.
The purchase option contract is a private and binding agreement for the seller. The seller commits to selling the property to the buyer. In this contract, a premium of 10% of the sale price is usually paid as an option fee, although the percentage or amount of the option fee can be freely negotiated by the parties, depending on the temporary reservation established.
This option fee can be paid directly to the seller or deposited in the bank account of a third party, which is often the account of the law firm handling the sale or the account of the real estate agency that facilitated the transaction. The buyer is given a period to exercise the option, typically between 1 and 3 months. Exercising the option means that the buyer notifies the seller of their intention to buy and execute the public deed of sale, scheduling a day and time at the Notary office chosen by the buyer to sign the deed of sale.
The consequences of contract non-compliance are stipulated in the option contract, i.e., if the seller or buyer fails to appear before the Notary to execute the public deed of sale. If the buyer doesn't show up, it's typically agreed that the option fee will be retained by the seller, and the contract will be terminated.
If the seller fails to comply, the buyer can choose between demanding that the seller execute the public deed of sale or refunding the option fee received or deposited, plus an equal amount.
This purchase option contract doesn't transfer ownership; it grants the buyer the exclusive right to buy, respecting the established conditions.
In this type of contract, the purchase is agreed, but payment and execution of the deed are postponed to a future date. It's common for this to occur when the buyer needs time to arrange financing. This contract is less binding than the purchase option contract, as non-compliance doesn't usually lead to payment of an option fee, but rather, it can result in a breach of contract penalty, the terms of which are freely agreed upon by the parties. It's typical for the amount of the breach of contract penalty to be higher than that of the option fee.
Once the purchase option is exercised, or the conditions of the private purchase contract with deferred payment are met, the seller and buyer will meet before a Notary to execute the public deed of sale. It's essential to provide all the necessary documents to the Notary. From this moment on, the buyer is the new owner of the property, and the property should be registered in the Property Registry.
DOCUMENTS TO BE SUBMITTED TO THE NOTARY:
The Notary will review the documents and ensure that all the necessary legal requirements are met before proceeding with the sale. After the sale, the Notary will notify the Property Registry so that the property can be officially transferred to the buyer's name. The Property Registry will then issue a Property Registry Certificate in the name of the new owner.
Acquiring a property in Spain involves several taxes and fees that need to be considered:
4.1. VAT (Value Added Tax) or ITP (Property Transfer Tax):
The tax applied depends on whether the property is new or used. New properties are subject to VAT (currently 10%), while used properties are subject to the Property Transfer Tax (ITP), which varies depending on the autonomous community in which the property is located. It's typically between 6% and 10%.
4.2. Notary and Property Registry Fees:
The fees associated with the Notary and Property Registry are typically paid by the buyer. These fees are based on the purchase price and vary depending on the Notary and Property Registry's tariffs.
4.3. Legal and Advisory Fees:
Hiring a lawyer or legal advisor is highly recommended, especially for non-resident buyers. Legal fees can vary, but they are usually around 1% of the purchase price. An advisor may assist in various steps of the process, including due diligence, contract review, and tax calculation.
4.4. Stamp Duty:
In some cases, a Stamp Duty may be applicable. It depends on the specific circumstances of the property and the region in which it's located.
4.5. Municipal Capital Gain Tax (Plusvalía Municipal):
This is a local tax calculated based on the increase in the property's value since the last transfer. The rate varies depending on the municipality and the time of ownership.
4.6. Non-Resident Income Tax:
If you are a non-resident in Spain, you may be subject to Non-Resident Income Tax on the income derived from the property, such as rental income or capital gains on its sale.
It's essential to consult a tax advisor to determine your specific tax obligations and ensure compliance.
4.7. Community Fees:
If the property is part of a community of owners (common in apartment buildings or developments with shared facilities), you will be required to pay community fees. These fees cover the maintenance and upkeep of shared areas and services.
After acquiring the property and ensuring it's legally registered in your name, you'll need to handle several post-sale procedures:
Changing Ownership Records:
You need to ensure that the property's ownership records are updated in all relevant authorities, including the Property Registry, tax authorities, and the community of owners, if applicable.
Continuing Tax Obligations:
As the property owner, you'll have ongoing tax obligations, including property taxes (IBI), income tax, and any other applicable taxes.
Property Management:
If you don't plan to reside in the property year-round or intend to use it for rental income, you may want to consider property management services to handle rentals, maintenance, and other property-related tasks.
Understanding Spanish Inheritance Laws:
It's essential to understand the inheritance laws in Spain and how they may affect your property. Seeking legal advice on estate planning can be beneficial.
Local Regulations and Fees:
Stay informed about local regulations, property fees, and community rules, especially if the property is part of a community of owners. Non-compliance can result in penalties and disputes.
To ensure a smooth and legally sound property purchase in Spain, it's highly recommended to engage a legal professional who specializes in real estate transactions in the country. They can guide you through the process, help you understand your specific obligations, and ensure all necessary paperwork and payments are in order.
Disclaimer: This guide is for informational purposes only and should not be considered legal or financial advice. Real estate transactions in Spain can be complex and subject to change, so it's important to consult with a qualified legal professional and financial advisor to navigate the process successfully.
Purchasing property in Spain can be an exciting and rewarding endeavor, whether it's for personal use, rental income, or investment purposes. However, due to the legal and financial complexities involved, it's crucial to approach the process with careful planning and the guidance of experienced professionals. By understanding the steps involved in acquiring property in Spain and the associated taxes and fees, you can navigate the process more confidently and enjoy your property in this beautiful country.
If you are considering a property purchase in Spain, it's recommended to:
By following these steps and consulting with professionals, you can enjoy a successful and legally sound property acquisition in Spain.
If you have any questions or need further clarification on any aspect of purchasing property in Spain, don't hesitate to reach out to the appropriate professionals who can provide guidance tailored to your situation.
Please note that property laws and regulations may change over time, and the information provided here is based on the legal framework as of September 2021. Always verify the most current requirements and procedures when considering a property purchase in Spain.
