GUIDE TO BUYING PROPERTY IN SPAIN
Please note the following is just a guide and legal advice should be sought when buying property in Spain
Updated 27th January 2021 - *Brexit will complicate the sale of homes to British citizens in some areas of the Vega Baja, due to a pre-constitution law that obliges non-EU foreigners to apply for a permit from the Ministry of Defence to acquire real estate in areas classified as of strategic interest for national defence.
According to the current "Regulation of areas and facilities of interest to National Defence" - Decree 689 of 10 February 1978, which develops the 1975 law - when a natural or legal person, a national of a non-Member State of the European Union, purchases a property located near a restricted access area, thye must apply for a military authorization by instance addressed to the Ministry of Defence and prior to the granting or recording of the deed. This obligation occurs in the province of Alicante for homes located in the areas mentioned above.
The buyer must provide the same documentation that was required 42 years ago, certificates that in some cases require great bureaucracy, and and can take months for the corresponding army department to grant permission. Anyone that could be affected by this should get legal advice to get assistance in processing this application, which usually takes four to six months to grant.
The British account for about 80% of transactions in the affected areas, so, based on purchases made in 2019, the affected homes would exceed 800 in the municipalities of Torrevieja, Orihuela, Pilar de la Horadada and San Miguel de Salinas.
The application for the military clearance needs to be submitted by Post to the Ministry of Defense. Apart from the application form, the required documents include notarised copies of identification documents, a certificate of criminal record from the applicant’s Country of residence, sworn translations and architect plans of the property and its location.
Promoters have been calling for years to the various governments to eliminate this obligation that is governed by a Decree approved prior to the adoption of the text of the Spanish Constitution, or, if not, propose that existing alternatives such as positive silence or responsible declaration be applied. For as "there are more up-to-date ways to get the data that is requested and you would have much more complete and useful information than the one you request," "The rules on money laundering to be met by financial institutions or public fedariums are examples of data that would be more than sufficient and current to consider authorizing these purchases of housing and would involve simplifying processing processes and therefore attracting wealth to the province of Alicante," says provia's secretary general Jesualdo Ros.*
It is important to know that all those UK citizens who already own a home in this area must apply for the said permit if they wish to declare any extension to the property, either with a Town Hall license or with an architect’s certificate to prove that the extension is old enough to enter the Land Registry record. The same applies to inheritance executions, even if the beneficiary already owns a share of the property.
Finding the Right Property General Information
Examine your reason for buying property in Spain. Where in Spain you want to buy property depends on whether you want the property as an investment, as a vacation home, or to live in permanently.
If you're buying as an investment, look in vacation hot spots on the coasts or in large cities. These properties are likely to go up in value and will provide good rental income.
For a vacation home, concentrate on apartments and villas in developments. The property management company will care for the exterior and landscaping, and plenty of neighbors means leaving the home vacant for months won't be as big of a concern.
For a more permanent home, you'll want to focus on your quality of life. Look at the local infrastructure, facilities, and accessibility. If you want to be around other expats, focus on towns and cities that have thriving expat communities.
Calculate your budget. Before you start looking at Buying Property in Spain you need to fully understand the costs of owning property in Spain so you can budget accordingly. You will have expenses beyond the price of the house.
You'll pay a stamp tax of around 1 percent of the purchase price of your new home, as well as fees to brokers, attorneys, and others. Assume you'll pay between 10 and 15 percent more than the list price of the house, once you factor in taxes and fees.
Don't forget the costs associated with moving your furniture and belongings to Spain, or purchasing new items for your Spanish home.
If you're buying a new home, you also must pay a 10 percent VAT tax (4.5 percent in the Canaries) on the property when you close on the sale of the house. (these fees are only a guideline).
Buying Property in Spain
Look at different types of Spanish property. Just as in any other country, you can buy properties in Spain that are in different states of readiness. Which you choose depends on your needs as well as your budget. There are different costs associated with different types of property.
New construction (obra nueva) is the most expensive type of property you can buy in Spain. However, the biggest advantage is that you know exactly what you're getting, and won't incur any remodeling expenses.
Resale property, which essentially is an existing house that has already been sold at least once. These properties are generally safer investments, provided you understand how much you'll have to spend on repairs or remodelling.
Off-plan (sobre plano) property has been approved for construction by local authorities, but construction is not yet completed. You may get a lower price for these properties than you would for new construction, but you run the risk that the house will never be finished.
Research your favourite areas. Before you buy property in Spain, hit the internet to learn more about areas that have captured your interest. The information you need depends on your reasons for buying property in Spain.
For example, if you're buying the property as an investment, you want to check out the property values in the area. If property values have been declining significantly in recent years, the area might not be a good investment.
If you're looking to rent out the property when you're not there, you want to look for a well-connected area with lots of attractions and things to do. Avoid properties that are too rural or isolated, as you may have a hard time keeping them rented on a regular basis.
If you want to move to Spain and live in the property permanently, research what it's like to live in that area on a daily basis. Find out about any risks, and compare the cost of living and tax rates to surrounding areas.
Visit the area where you plan to buy. Spending some time on your own exploring the area around property you want to buy is crucial. Go there not as a tourist on vacation, but with an eye toward what it would be like to live there full-time.
While it's important to find out what activities and entertainment are available, if you plan to live there permanently, these things shouldn't be your priority. Renting a property in the area for a few months will give you a better idea of what it's like to live there.
If you want to buy property in Spain for investment purposes, you still need to look at what daily life is like in the area. You'll need to be able to tell prospective renters what the property offers for them.
Check property location prior to purchase
Planning and building rules differ from region to region, you should ensure you research the rules relating to the location of the property prior to purchase.
If you are considering purchasing a coastal property you should contact the Coastal Demarcation office in your region to get a certificate to certify that the property is not affected by the 1988 Coastal Law. Bear in mind that while it is possible to view the coastal boundaries of the public maritime areas online on the Environment Ministry’s website, this may not provide sufficiently accurate information on which to base a property purchase.
Be extremely careful if the Land Registry record shows that the property you wish to buy is built on rural land. In normal circumstances the government reserves this type of land for agricultural use and you need to check with the municipal and regional authorities to ensure that full planning permission has been obtained for residential use.
In some parts of Spain, the peripheral land surrounding a military or naval base is considered ‘restricted’ under Spanish law, and specific rules may apply when buying, selling or carrying out construction work on properties located in these areas.
From 1 January 2021, UK nationals who wish to buy property in these areas, including those who fall within the scope of the Withdrawal Agreement, will be required to meet third country national (i.e. non-EU national) requirements and obtain a military permit from the Spanish Ministry of Defence prior to purchase. This permit is only applicable to new property purchases or construction works in the areas referenced below from 1 January 2021.
Areas referenced in this law include: Cartagena area (Murcia) including southern Alicante and eastern Almeria. The Strait of Gibraltar area. Bay of Cadiz area. Galicia’s coastal regions, all bordering regions with France, Andorra and Portugal. all Spanish Islands (Balearic Islands and Canary Islands) – see Art 32. and Annex II of the Royal Decree 689/1978. Ceuta. Melilla
See Annex II of the Royal Decree 689/1978 for a list of specific towns and areas affected, and check with local property registries and local notaries for advice on whether this law applies to the property you own or are considering purchasing. Exemptions may apply in certain areas.
Buying Property in Spain
It is strongly recommended that you choose an independent lawyer who is specialised in Spanish land law (urbanismo). Independent means that they work on your behalf only and are not also looking after the interests of the agent or developer. The Spanish property conveyancing system is different to the UK system so you should ensure that those involved in the transaction are qualified and experienced in Spain.
Exercise extreme caution if an estate agent, promoter or lawyer urges you to cut corners to save money or time.
A Spanish notary public will be involved in preparing the contract of sale and issuing the public deeds. As the purchaser, you have the right to choose which notary you use. The notary is a public servant who has a duty to provide you with free and impartial legal advice on all aspects of the contract before you sign. It is a good idea to seek advice from the notary early on. When a date is set for signing the contract, you have three days beforehand to visit the notary and ask any questions you may have about any aspect of the contract.
If you choose to work with a British estate agent, promoter or lawyer, check that they are qualified, reliable and have experience operating in Spain. Check that they are registered with the Law Society in the UK and specialise in International Transactions. If your lawyer is based in Spain, ask for their registration number and check that they are registered and practising with the local bar association (Colegio de Abogados).
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You should also check that your lawyer has professional indemnity insurance and not sign any papers or hand over any money until you have taken independent legal advice.
Many Spanish citizens use a ‘Gestor’ to carry out bureaucracy on their behalf. You should note that only a Gestor Administrativo with the GA kite mark is professionally qualified and certified to process paperwork directly with the Spanish administration.
Taxation is a complex issue, and taxes associated with buying, selling and renting property in Spain can vary widely from one region to the next, therefore it is advisable to seek the advice of an accountant or professional tax advisor.
The Spanish tax authority is called the Agencia Tributaria. It provides some information on its website in English.
The UK has a double taxation agreement with Spain to make sure that you do not pay tax on the same income in both countries. You can ask the relevant tax authority about double taxation relief.
Existing double taxation arrangements for UK nationals living in Spain have not changed.
As a Spanish resident, you must declare your global income to the Spanish authorities, no matter which country it came from. If you are not a resident, you will only pay tax on income that came from Spain.
Buying Property in Spain
Purchasing the Property
Get your Foreigner's Identity Number. If you want to conduct any business or financial transactions in Spain, including purchasing a house or opening a bank account, you'll need a Número de Identificación de Extranjero (NIE).
Foreign nationals are assigned a NIE number when registering as a resident in Spain at the Oficina de Extranjeros (immigration office) or designated police station, however property buyers from outside Spain can apply for a NIE at the Spanish embassy or consulate in the UK or through a representative.
Set up your accounts. You'll need insurance and a Spanish bank account if you want to buy property in Spain. Most sellers will only accept checks drawn on Spanish banks and payable in euros.
If you're receiving a pension, make sure you can get that pension paid into a Spanish bank.
You may be getting your mortgage through a Spanish bank. In that case, it's usually easiest to set up your bank account at the same bank.
If you're using a Spanish mortgage lender, they'll help you get property insurance. Otherwise you'll have to arrange for this yourself.
Hire a translator. Even if you consider yourself fluent in Spanish, legal documents can be especially difficult. Having these documents translated into your native language so you understand the deal.
Check the website of the Spanish Ministry of Foreign Affairs to find a list of accredited translators.
Ideally, you want a translator who has experience with legal documents, especially real property documents.
Get a full survey done. Even if the property has been surveyed fairly recently, you still want to have a fully survey done before you buy the property so you know exactly what you're getting for your money.
A survey is separate from an inspection. An inspection shows you existing defects or improvements that can be made to the house and other structures. A survey simply tells you where the boundaries of your property are, as well as the locations of any underground cables or pipes.
Negotiate a contract. Your broker and attorney (if you've hired one) will negotiate with the seller in an attempt to lower the price as much as possible. Other factors up for negotiation include who pays taxes, what structures or fixtures are included in the final price, and who pays for any repairs.
The contract also will include deadlines for various steps of the process to be completed. There will be deadlines for you and the seller. For example, if you've not yet secured financing, the contract may specify a date by which you must have a mortgage for the property.
The details included in the contract depend to some extent on the type of property you're buying. For example, if you're buying an off-plan contract, you'll be signing a payment construction contract. This contract binds the seller to complete the house under a certain schedule.
Before you complete your property purchase you should make sure that:
1. You have seen the Land Registry extract (nota simple), available from the Colegio de Registradores (translations into English for an additional fee), and checked the following details
2. The property and land for sale match the details registered and the sellers are the registered owner(s)
3. Check there are no debts or charges, such as a mortgage, on the property
4. Check there are no legal proceedings initiated against the property for contravention of land planning law
5. Make sure you have checked that planning permissions are in order and the property is a legal build. This is particularly relevant when buying off-plan or direct from a developer. The town hall can inform you whether the building has all licences and permissions and provide details of the type of land. If the property is built on rural land or land that is not classified for construction, additional confirmation should be sought from the regional government as to whether they have authorised the construction
6. if you are buying an off-plan property, confirm that the property has been certified as finished by a registered architect and registered as a new build in the property register. The registration should also provide details of the developer’s insurance against structural and other defects in the construction. In the case of a private build (the previous owner built their own house and decided to sell before ten years had lapsed) you will need to request these details separately
7. check the latest town plan to see whether or not the plot you wish to buy has any building restrictions, is in a green zone or includes a public pathway or similar. This can be viewed at to the town planning (urbanismo) department of the local town hall
8. Carry out a property survey. Whilst this is not obligatory, it is wise to get a chartered surveyor to check the property
9. You know the cadastral value of the property and how much purchase tax will be due. Be aware that tax is charged on the council’s valuation of the property as opposed to the amount of the sale. You can check this at the regional government’s online tax agency site using the cadastal reference number
Make sure you have seen the following documents:
A paid-up receipt for the previous owner’s annual property tax (IBI). It is also wise to get a certificate from the town hall proving that there are no unpaid rates from previous years
The Catastral certificate giving the exact boundaries and square metres of your land. The Cadastral record will be linked to the Land Register record by a cadastral reference which will be included in both. You should ensure that the property and land description contained in both records matches
The licence of first occupancy or habitation certificate issued by the town hall. You will need this document to connect to electricity and water companies. Developers cannot force you to complete without this licence.
Receipt to prove all utility bills have been paid by the previous owner
If applicable, a certificate signed by the President of the Community of Property Owners stating that there are no outstanding debts. You should be aware that if you later find that there are such debts outstanding, as the new owner, you assume the debts for the current and previous year (two years in total)
As from 1st June 2013, all homes for sale or to let in Spain are required by law to have an energy efficiency certificate. If you are considering buying a property, the seller is obliged to show you this certificate
On completion, the public deed should reflect an accurate description of the property. It is advisable that you register the property in your name with the Land Registry as soon as possible to ensure full protection of your rights. The notary can even send advance notification to the Land Registry electronically once the public deed is signed.
Buying Property in Spain
Apply for a mortgage. Unless you're buying the property for cash, you'll need to finance your purchase.
Do your homework: you should analyse and compare a range of different products and services offered by different lending companies. If you have any doubts about the terms and conditions, ask the lender to clarify. You should also check that the lender is listed as authorised to operate in Spain with the Bank of Spain.
Look for the mortgage which is most appropriate for your capabilities and needs. There are a range of mortgages on offer and you should pay special attention to the interest rate and repayment period, fees for setting up the mortgage as well as early repayment and cancellation fees.
If you cannot keep up the mortgage repayments, the Spanish bank could repossess your property in Spain. If the value of the property is less than the total debt outstanding (you are in negative equity), the bank may pursue your UK assets to recover the mortgage shortfall using a European Enforcement Order.
Make sure you fully understand the mortgage agreement you sign. If you have any doubts check with the branch during the 10 working-day period after the binding offer has been provided. If for any reason you cannot keep up the mortgage repayments, you should speak to your bank immediately (before defaulting on repayments) to discuss the options available.
Close on the property. Once you've negotiated a sales contract and have your financing in place, you'll conclude your purchase. If you're able to do this in person, it typically will occur at a notary's office near the property.
When you close on the property, you'll have to make your initial deposit, typically of around 10 percent of the total purchase price of the home.
If you're not able to appear in person, you can arrange to have someone represent you as a representante verbal (verbal representative). You can later ratify the representation at a Spanish consulate office in your home country, or at the notary's office next time you visit Spain.
Register the property. In Spain, the buyer is responsible for registering the transfer of ownership with the local registry office. If you used a notary for closing, they may provide this service for a fee.
If you're paying the notary to register the property, make sure you understand exactly what they're going to do. They may simply notify the registry office that a transfer was made, but not complete the full registration.
The cost of registration and notary services together typically ranges from 0.5 percent to 1 percent of the sale price of your property.
Compute property taxes. There are several types of real and personal taxes you must pay if you are living in Spain for any length of time, or if you own property there. The amount of taxes depends on the cost of your property and the area where it's located.
You must pay property ownership tax yearly. The tax is set locally, and ranges from 0.4 percent to 1.1 percent of your property's valor catastral, or the administrative value of the property. That amount is typically lower than market value.
For a small country home, your taxes may be as little as 100 euros per year. However, a luxury villa in a waterfront tourist development could set you back as much as 3,000 euros a year in taxes.
If you own more than 700,000 euros in worldwide assets (this figure may chang), you may end up paying the wealth tax for any property value beyond that amount. The rate ranges from 0.2 percent to 2.5 percent, depending on the value of your assets.
You also must pay personal income tax based on the valor catastral of your property. If you plan to rent out your property, you'll also pay around 25 percent of the gross income you earn from renters.
Owners who let their properties on a short or long-term basis in Spain must comply with national rental regulations as set out by the national rental law (Ley 29/1994, de 24 de noviembre, de Arrendamientos Urbanos and Real Decreto-Ley 7/2019, de 1 de marzo).
Before entering into a tenancy agreement as a landlord (arrendador) or tenant (arrendatario) in Spain, make sure you know your rights and obligations as they can differ from those in the UK. Consider seeking professional advice to ensure you are complying with Spanish and local legislation.
Buying Property in Spain. Properties for Sale HERE
This information is provided as a general guide and may be subject to change at any time with little or no notice. Benidorm Seriously will not be liable for any inaccuracies in this information. British nationals wishing to obtain any further information must contact the relevant local authority or seek legal/specialist advice.
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