Buying and selling guide for the Costa del Sol Malaga Mijas Marbella Estepona - Sotogrande
Choosing the right Lawyer is vital when buying overseas. In today s fast moving market is essential that your legal representative can move quickly, efficiently and has all the tools needed to secure a sale for you. The purchasing process: Choosing the right Real Estate Agent AIPP/REAS registered and fully compliant There are many Real Estate companies on the southern coast of Spain, but only very few are registered and compliant with the Real Estate Laws and Code of Conduct within Europe. Affinity Humberts is fully registered and compliant with all new laws and regulations. We are also an AIPP registered agent, which means that you as a client have the assurance that you have an independent body acting on your behalf and regulating how we operate. Our company is also a board member of the recently founded REAS (Real Estate Association of Spain) meaning we are regulated both in the UK (AIPP) and Spain (REAS). We are also part of the Chestertons and Humberts group, meaning we are able to assist our clients in purchasing a property anywhere in the world. Choosing the right Lawyer and property legal searches It is advisable to use a Lawyer based in Spain who will provide the legal guarantees for the purchase of your property, ensuring that Spanish legal requirements are met and your property is passed to you debt and problem free. Your Lawyer will check and ensure that the property is purchased free of encumbrances, loans, charges or debts and that all payments of local contributions/taxes and community fees are up to date. Your Lawyer is in effect responsible for passing that property to you free of debt. Reservation deposit and contract Once you have found the right property, the purchase process begins with a reservation agreement which takes the property off the market and also freezes the purchase price. The deposit to be paid at this stage is usually between 3,000 and 50,000. Before arriving in Spain, ensure you have cleared funds available. The best way to pay the reservation deposit is by credit/debit card or direct bank transfer. It is not advisable to pay by cheque, especially if drawn from a foreign bank account, as it can take up to 2 months to clear in a Spanish bank. Such a delay will inevitably cost you your property. This deposit is usually held by your Lawyer, your agent (as long as they are compliant with Money Laundering Regulations and have a segregated client account) and in some instances this deposit can be paid directly to the vendor s Lawyer. 2
The southern coast of Spain remains the number one choice for the British to invest in. It s also one of the most popular holiday destinations for Europeans. Exchange of private purchase contracts Within approximately 10 days of signing the reservation agreement, the private purchase contract is to be signed between the buyer and the seller (or their authorised representatives). This is similar to exchanging contracts in the UK. During this time, your Lawyer should have completed the searches in relation to the property and will have arranged with the seller the procedure for cancellation of any outstanding debts. It is customary practice at this point to pay between 10 to 50% of the purchase price. At this point these funds will be held within your/vendors Lawyer s escrow/client account. Formal completion and exchange at the Notary A property sale is formally completed in Spain when the title deed (Escritura de compraventa) is signed before a Public Notary in Spain, the agreed final payment is made and possession of the property is passed to the new owner. In the case of new build properties, it can take up to 18 months before completion and usually payments are in stages split over two to four months, normally paid by banker s draft, a cheque from a Spanish bank account or by bank transfer. 3
Registration Once the title deed is signed, the notary will send a copy of it to the local land registry. Your Lawyer will pay on your behalf all the relevant transfer taxes and will deal with the formalities of registration of your title deed. Final registration of the title deed may take several months after completion. Your Lawyer will arrange for the transfer of the utility services, such as water and electricity, and will also organise direct debits to pay future bills from your Spanish bank account (your Lawyer or agent will also set up a Spanish Bank account in your name). Purchasing a property on a new development When purchasing a property on a new development, the developer should provide bank guarantees/policies of insurance against each payment made on account of the purchase price. Many developers offer these bank guarantees free of charge whilst others take a percentage charge. A bank guarantee protects your payments, so in the unlikely event that the developer either fails to complete the property, it goes into liquidation or where they simply fail to complete on time (and you do not wish to wait), all funds will be returned to you in full. A new property is handed over without water and electricity connection - this can however be arranged by a Lawyer. Connection of such services can take up to four weeks following completion, therefore, we suggest that you do not make any plans to use the property during that period (this also applies to a repossessed property). Under Spanish law, the developer will issue you with a liability construction guarantee. Costs There are in principle three fees and one tax to pay when purchasing property in Spain. You should budget that the costs involved when purchasing a property in Spain are approximately 10.5 to 14% of the purchase price. If you have a Spanish mortgage there is an additional cost of approximately 2 to 4% of the property purchase price. Legal fees are a standard amount throughout Spain (when purchasing a property), so make sure you choose a Lawyer who provides the maximum service - answering their mobile phone at weekends and being available 24/7 for example. The fees 1) Legal fees: 1% (plus VAT, or IVA in Spain) of the purchase price (over 150,000). If the purchase price is under 150,000 this percentage may vary as most Lawyers have a minimum charge of 1,500 plus VAT. 2) Notary fees: 0.5% (approx.) of the purchase price, although the Notary charges are calculated according to a fixed scale, depending upon the official value of the property. This will range from 300 to 1,200. 3) Property Registry: 0.4% - Generally 60-80% of the notary fee. 4) Transfer tax 8%, 9% or 10% depending on the value of the property (respectively 0 to 400k, 401k to 700k and 701k plus). 5) Electricity/Water connection/ NIE numbers 0.5% (approx.). 4
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Spain s housing market finally returned to growth in Q1 2016, until this point Spanish house prices had fallen by a total of 41.9% based on figures from TINSA. They report that the overall price points for 2018 will remain on average 30% below the height of the market in 2007 The tax A brief and accurate explanation On a resale property, Transfer Tax (ITP) at 8% is applicable on purchases up to 400,000, from 400,001 up to 700,000 the rate is 9%, and from 700,001+ the rate changes to 10%, which is payable upon completion. Example: Purchase price of 450,000; you pay 8% on 400,000 and 9% on 50.000. When buying from a developer, you will pay VAT (IVA) at 10% which is payable with each installment, plus stamp duty at 1.5 % of the property price. A VAT rate of 21% is applicable when buying commercial premises, new plots of land (no previous owner) or garage spaces. Other services your Lawyer should be able to provide to assist you are as follows: - Change of utility contracts and organising payment by direct debit - Fiscal / Tax representation - Community representation - Wills - Insurance - Water and electricity connection charges (your Lawyer may need to attend the electricity or water offices to connect or change a contract - This is why a locally based Lawyer should be used) - Obtaining an NIE number This is the Spanish ID/fiscal number that will be requested by the Notary in order to sign the title deeds of your property. We recommend that you apply for your NIE number at an early stage as you may need to be present in person at the local Spanish Police station to obtain this. Your Lawyer can organise an appointment at the Police station for you and will also accompany you there (another reason why you should use a local based Lawyer) - Power of Attorney You can provide your Lawyer with a power of attorney in order to act on your behalf with regards to your purchase this is highly recommended and means you do not need to be present in Spain to set up a bank account, NIE number or even attend the completion of the property purchase (This costs around 80 to 100 per person and is paid directly to the Notary). Mortgages Spanish banks are willing to give mortgages to non resident purchasers of a property in Spain. The period of the mortgage depends upon the age of the buyer but can be extended up to a maximum of 30 years. The maximum amount a non resident can borrow is 70%** of the property value, depending upon your income, assets and liabilities. You will need to provide proof of your capacity to repay the mortgage and most banks will look for earnings per month in excess of three times your expected monthly mortgage repayment. 6
Documents required by a Spanish bank to apply for a mortgage: 1) Last three to six months pay slips 2) Last tax return or P60 if employed (see point 6 if self employed) 3) Bank reference to include telephone, fax number, name of Bank manager and your account numbers 4) Last three to six statements of your bank account 5) Statements of current assets and liabilities 6) If employed, a letter from your employer stating the length of employment, salary, etc. is required. If self- employed, profit and loss accounts signed by a Chartered Accountant are required 7) Experian credit report **It is possible to borrow in excess of 70% as a non resident, but this will normally only be available when purchasing one of the banks own repossession properties or certain new build developments. Wills You should make a separate Spanish will dealing exclusively with your Spanish assets in order to avoid time consuming and expensive legal problems for your heirs. As a foreigner, you will usually find that Spanish authorities do not oblige you to follow the Spanish law of compulsory heirs. You can leave your property to whomever you choose, as long as your own national law permits it. Selling a Property When selling a property in Spain there are various related costs, which are: 1) Capital gains tax is potentially due on the sale of the property. This tax is calculated as the difference between the value of the property at the time of its acquisition and the value at the time of its sale less any deductible purchase and sale expenses. The tax rate is between 19% and 21 % for both non residents and residents. 2) If the vendor is a non resident in Spain, 3% of the sales price must be retained and paid to the Tax Office/Treasury on account of the potential liability to capital gains Tax. Your Lawyer will inform you about existing exceptions. If you do not have a capital gain this amount is normally refunded within the following year. 3) Plus Valia: This is a Municipal tax paid on the increase in value of the land since the previous sale and is fixed by the local Tax Authorities. It is calculated based upon the size of the land. By Law, the vendor is obliged to pay this tax. 4) Lawyer s fees, normally 1%+VAT (subject to a minimum of around 1500+VAT). 5) Real Estate sales commission (anything from 2.5% to 10%+VAT). 6) Mortgage costs. If there is a mortgage on the property, you must consider the bank costs for the cancellation of the mortgage and the notary and registry fees. The Costa del Sol has Spain s best climate, with an average temperature throughout the year of 18 ºC! The sun shines at least 300 days a year, with one of the best microclimates in Europe! 7
Did you know? Affinity Humberts are part of the world famous Chestertons and Humberts group, established in 1805. Affinity Humberts is a registered member of the AIPP, the overseas Real Estate regulator and we are also a founding (board) member of REAS, the Real Estate Association of Spain. We have won best large real estate agency for Spain 3 years in a row, courtesy of The European property Awards! Spain is the worlds 3rd most visited country. There are 23 beaches on the Costa del Sol that have been awarded the Blue Flag Award for cleanliness. International buyers make up 32.9% of the property market. Spain is the number one destination for overseas investors right now. Of these investors, the majority are aged 55-64 and will buy within the next 12 months. The Costa del Sol stretches over 300 kilometers from the Straits of Gibraltar (west) to the province of Granada (east). 66% of all buyers are cash buyers and not reliant on any finance. Christmas is a very special time in the city of Malaga. There are more than 3 million low voltage lights that are placed in the main high street alone! Check us out on Facebook, Instagram and Twitter @affinityspain Read our independent reviews on FEEFO! www.feefo.com (Google search affinity Humberts Feefo ) *source TINSA and Rightmove. Local 3, Comercial Vasari, La Alzambra, Puerto Banus, Marbella 29660, Spain.