A Brief Guide to Buying Property In Spain

Legal Formalities

Prior to completion, there are various types of private contracts you can use to formalise an agreement with the vendor. Whichever one you use, don’t sign or pay anything until you get the thumbs up from your lawyer.

Reservation contract – Documento de reserva

With this contract you pay a deposit to reserve a property for a specified period of time – often 30 days. If you back out at the end of this period you typically loose your deposit. If you proceed with the purchase, the vendor is contractually obliged to sell you the property at the agreed price. The deposit is usually between 3,000 and 6,000 Euros, and counts towards the final price of the property. Developers often use this type of contract when selling off-plan. Even though the deposit is relatively small (compared to the overall property price), you should not sign this contract without checking with your lawyer.

Deposit Agreement - Contrato de Arras

This contract requires that you pay a deposit – normally 10% of the agreed price - when the contract is signed. If you fail to go through with the purchase you will loose all of your deposit to the vendor. But if the vendor backs out before signing the deeds, you receive back double the deposit. This contract makes it expensive for either side to back out, but at the same time it does leave the door ajar should either side wish to do so. This is the contract you are most likely to be asked to sign if you buy a resale property from a private individual.

Option To Buy Agreement -  Contrato de Opción de Compra

This type of agreement gives the buyer the exclusive right to buy a property within an agreed time frame. The option does not have to be exercised, but it is usually agreed that if the option is not exercised, the buyer looses the money paid for the option.

Private Sales Contract - Contrato Privado de Compraventa

A contract that specifies in detail (price, dates, contents, etc.), the terms under which the transaction will take place. Unlike a deposit contract, there is no backing out of private contract unless both sides agree to it.

Ownership structure

Most English-speakers buy the simple way, which is in their own names, or shared with a spouse. In most cases this is a sensible option. However if you have any inheritance concerns – for example you are remarried and want your partner, rather than your children, to inherit the property on your death – then you need to consider one of the other options. You should always discuss your needs and circumstances in the context of Spanish inheritance laws with your lawyer before deciding how to structure the purchase.

© Mark Stucklin (Spanish Property Insight)

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