An overview of the buying process

An overview of the buying process in Spain is as follows. You make an offer and then negotiate with the vendor until you reach an agreement, after which your lawyer will carry out the necessary due diligence and check the appropriate contracts. Once you get the okay from your lawyer – but never before – you sign a private contract with the vendor and make an initial payment as specified in the terms of the contract. This is the point of no return after which backing out becomes difficult or impossible without significant financial loses. You will then have time to prepare for the signing of the deeds before Notary – normally between 1 and 3 months – in which time you make arrangements such as getting your funds in place. Come the appointed time you sign the deeds before Notary and take possession of the property. The final stage involves inscribing your title in the property register, paying any relevant taxes and setting up utility connections.

In reality you may find that some stages, for instance negotiations and due diligence, can be done in parallel (at the same time) rather than in series (one after the other) or that the whole process seems to be a lot more messy. However it is important to understand the ideal sequence of events and the logic behind this, which is essentially to protect your interests. Perhaps the most important point of all is that you should never sign contracts and make any non-refundable payments until you get the all clear from your lawyer after an adequate due diligence.

It is worth pointing out that, in general, you need to take more precautions when buying from a non-resident than when buying from a vendor who is resident in Spain. It is relatively easy for non-residents to leave Spain without settling their outstanding debts, such as taxes related to the property, and some of these debts can become the new owners problem. The tax authorities and other debtors can pursue Spanish residents for their debts, but as it is far more difficult to pursue foreigners in another country they tend to go after the vendor’s previous asset – i.e. your new property.

Preparing to make an offer

If you find a property you want to buy you will need to make the vendor a serious offer, which will be the basis for your subsequent negotiations. But before making an offer you should prepare your negotiations strategy and identify and prioritise the information you will need to proceed with the negotiations.

Review your budget

Unless you have more than enough money to buy the property it is always important to review your budget (based on the property in question) before you proceed to make an offer. You may be able to negotiate the vendor down from the asking price but don’t count on it, and don’t make an offer you can’t afford. People often find that the property they set their hearts on is the one that most stretches their budget, and if this is the case you should go over your finances once again and identify if there are any unknown variables that might put the property out of your reach. This is a very important point as if you are over optimistic about your finances when you pay an initial deposit you may lose your deposit if you can’t then complete.

Be realistic about all the transaction costs if you wish to avoid unpleasant surprises. People often use a 10% rule of thumb for estimating the transaction costs but this might over or under-estimate the costs in your case by up to 2%. Try and estimate the costs as accurately as possible before you start the negotiations as they may have a bearing on what you can afford to pay. Also, never forget that you will have to furnish the property, so keep the costs of this in mind as you proceed.

Mortgage

If you need a mortgage to help finance the purchase this will have an big impact on the price that you can pay. Though 80% mortgages are possible it is more likely that you will only get 70% of the value, and the mortgage valuation that determines the amount you can borrow may be disappointingly low. If you need to use a mortgage you must consult with a good mortgage broker before you make an offer, and then proceed on the basis of conservative assumptions. You will also need to have a valuation carried out before you know exactly how much money the bank will lend you, so if you are using a mortgage you need to include this issue in your negotiations agenda.

Refurbishments

Be realistic about the need for refurbishments. For obvious reasons you should avoid buying a property that you can’t afford to refurbish property, which means thinking about this issue before you make an offer. If you judge that significant refurbishments will be necessary, but you don’t know what they will cost, then you will need to build this into the negotiations agenda.

Survey & valuation

If you want to have the property surveyed or valued before you commit you will need to build this into your negotiations agenda. Though an extra expense it is always a good idea and may put you in a stronger negotiating position, which is why many vendors reject the proposal. Unless you are absolutely convinced that the property is in excellent condition you are strongly advised to have a survey carried out. Decide at this stage whether it is something you wish to push for.

Lawyer

As was explained in the chapter on getting ready to buy you should have already selected an independent lawyer to work with. As there is still a chance that the negotiations will come to nothing you may wish to wait before hiring this lawyer and making the first payment. However the sooner you get your lawyer involved in the checks the better. If you are confident that you will proceed to buy then now is the time to hire your lawyer, which means starting to pay legal fees. In any event you will have to do this at the very latest once you have reached an agreement in principle with the vendor and before you sign any contracts.

Negotiations agenda

Before you start negotiating with the vendor you should have your agenda, objectives and strategy clear.

Your agenda should cover all the issues you want to bring into the negotiations. Your objectives are what you want to achieve, for instance your target price and the maximum price you are prepared to pay, and you strategy determines the rationale behind your starting offer and the speed and size of any increments you will concede. You should base your strategy on what you know about the property, the state of the market, and the vendor (nationality, personal circumstances, hurry to sell). With the best preparation in the world, however, there is no escaping the fact that rising markets favour the vendor (they are more inclined to wait for a better offer than yours) whereas falling or stagnant markets favour buyers (as vendors are less confident that they will get a better offer any time soon). This is as true of Spain as it is anywhere.

Generally speaking Spanish vendors can be the hardest to negotiate with. The Spanish tend to take a bloody minded attitude to the price they want and hold on until they get it, no matter how long that takes. As a group they are also in a better position to hold out than is typical of foreign vendors, who may be more impatient to liquidate their assets in Spain. The Spanish also tend to demand higher under the table cash payments (to avoid taxes), which buyers need to avoid or minimise.

Negotiations over price are not helped by the lackadaisical way in which properties are valued in Spain. Vendors often name the price they want based on what little they know of the market. They may have heard that Pepito Perez sold his house down the road for X so they ask for X plus 20%, convinced as they are that their property is much more attractive. Many estate agents in Spain simply accept the vendor’s price rather than argue for a more realistic one. All of which means that asking prices can be somewhat arbitrary, so it is important for buyers to have a reasonable idea of going market prices to guide them during negotiations.

Estate agency commission

Estate agents’ commissions are another important issue to bear in mind when formulating your negotiations strategy. In the UK estate agents earn a percentage of the transaction price but in Spain vendors sometimes present estate agents with a non-negotiable net amount that they want from the sale. They then leave it up to the estate agent to charge whatever commission they can get away with on top of this figure. Estate agents, who normally control the negotiations by virtue of intermediating between both parties, sometimes add on 10% or more, in the hope that they will end up with 5% or more. So, in some cases buyers assume they are discussing the price with the vendor when in reality they are simply negotiating the size of the commission with the estate agent. Spanish vendors are more likely to ask for a net amount whilst foreign vendors are more likely to agree a percentage fee of the final price with the estate agent (as they do at home). So if the vendor is Spanish there is a chance that the estate agent has a powerful incentive to defend the highest price possible, as every Euro above the vendor’s net amount goes straight to the commission.

The practise of adding a commission on top of a net price is far less common these days, as the Spanish property crash reduced the power of vendors to set the terms. These days a standard commission as a percentage of the sale price is far more common. This makes the estate agent more ambivalent about the final price, and less of an obstacle to price negotiations. Indeed, with a standard commission agents will have an incentive to advise the vendor to accept any reasonable price as the important thing is closing the sale and getting paid. Buyers should keep that in mind.

Issues to negotiate

The key issues to negotiate with the vendor are as follows:

The price

For obvious reasons you want to agree the lowest price possible.

The undeclared value (almost unheard of these days)

The amount of the price (if any) to be paid in cash under the table and not declared in the deeds, often called ‘B’ or negro, and that reduces tax and transaction costs for both vendor and buyer, but mainly for the vendor (capital gains) . This used to be a common practise in Spain before 2010, especially if the vendor was Spanish, with as much as 50% of the sale price undeclared and paid in cash in some cases, though 10% to 30% was far more common. After 2010, however, the practise went into steep decline. Anti-terrorism and money laundering  drives by the authorities made it increasingly difficult to handle large sums of cash. And once boomed turned to bust, and buyers took control of the market, vendors were in no position to demand cash payments.  The best advice is to refuse to pay any of the price in cash that is not declared on the deeds. It is a fiscal fraud that mainly benefits the vendor whilst the potential liabilities accrue to the buyer. As a buyer,  you want the full price to be declared on the deeds.

Which contract to use

The type of contracts you will sign before the deeds (more detail below in the section on contracts). You may agree to skip the private contract altogether and go straight to the deeds.

Deadlines

Before you sign a private contract you will need to agree a deadline for signing the public deeds before Notary. It is common to agree a deadline of 1 to 3 months after signing the private contract. Anything less than a month makes it almost pointless signing a private contact and you could consider proceeding straight to signing the deeds before Notary

IBI payments in the year of sale

Payment of the local rates (Impuesto sobre Bienes Inmuebles – IBI) in the year of sale. This can be a complicated issue depending upon how the local authority charges the rates (annually or quarterly) but fortunately the amounts at stake are usually no more than a few hundred Euros. If the vendor agrees to pay the IBI for the year then you need to reimburse the vendor for the months that correspond to your ownership. However if you agree to pay the IBI for the year then you can deduct the IBI that corresponds to the vendor from the price of the property. The important point is to clarify this issue with the vendor in advance. Note that from the summer of 2016, vendors can pass on a pro rata share of the IBI council tax to buyers even without any prior agreement.

Who pays the Plusvalía

The plusvalía (Impuesto sobre Incremento del Valor de los Terrenos de Naturaleza Urbana) is a municipal tax on the increase in the value of the land upon which the property is situated. For an apartment that has recently changed hands this tax will be low. However for a detached property with land, in a prime residential area, that hasn’t changed hands for many years, the plusvalía could be quite substantial.

Though by law this tax corresponds to the vendor (who has owned the property whilst the land appreciated) buyers sometimes agree to pay it. However this is nothing more than a surreptitious way for the vendor to increase the asking price so you should resist any attempt by the vendor to get you agree to paying the plusvalía. If the vendor is a Spanish resident then you don’t need to discuss the question of the plusvalía unless the vendor brings it up. You can just assume that the vendor is going to pay it, unless otherwise agreed, and make sure your lawyer confirms that the private contract you sign states that the vendor will pay the plusvalía. However if the vendor is a non-resident then you definitely need to bring up the matter with the vendor. If a non-resident vendor leaves Spain without paying the plusvalía then the debt is attached to your property and you have to pay it. Therefore you have two options when buying from a non-resident: 1) Have your lawyer accompany the vendor to the town hall to pay the plusvalíastraight after the signing of the deeds, or 2) agree that you will pay theplusvalía, and deduct it from the payment made at the signing of the deeds. The second option is the best from your perspective. Whatever you agree it always helps to know how much the plusvalía will be. Your lawyer can either calculate it or ask the town hall.

Extras

Any interior or garden furniture that is included in the price. If you agree to buy anything over and above the fixed elements of the property then this needs to be agreed and listed in an inventory that forms part of the contract you sign. Be warned that upon taking possession, some people have discovered that what they thought were fixed elements (for instance fixed bathroom cabinets and shower equipment) have been ripped out. Few vendors are so tacky as to do this but it does happen, albeit very occasionally. Just bear it in mind and clarify the situation if you judge that there are any attractive fixed features that could be easily removed.

Access to the property

If refurbishments are key to your decision and you need to have them costed (and, in some cases, checked with the town hall) before you can proceed, then you will have to negotiate access to the property for an architect and or builder. Likewise if you want to have a structural survey carried out. There are no easy answers to this and it all depends upon the attitude of the vendor. However if you are supported by a ‘can do’ estate agent, and if its clear that you are serious, then you should be able to reach an agreement on this issue. If the vendor will not agree to an architect’s visit before you make an offer you should at least talk to an architect and describe as best you can the property and the refurbishments that you imagine will be necessary. It’s not much to go on but it may give you at least some idea of the magnitude of the costs you will face.

If you need a mortgage you might not be able to commit to a price until you know how much the bank will lend you. But before deciding how much it will lend you the bank will insist on carrying out a valuation, which means sending an valuer (tasador) to visit the property. The problem is that many vendors will refuse to allow a valuation before you have signed a private contract that commits you to a price, as they fear a low valuation being used against them in the negotiations. If you need a mortgage you should start off by asking the vendor for permission to arrange a visit from a tasador. If they refuse then you will have negotiate a clause in the private contract that makes the agreement conditional on the mortgage you can obtain. The worst scenario is if you commit to a price, pay a deposit and then find that you can’t complete due to mortgage problems. If this happens, and you do not have a conditional clause in the contract, you may lose your deposit.

Negotiating

It may help to start with a written offer to show how serious you are. However this does require that the offer is written in a language that the vendor will understand, and must contain the necessary legal caveats. In most cases the negotiations are done verbally, and unless you have a very good grasp of the detail, and are sure about what you are doing, you are better off starting with verbal negotiations.

Your starting offer is always a key question as this sets the floor for the subsequent negotiations over price (the ceiling has already been set by the vendor’s asking price). Unless you are sure that the property is a gem on offer at a bargain price you should never offer the asking price as most vendors work on the assumption that they will be negotiated down when setting the asking price. However you should also avoid making a joke offer that will be dismissed out of hand or offend the vendor, as this might terminate the negotiations. Your starting offer will depend upon many factors such as the state of the market, what you know of the vendor, and the price and characteristics of the property in question. An offer of 20% below the asking price is a very different thing when the asking price is 200,000 Euros to when it is 1 million Euros. Taking into account all these considerations you need to come up with what you think will be the very lowest figure that will engage the vendor. This is when you find out how important it is to have researched the market.

You are negotiating to reach an agreement in principle on the key issues such as price, contents, and dates of completion. However you should not make any binding commitments until you have carried out an adequate due diligence. Once you reach a verbal agreement it is a good idea to have your lawyer summarise the key points in writing and get this over to the vendor so as to reduce the chance of any misunderstanding that might scupper the transaction further down the line. If you choose to do this it must be made very clear in the wording of the document that this is just a clarification of what you have agreed in principle and not a binding commitment.

Due diligence

Buying property in Spain is always a case of caveat emptor (buyer beware) so never make any payments or sign any contracts until you have had a qualified, independent lawyer run the necessary legal checks. This may seem blindingly obvious but a surprising number of British buyers fail to do this. Nearly all of the cases where buyers have run into serious problems can be explained by a failure to carry out an appropriate due diligence.

For the due diligence to be effective it must be carried out by an appropriate lawyer. This means using a lawyer with no conflicts of interest, so never ask anyone involved in selling you the property to recommend you a lawyer. The lawyer you use should also be specialised in Spanish real estate law.

Due diligence is essential a series of legal checks. However in some cases you may also need an architect or surveyor to check the property before you proceed. You may decide this is necessary if you have any doubts as to the structural or physical condition of the property, or have plans to extend the property. Basically due diligence is your chance to check anything you feel needs to be checked before you commit.

You may find that due diligence raises issues that need to be negotiated with the vendor. And example of this might be if the vendor has extended the property or built a pool without permission from the town hall. In this case you will need to have the vendor legalise the extension (by presenting a project to the town hall) before you proceed. This has a cost and delays the process so the vendor may be reluctant to agree. However it is usually possible to negotiate an agreement.

Generally speaking, if you take out a mortgage from a Spanish bank when buying a property in Spain you will also benefit from the due diligence that the bank carries out. After all the bank will have a significant stake in the property and therefore is just as interested as you that the property is free of legal problems.

Due diligence checks

Here we describe the most common checks carried out during due diligence. You will have to be guided by your lawyer as to the checks that appropriate in your case. The more checks you carry out the more expensive the process is likely to be.

Check the vendor’s title

Confirm that the vendor (or vendors, if the property is jointly owned) has full title to the property and can legally sell it. Your lawyer may choose to request a full report (Certificado Literal de Dominio y Cargas) from the property register (registro de la propiedad) or, as is more common, request a basic report (nota simple informativa). The basic report is enough for the vast majority of purchases.

If the property register lists a title that is no longer accurate, as can happen when a previous owner has died and willed the property to another party who has not yet notarised and registered the new title, then the register will need to be updated before you can proceed. This will have to be done by the present owner(s).

Note that some properties in Spain are not inscribed in the land register and do not have any notarised title deeds. This situation is quite common in rural areas, especially in Galicia. Whilst the vendor’s title may well be genuine, and whilst it is possible to officially register the title, British buyers would be biting off more than they could chew. You would be well advised to walk away from any property that doesn’t have notarised title deeds.

Check for any pre-emption rights & tenants

Whilst looking into title issues your lawyer will also need to find out if anyone has a pre-emption right over the property. A pre-emption right gives its holder a preferential right to buy the property at the price agreed between you and the vendor. This would be the case if there are sitting tenants with indefinite contracts.

If you buy a property with sitting tenants then they will have the right to stay in the property for the remainder of their rental contract. Unless you are specifically looking to buy a property with sitting tenants you should always avoid doing so. If you do buy a property with sitting tenants you must never agree to pay any of the price under the table as there is a chance that the tenants could then force you to sell them the property at the price declared in the deeds. British buyers are would be well advised to avoid all properties with sitting tenants.

Check that the property is free of debts, charges, liens and embargoes

Though the contract you will sign should state that the property is sold free of any encumbrances, it is always necessary to double check as the debts become yours once you own the property. The land register will reveal any debts that are associated with the property, for instance a mortgage, loan, or certain unpaid taxes or penalties. The existence of any debts is not in itself a problem so long as they are identified in advance, and the vendor’s have them cleared before or at the time of signing the deeds before Notary. If the vendor has a mortgage on the property it is likely that the mortgage will be cancelled at the signing of the deeds (out of the money you pay to the vendor). This may require that you pay a cheque directly to the mortgage lender.

Check that payments of local taxes (IBI) are up to date

You also need to see the latest receipts of payment of local rates (IBI), and in some cases check with the town hall (ayuntamiento) that there are no problems with unpaid rates from previous years. The town hall can issue a certificate to this end. Any unpaid rates become the new owner’s liability.

Check the deeds

Your lawyer will need to check the existing deeds, so the vendor or estate agent will have to make a copy available to you.

For a start your lawyer needs to confirm that the property is correctly described in the deeds before you proceed to buy, so you will need to obtain a copy of the deeds from the vendor. The deeds contain descriptions of the amount of land (if any), boundaries, built areas, internal divisions, exterior recreational areas and other salient features of the property.

Properties are quite often inaccurately described in the deeds for a number of reasons. The vendor or a previous owner may have carried out building work such as an extension or a new pool, and not have registered these changes in the deeds. This may be because the changes were illegally carried out – without permission from the town hall – or because the owner forgot or could not be bothered with the time and expense of having the changes registered in front of a Notary. In the latter case the town hall will have a copy of the building work authorisation (licencia de obras or licencia de reformas), as should the owner. If authorisation from the town hall can be produced to justify the discrepancy between the physical reality of the property and the deeds, then this can be used to update the deeds when you complete and sign before Notary. However if the changes were carried out illegally – without authorisation from the town hall – then the process becomes somewhat more complicated to resolve. In this case you would need to consult with your lawyer on the best way to have the changes legalised – if at all possible – before proceeding. You should never buy a property with illegal features that are impossible to legalise.

Another reason why the property might appear to be incorrectly described in the deeds is because you have been mislead as to what you are buying. When this happens it normally involves property with land, however it could also conceivably happen when buying on an urbanisation, or any detached property. The point is that you have to take great care to study the deeds and relate them to what you have been physically shown during the visit. This demonstrates why it is so important to take detailed notes and photos of a target property when you visit. You then need to have the deeds clearly explained to you by your lawyer, who should translate the relevant section for you so that you clearly understand how the property is described. In an ideal world your lawyer will be able to visit the property to confirm that it is as described in the deeds, so try and arrange this if possible.

If you are buying a property that includes a private parking space then pay attention to how this is presented in the deeds. The parking space might be in the same deed as the property, or in a separate deed. If it is in a separate deed then it needs to be checked in the same way as the main property. A separate deed is slightly more complicated and means you will have to pay separate rates and slightly higher transaction charges (Notary fees, land register fees and stamp duty).

You must not buy a property until it is accurately described in notarised title deeds, or until some other mechanism has been arranged by which you can be sure that accurate deeds can be notarised and inscribed in the property register. If there are any illegal features that are not described in the existing deeds then you will have to negotiate an acceptable legalisation process with the vendors. If necessary you might consider agreeing to pay part of the costs of the legalisation process. However some discrepancies are too big or too illegal to sort out, even with the best will in the world on both sides. If this is the case, and you lawyer will have to advise you here, then just walk away from the deal. If you sign deeds before any discrepancies have been resolved, then the problem becomes yours and yours alone.

Some illegal features may become legal by virtue of the amount of time that they have existed – normally after 4 years without any complaints from neighbours or orders from the town hall to remove them (Expediente de infración urbanistica). However in this case you must always have a registered architect certify that the feature is more than 4 years old (certificado de antigüedad de un arquitecto certificado), and get the all clear from the town hall before proceeding to commit.

When checking the deeds your lawyer will also have to pay attention to how many times the property has changed hands in the last 4 years, and who the previous vendors were. If the property has changed hands at all in the last 4 years, and if any of the previous vendors in this period were non-resident, then your lawyer will need to check that a 5% retention was paid to the tax authorities buy whoever bought the property from a non-resident vendor. If the property has not changed hands in the last 4 years (4 years and 1 months, to be precise) then there is nothing to check.

Check the cadastral record

Whilst the principle function of the property register is to record title, the cadastre (catastro) records the location, physical dimensions and classification of all properties in Spain. The cadastre provides a generally accurate physical description of all properties, and also includes plans, maps, and aerial photographs. The cadastre is a very useful source of information when buying rural property as it helps to identify discrepancies between the deeds and what you have been shown. Various types of reports can be requested from the cadastre that help clarify the physical dimensions and features of a property. Your lawyer will have to decide if this check is necessary and which report to request.

Along with keeping a record of the precise location and physical attributes of every property in Spain, the cadastre also serves to calculate the municipal rates (IBI) for each and every property in Spain. Indeed its primary function is to serve as an inventory of property for tax and assessment purposes. Therefore if you have any problems getting IBI receipts from the vendors you can get the property’s cadastral reference number (referencia catastral) from the cadastre and then use this to get an IBI report from the town hall. If you know the address of the property you can find out the referencia catastral in an instant by checking online at the cadastre’s website (see Solutions for Spanish property buyers, owners and vendors for link to the Cadastre online services). There is no charge for this check and you will also be able to see a plan of the property online.

Check with the urban planning department of the town hall

It may be necessary to check various issues with the planning department (urbanismo) of the town hall.

If the property does not match the description in the deeds then your lawyer may need to visit the planning department of the town hall to clarify what is and is not legal, and what can be legalised if necessary. The planning department has plans for all the land within the municipality, along with the regulations that govern what can and can’t be built on this land. In some cases it may be more appropriate for an architect to carry out this check and report back to your lawyer, as not all lawyers understand the intricacies of planning regulations.

In some parts of Spain, especially in the south, Notaries have given their consent to deeds that contain illegal building. Of course this should never happen but it does, albeit rarely. If you are buying in an area such as Marbella, where a few Notaries have turned a blind eye to irregularities, then it may be necessary to check the property with the planning office, regardless of whether the deeds are correct or not. The truth is there is never any harm in requesting a report (informe urbanístico) from the planning department of the town hall, just to be sure of the situation. It is of course an extra expense.

If you are buying a property on the assumption that you can extend or refurbish it then you will need to have your lawyer, or preferably an architect, check what you will be allowed to do. This can only be checked at the planning department of the town hall. Ideally you should present your building plans (projecto) to the town hall for approval before you reach the point of no return. That way you can be sure that you will be allowed to extend the property the way you wish to before you buy.

Over the last few decades there has been a problem with illegal developments in Spain. When buying a recently built property, and especially when buying newly built property from an investor, you may need to check that planning permission (licencia de construcción) was granted, that a certificate of completion (certificado de final de obras)was signed by an architect, and that an occupancy licence (cédula de habitabilidad or licencia de primera ocupación) was issued by the town hall. Generally speaking, if a property has mains connections to water and electricity then it has necessary licences, as the utility companies will only supply properties with an occupancy licence. Note that some British buyers on developments in the Costa del Sol are having to survive with water and electricity taken from the developers ‘works’ connection rather than directly from the utility companies. This is because these developments have not been granted occupancy licences. At some point these owners will be cut off unless the licence is granted.

In some cases entire urbanisations have planning problems or issues that have not been resolved with the municipal authorities. The developer may have cut corners with the infrastructure or proceeded without the necessary permits, and owners may have to correct these problems at their expense, sometimes years later. Owners on these developments may also experience problems receiving municipal services such as rubbish collection and road maintenance, which adds to the cost and inconvenience of living there. Someone trying to sell a property on one of these urbanisations has no incentive to broadcast these problems, so it may be worthwhile checking these issues with the town hall before you buy a property on an urbanisation. The town hall can confirm if an urbanisation suffers from any outstanding issues, and whether the urbanisation has been fully approved.

If you are looking at a property in an urbanised area you may also wish to find out what is going to be built around the property. Many British people have been sold property with pleasant views on the promise that nothing will ever be built to obstruct the view. This often turns out not to be the case and a fair number of people have lost their sea views to an apartment block. In Spain you have to assume that if a 5-storey apartment block can be built on the plot in front of the property then that is exactly what will be built. A look at the urban plan(plan parcial) in the town hall will reveal exactly what can and can’t be built on the land around the property you are considering.

Lastly you also need to check with the town hall if you want to know about the overall development plans for the region. This information is contained in the general plan (plan general) and includes plans for major projects such as motorways, airports and railway lines. If you are buying in a consolidated urbanised environment it is very unlikely that you will be adversely affected by anything in the general plan. Outside of consolidated areas, however, there is a very small chance that plans to build a motorway, or reclassify rural land as development land, could affect the property you are considering.

Check the community of owners

If the property is part of a community of owners (comunidad de propietarios), as is nearly always the case for apartments and urbanisations, then you should check that the vendor is up to date with community fees (gastos de comunidad or cuota de la comunidad de propietarios).

You also need to find out what the community fees are so you can budget for them, and check whether there are any plans afoot to upgrade the communal areas that might mean a large and unexpected cost shortly after you have purchased. Finally you should always check the community bylaws for any that might affect you (such as restrictions on renting out properties). You can obtain all this information from the secretary or administrator of the community of owners (administrador de la comunidad de propietarios) who can also provide you with a copy of the community bylaws (Los Estatutos de la Comunidad de Propietarios).

Other issues

• Check the amount of plusvalía if the vendor is non-resident, or if there is any chance that you might have to pay it. This can be checked with the town hall.
• If the vendor is an off-shore company, confirm that that the special 3% tax levied on this form of ownership has been paid to date.
• If the property is within 500 metres of the coast then your lawyer may need to confirm that the property does not fall foul of the coastal planning law (ley de costas).
• If the property is being sold with furniture of any value then make sure you are provided with a signed inventory of the furniture.
• Check that all utility bills are up to date (water, gas, electricity, telephone) by obtaining copies of the latest receipts from the vendor.
• Confirm that you are not expected to pay the estate agent’s commission.
• Obtain the exact postal address of the property.
• Find out if the vendor has any technical plans and specifications for the property, and ask to see them if they do. If the property is less than 10 years old then enquire into the builder’s guarantee.
• If buying a rural property have your lawyer check if any 3rd parties have rights of way over the property (servidumbres de paso), or whether the property you are considering needs rights of way over someone else’s property. The same applies to water rights and hunting rights.

Deposit payment

If you sign a private contract that involves you paying a deposit of, for instance, 10% of the price, then you need to agreed a payment method that is acceptable to both you and the vendor.

The options are as follows: 1) Pay the funds to the vendor, 2) Pay the funds to the estate agent, 3) Pay the funds to the vendor’s lawyer, 4) Pay the funds to your lawyer.

Paying the funds to the vendor will of course suit the vendor nicely, but if the vendor were to back out of the sale this could make it more difficult for you to get your deposit back. Therefore don’t do it. It is better to pay the deposit to a 3rd party, such as a lawyer (yours or the vendors, but ideally yours), who can be expected to pass the deposit on to the appropriate party according to the contract and the outcome. In reality it is quite common to pay the deposit to the estate agent, which is not a problem if the estate agent is professional and trustworthy. What is a problem, though, is knowing which estate agents to trust. Therefore in most cases you should avoid paying a deposit to an estate agent.

Whichever 3rd party you pay the deposit to, try and ensure that they have a bonded escrow account that provides you with extra protection. Unfortunately few lawyers or estate agents in Spain have such accounts, so you may have to make do without this protection. Whichever method you agree with the vendor make sure you have the necessary bank details to make the payment on time.

Purchase contracts

Once you have done all the checks that are appropriate in your case, and have been given the all clear by your lawyer, you can commit by signing a private contract and paying a deposit. As shall be explained below this is not the only way to proceed but it is the most common.

In some cases you may be able to skip the private contract stage altogether and go straight to signing the public deeds before Notary. This is the case if you are in a position to do the due diligence quickly, and can move onto signing the public deeds in under a month. In essence all the private contract does is buy you (or sometimes the vendor) time to be get prepared for signing the deeds. If both you and the vendor can move quickly then there is not point in signing private contracts, as they are nothing more than a step on the road to signing the deeds.

There are various ‘private’ contracts you can sign before you get to the ‘public’ contract (the deeds you sign before a Notary). Private contracts are no less binding on the buyer and seller than the public deeds, but they can’t be inscribed in the land register without the Notary’s signature, and they are not binding on 3rd parties, such as the vendor’s creditors. Never sign any contract, public or private, without your lawyer checking it first and giving you the go-ahead.

Option contract

In Spanish: Contrato de opción de compra

With this contract you pay an agreed amount to the vendor – say 5%, though it could be as high as 10%, of the agreed price – and in return the vendor commits to sell you the property at the agreed price if you exercise the option to buy within the timeframe agreed. If you exercise the option to buy then the contract becomes, in effect, a fully binding private contract of sale, and your payment counts towards the full price. However if you don’t exercise the option in the agreed timeframe, then you lose the money you have paid for the option, and the vendor is no longer contractually obliged to sell you the property. That would be the end of the matter and you would have no grounds to dispute the contract in court. For this reason this contract is popular with vendors. However you should only sign this contract and pay the option amount if you are sure that you want to proceed. You need to do a full due diligence before proceeding to sign this type of contract.

Reservation contract

In Spanish: Documento de reserva

This contract requires that you pay a deposit to reserve a property for a specified period of time – usually 30 days. At the end of this period you either back out and lose your deposit or proceed to a more substantial contract that commits you to buying, such as a deposit contract, a private sale contract or even the public deeds. If you proceed, 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.

British buyers will almost certainly be asked to sign a reservation contract when buying from a developer, and estate agents may also try and get British buyers to sign a reservation contract when buying resale property. There is a good reason for this and not one that favours the buyer. Estate agents want to turn the momentum and enthusiasm of your visit into a commitment as quickly as possible. If you go home having signed a reservation contract and paid a non-refundable deposit of 6,000 Euros you are more likely to proceed with the purchase than if you go home having seen a property that you plan to buy, but without having made any commitment. The deposit makes a change of mind more costly, so on average fewer people change their mind if they have paid one.

The truth is that reservation contracts do buyers few favours. They involve a substantial financial commitment of 3,000 to 6,000 Euros before any due diligence is done, and they are usually very basic and vaguely drafted documents that give the buyer little protection. You are much better off doing an appropriate due diligence and then signing a more substantial contract, even if this takes longer. If you really feel the need to take a property of the market for a period of time (when buying from a private individual) then propose using the option contract described above. In any event never sign a reservation contract without checking with your lawyer first, and try and avoid this contract altogether.

Note that some agents and networks insist that you pay a deposit of around 6,000 Euros just to communicate an offer to the vendor. Always check with estate agents in advance if they have this policy, and avoid dealing with them if they do.

Deposit contract

In Spanish: Contrato de arras penitenciales

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 having signed the deposit contract you will lose all of your deposit to the vendor. However if the vendor backs out before signing the deeds then the vendor will have to pay you back double the deposit. Therefore 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. Unlike the contracts discussed below you cannot be forced to go through with the sale, though you lose your deposit if you don’t.

You should only sign a deposit contract once you have done the necessary due diligence and been given the all clear from your lawyer, as you may lose the entire deposit if any problems subsequently emerge. Spaniards often use the deposit contract when buying property, unlike the reserve contract, which the Spanish have never typically used. This is the contract you are most likely to be asked to sign.

Down payment contract

In Spanish: Contrato de paga y señal

The down payment contract is very similar to the deposit contract and contains much the same information. The big difference being that there is no mechanism for backing out unless both sides agree to call of the transaction. Neither of the parties can back out unilaterally so you will be forced to go through with the purchase if the vendor is unwilling to tear up the contract and return your down payment.

Private purchase contract

In Spanish: Contrato privado de compraventa

Like the down payment contract the private purchase contract is a binding contract with no mechanism for backing out unless both sides agree to tear up the contract. However in this case you pay no down payment at the time of signing the contract, which means you have to pay the full amount of the purchase at the signing of deeds before Notary. The private contract is just as legally binding as the public deeds. The difference is that the private contract can’t be inscribed in the property register because it hasn’t been authorised by a Notary.

As a British buyer it is very unlikely that you will sign a private purchase contract if there is no deposit or down payment involved. When the buyer is foreign, the vendor will always insist on a deposit or down payment, as otherwise it is too easy for the buyer to walk away from the contract. Although this would be breach of contract, the vendor would have difficulty enforcing the contract on a buyer in a different country. This means that, as a British buyer, you will only ever be offered a down payment or deposit contract.

It is important to realise that the full amount you have agreed to pay the vendor will be noted in whichever private contract you sign, even if you have agreed to pay part of the price under the table in cash. However the public deeds you sign before Notary will only mention the amount you have agreed to declare, which is what the tax authorities will see. Private contracts that can be used to prove a discrepancy between the agreed price and the declared price are usually destroyed after the deeds have been signed and the sale completed.

Lastly, whenever you sign a contract that involves making a payment, this should be clearly noted in the document you sign, or you should be given a signed receipt. All these contracts should also provide unambiguous detail on the buyer, the vendor, the property, the price agreed, the deadline for signing the deeds, vacant possession, debt-free title, how the transaction costs will be paid, clauses that allocate responsibilities, conditional clauses that need to be met for the contract to be valid, and how disputes will be resolved. If you are buying any furniture or other items from the vendor these should be included in an inventory attached to the contract.

Signing the deeds - escritura pública

Signing the public deeds of sale before a Spanish Notary is the moment when you buy the property outright.

Once this is done the property is yours and you can have your title inscribed in the land register – the most secure form of ownership. Once your title is inscribed in the land register no one can challenge your claim to the property. Furthermore, because private contracts are only binding on the parties to the agreement, and not on 3rd parties, you will find it impossible to get a mortgage unless you sign public deeds and inscribe them in the land register.

The private contract you have signed will state the date by which the public deeds must be signed. This is normally anything from 1 to 6 months later, depending upon what you agree with the vendor. You will find this time useful for preparing for signing the deeds.

Preparing for signing the property deeds before a Spanish notary

To sign the deeds before Notary you must either be present in person or arrange a power of attorney for someone else – usually your lawyer – to sign on your behalf. If you are buying the property jointly with other people you must all be present or sign separate powers of attorney (the same applies on the vendor side). So if you cannot make it to the signing in person you must arrange a power of attorney in good time. You can authorise a power of attorney by signing one before a Spanish Notary, or through the Spanish consulates in the UK, or through a British Notary Public with a Hague Apostille.

There are some other issues you need to sort out in advance to ensure that the signing and aftermath proceeds smoothly.

• Select a Notary. It is your right as the buyer to choose the Notary. As you are unlikely to know any Spanish Notaries you will need to leave the decision to your lawyer. Find out from your lawyer what arrangements need to be made to pay the Notary.
• Fix the date and time for signing. As private contracts normally only give a deadline for the signing of the deeds you now need to agree an exact date and time with the vendor for signing the deeds, and confirm the appointment with the Notary. You also need to inform the vendor of the Notary’s name and address. Once the date has been agreed you need to make your travel arrangements if you are attending in person.
• Make sure you have the necessary funds in Spain. If you are using a mortgage you will also have to make sure that the funds required to pay all the taxes and inscribe the title in the property register have been transferred to your account with your mortgage lender. Your mortgage lender will explain what you need to do and when in this case.
• Agree payment method with vendor. In most cases you will be expected to produce a bank-guaranteed cheque (cheque bancaria) issued by a branch in Spain. Cheques without a bank guarantee will not be accepted, and cheques from branches abroad could cause problems. If you are bringing cheques, find out exactly to whom they should be made. Another convenient option is to transfer the money to the Notary’s escrow account, if the Notary allows this. Your lawyer should inform the Notary of whichever method you agree with the vendor. Make sure you have all the necessary details to arrange the payment (for instance the Notary’s escrow account details and the reference details you have to provide) in good time.
• Arrange a mortgage valuation. If you need a mortgage and have been unable to arrange a mortgage valuation by this stage then you must have one carried out now. You will not be granted a mortgage without a valuation. You will also have to inform your mortgage lender of the date, time and place of the signing of deeds, as their representative will need to be present.
• Withdraw cash if necessary. If you have agreed to pay a part of the price under the table you will have to withdraw cash before you go to the Notary. Depending upon the amount this can be quite a challenge. Be warned that there are restrictions on the amount of cash you can withdraw from your bank, even if you have the funds in your account. Always check in advance with your bank how much cash you can withdraw in one go without raising questions.
• Remind the vendor that a certificate from the president of the community of owners (signed by both the president and the administrator) is required. If the property is part of a community of owners you need to remind the vendor at least 10 days in advance of the signing to request this certificate of payments from the administrator or secretary of the community of owners. This certificate (certificación sobre las deudas con la Comunidad de Propietarios) will need to be shown to the Notary during the signing.
• Check which documents you need to bring to the signing. Check with your lawyer – who will check with the Notary – what documents you have to bring to the signing. As a minimum you will need to bring your passport (or Spanish residency card if you have one) but you may also be required to produce an NIE number and other certificates such as birth and marriage certificates, and even possibly official translations of these documents. It depends upon the Notary and the circumstances of your transaction. Always check in advance.
• Check the postal address of property. Find out the exact postal address of the property. This may not be the same as the address given in the deeds.
• Gather information for changing the utility contracts. Get all the information you need to take over the vendor’s utility contracts, if you haven’t done this already. This means getting copies of all the latest utility bills from the vendor. Make a note of the telephone number. If more than 3 months have passed since your lawyer checked that all local taxes and utility payments are up to date then ask to see the latest receipts or payment.
• Keys. Find out how many sets of front door keys will be handed over. Ask to be given keys to all doors and gates, or be given instructions as to where they will be left at the property.
• Security alarm. If the property has a security alarm, find out the security code.
• Confirm date of vacancy. Confirm that the property will be vacant from the time of signing the deeds. The vendor has no right to remain in the property after signing the deeds, but you may give them permission to stay for a specified period of time whilst they arrange to leave. If this is the case it must be covered in the private contract you sign. Always try and avoid anything but vacant possession.
• Last visit. If at all possible try and arrange for a time to visit the property with the vendor to find out how all the property’s functional systems work, and cast an eye over the condition of the property.
• Local providers. Ask for a list of contact details of useful local providers from the vendor.
• Arrange insurance. Arrange insurance for your new property so that you are covered from the moment you sign the deeds.

Signing the property deeds before Spanish Notary

Notaries are required by law to run certain checks before they witness a deed of sale. For instance the Notary is supposed to request a nota simple to confirm that the vendor is the genuine owner of the property and that the property is free of any (unexpected) encumbrances. This leads some estate agents to claim that buyers are perfectly well protected by the Notary and don’t need a lawyer. Nothing could be further from the truth. You must use your own lawyer, not only for the due diligence but also for accompanying you to the Notary. In reality the Notary gives you little protection so you must be accompanied by an experienced and qualified professional when signing the deeds.

In the days before the signing of the deeds your lawyer should have passed the Notary’s clerk all the information required to prepare the deeds. Your lawyer should then have obtained a draft copy of the deeds to check before the day of signing. This check is important, as you do not want to discover any errors in the Notary’s office as this could delay the signing.

Assuming that everything has been correctly prepared then signing the deeds before Notary is a relatively straightforward affair. Having said that it can feel a bit crowded and chaotic, not to mention bizarre for British buyers unaccustomed to such proceedings. Along with the Notary, all parties to the agreement must be present, which means everyone selling, everyone buying (or powers of attorney), any mortgage lenders involved, and lawyers from both sides. Any estate agents or brokers involved are also likely to be present – to ensure that they are paid!

Under normal circumstances all you need to take with you to the signing is your passport and any cheques or cash if you are paying this way. You should also take along your NIE number if you already have it, though this is not essential for the actual signing (but will be needed within 30 days of the signing to pay the necessary taxes). Always make sure you have a few hundred Euros of cash on you, as there may be some petty expenses, such as sharing the IBI for the year, which you may be able, settle on the spot with the vendor.

Upon arrival you will be asked by the Notary’s clerk for your identity document, and then shown into an office with all the parties involved to wait for the Notary. You may pass an uncomfortable half hour or more of silence or small talk with the vendors, who you may be meeting for the first time. The Notary will then breeze into the office, take a seat at the head of the table and start the proceedings.

The Notary will start by checking all the vendors and buyers against their identity documents. Various details of your civil status may be confirmed (nationality, domicile, profession, age, etc) along with your matrimonial regime, if relevant. The Notary then starts reading the deeds aloud in Spanish, so unless you speak Spanish you will have no idea of what the deeds say. This is not a problem if your lawyer is present. However if, for whatever reason, you are not accompanied by a lawyer at the signing of the deeds, you must take a translator along with you so that you know what the deeds say before you sign. Some Notaries will refuse to sign the deeds if one or other of the parties does not understand Spanish and does not have a legal representative or translator present.

In the course of reading aloud the deeds, in which the property and the agreement are described in detail, the Notary also confirms the payments made by the buyer to the vendor. This is when you produce payments such as bank drafts for any outstanding amounts on the declared price (the price stated in the deeds less any deposits or down payments already paid). But now comes a very important point of etiquette: if you have agreed to pay a part of the price under the table, then never produce this cash in the presence of the Notary. Always wait until the deeds have been signed and the Notary has left the room before you bring out the envelope stuffed with cash.

If you are taking out a mortgage then this will require a separate deed, which the Notary will also read through. The Notary should also check the latest IBI receipt and the certificate from the secretary of the community of owners to ensure that the vendor is up to date with these payments. Finally the Notary informs the buyer and the vendor of their fiscal obligations. If the vendor is a non-resident the Notary will confirm that the non-resident tax retention has been made by the buyer, to be paid to the Spanish tax authorities within 30 days.

If no objections have been raised by either party as the Notary reads through the deeds, and if the payments are correct, then the deeds are passed round for signing by all parties and finally by the Notary. You are then handed the keys.

Once the deeds have been signed the Notary will often leave the room. If you are paying any money under the table (which is illegal and you are strongly advised not to do) this is the time to hand it over to the vendor, who will no doubt count it in your presence. Once this is done the sale is complete and all that remains for you to do is collect an unauthorised copy of the deeds (copia simple) from the Notary’s clerk before leaving (there is a small charge for each copy and you should inform them of the number of copies you need in advance). The Notary will keep the original deeds (copia autorizada) for a few days to record them in the Notary’s register, after which they can be collected for inscribing in the land register.

You may have to settle the Notary’s fees before leaving if you have not made prior arrangements on this front with your lawyer. If so be sure you know what the Notary’s fees amount to and have the funds on you to pay them.

More about notaries and why you can't avoid them

The notary is one of the key figures of traditional Spanish society, along with others notables such as the doctor and the priest. But whilst the standing of the clergy in Spain has taken a bit of a beating in recent decades, Spanish notaries continue to enjoy a prestigious position in society, not to mention a privileged revenue stream guaranteed by law.

Though they earn their fees from private individuals and companies, notaries are essentially public officials who play a neutral role in drafting and witnessing many types of contracts in Spain. Their job is to ensure that both parties to an agreement understand the terms of the contract, that the terms of the contract do not contravene any laws, and to ensure that the appropriate taxes generated by the transaction are paid.

Why do you have to sign public deeds before a notary?

The notary public is not so important in other countries. When you buy a property in the UK, for example, you exchange contracts, pay the vendor, get the keys and the property is yours, after which you are free to register your title in the land register. The big difference in Spain is that you can’t inscribe your title in property register – Spain’s version of the land register – unless a Spanish notary witnesses the deeds of sale. Under Spanish law a notary’s signature is required to ‘elevate’ a private contract into public deeds that can be inscribed in the land register, so the bottom line in Spain is no notary signature, no inscription in the property register.

But is inscription of your title in the Land Registry (registro de la propiedad) really necessary? In theory no, as a private contract between buyer and seller is fully binding on both parties (though not on third parties). Some Spaniards, especially in rural areas, own property that is not inscribed in the register, thus saving on the hassle and expense (notary fees, registry fees and taxes) of inscription. And curiously there is much more property inscribed in the property register than exists in all of Spain, so something is not quite right. For British buyers, however, it is crucial to inscribe their title in the property register, as it is the only truly secure form of property ownership in Spain. The first person to inscribe title to a property gets to keep it, which is all the reason you need. There are other advantages too, for instance protection from the vendor’s creditors and the ability to take out a mortgage against your property. So all buyers need to complete their purchase in the presence of a notary if they are to enjoy the benefits of inscription in the property register.

When can you sign?

It depends upon whether you are buying a resale property that already exists, or a new property from a developer that is under construction or off-plan.

When buying a resale property you can sign the deeds before notary at the first convenient time for you and the vendor. This is often between 1 and 3 months after signing a private contract. Be careful when buying resale properties from foreign vendors who have large mortgages: there is a small risk that they will take your deposit and skip the country, after which the mortgage lender will sell the property to pay off the mortgage and you may be left with nothing. When the vendor is a foreigner with a large mortgage you should avoid private contracts with deposits and go straight to signing the escritura – the public deeds before notary.

When buying a newly built property from a developer you can sign the escritura and make the final payment once the property has been certified as duly completed by the head architect. Unless you have agreed to sign deeds for a property under construction, which is always best avoided, you are not obliged to sign the escritura until the developer can produce the certificado de final de obras signed by the architect.

Preparing for signing

Whatever type of property you buy you should only sign the escritura once your lawyer has carried out all the final legal checks, for instance on the vendor’s title, debts and licences, to mention just some of the necessary checks.

You also need to agree a payment method with the vendor before you turn up at the notary. Bank-guaranteed cheques issued by a branch in Spain are the preferred method, though it should also be possible to transfer funds to the notary’s escrow account. Banker’s draughts from banks outside of Spain are likely to be viewed with suspicion by many Spanish vendors, and may well be rejected. To avoid a crisis in the notary’s office just make sure the vendor is aware of and happy with your proposed payment method, and then get all your funds in place.

Also make sure you have the necessary documents with you when you go to the signing. In most cases you only need your passport, though it does depend upon the notary, and you should always have your lawyer clarify what the notary requires before you attend.

Though it is always best to attend the signing in person you can also have someone sign on your behalf by granting them a power of attorney. The easiest way to grant power of attorney is to sign one before a notary in Spain, though at greater expense one can also be arranged through the Spanish consulates in the UK or through a British notary public and Hague Apostille. Everyone involved in the transaction – all the vendors, buyers, and mortgage lenders – have to be present in person or represented by powers of attorney at the signing of the escritura.

What happens in the notary’s office?

Upon arrival you are shown into an office with all the parties involved to wait for the Notary. You may pass an uncomfortable half hour or more of silence or small talk with the vendor, who you may be meeting for the first time. The Notary – who always exudes importance – will then breeze into the office, take a seat at the head of the table and start the proceedings.

The notary will confirm the identity and other personal details of all the buyers and sellers present, and then read the deeds out loud. Some notary’s like to show off their English by giving a partial translation, though most will just read them out in Spanish. Whatever the case you need to be sure the deeds are correct before you sign them, which means having a translator present or relying on your lawyer. Some notaries will refuse to sign the deeds unless a foreign buyer has a lawyer or translator present.

The notary will also make certain legal checks, though these vary by autonomous region. As a minimum they should have request a property registry filing just before the signing to confirm the vendor’s title, and that the property is free of any (unexpected) encumbrances. This leads some estate agents to claim that buyers are perfectly well protected by the Notary and don’t need a lawyer. This is not so. In reality the Notary gives you little protection so you must be accompanied by an experienced and qualified professional when signing the deeds.

If nobody objects to the content of the deeds the notary will pass them around for signing by all parties, and confirm the payment of any outstanding amounts by the buyer before the keys are handed over. This is when you produce payments such as bank drafts for any outstanding amounts on the declared price (the price stated in the deeds less any deposits or down payments already paid). But now comes a very important point of etiquette: if you have agreed to pay a part of the price under the table, which you are strongly advised not to do, then never produce this cash in the presence of the Notary. Always wait until the deeds have been signed and the Notary has left the room before you bring out the envelope stuffed with cash. The vendor will then count out the cash in front of you.

After signing the deeds

After signing the deeds the property is all yours, though the taxes still need to be paid and your title inscribed in the property register.

You will be given a copy (copia simple) of the deeds to take away after the signing. Each copy costs around 30 Euros so you should decide how many copies you want in advance. You can use the copia simple to do most things, such as set up utility contracts and pay taxes. A few days later your lawyer will be able to collect the original deeds signed by the notary (copia autorizada), which are needed to inscribe your title in the property register. In the meantime the notary should have faxed notification of your purchase to the property registry immediately after the sale, thus blocking the register for 10 days and preventing anyone else from inscribing a claim to the same property during this period.

Spanish Notary costs

Notary fees are set by the government according to the number of clauses in the deeds and the declared value of the property. As an approximate guide they range from 0.1% of the declared price of a property (for properties of 400,000 Euros or more) to around 0.4% (for properties of under 100,000 Euros). If you use a mortgage then you will have to pay Notary fees on the mortgage deeds as well.

After signing the deeds

After signing the deeds there are a number of important tasks to carry out. Some of these can be performed by your lawyer, though you do need to confirm that they are included in the price you agreed with your lawyer. Alternatively you can use a gestor appointed by the Notary, though you should always find out what the cost of this will be in advance. If you have taken out a mortgage then your mortgage lender will insist that their gestor to pay the necessary taxes and inscribe the mortgage and title in the property register. If this is the case they should have informed you what the cost will be.

Immediate notification faxed to the land register

Immediately after signing the deeds the Notary’s office will fax notification of the transaction to the land register if asked to do so by the buyer. This makes it impossible for anyone else to inscribe the same property in the land register for the next 10 days. The risk of this happening is very small, as it requires that the vendor try to sell the same property to two different buyers within a short space of time – an intentional fraud.

Paying the taxes resulting from the purchase

If you buy a resale property without using a mortgage the only tax you have to pay is the transfer tax called ITP (Impuesto sobre Transmisiones Patrimoniales).This tax includes another tax called IAJD(Impuesto de Actos Jurídicos Documentados), which you will often hear referred to as stamp duty. For the lastest ITP tax rates see The Cost of Buying and Owning Property in Spain

If you use a mortgage then you will also have to pay stamp duty on the value of the mortgage. This tax varies (for example, between 0.5% and 1%) by autonomous region.

Taxes must be paid via an authorised bank within 30 working days of the signing of the deeds. You will only be able to inscribe your title and mortgage in the property register if you have proof that taxes have been paid. You will need your NIE number, the appropriate form, and the copia simple to pay any tax. The bank will then notify the regional tax office (Delegación de Hacienda de la Comunidad Autónoma).

If you have purchased a property from a non-resident you will also have 30 days to pay the tax retention that you have withheld from the vendor (payment via authorised banks). Proof of this payment is required before you can inscribe your title in the land register. You will also have to pass on proof of this payment to the vendor or the vendor’s lawyer, as without this they cannot claim back any tax if the retention was greater than their tax obligation.

If you have agreed to pay the plusvalía then this has to be paid to the town hall within 30 days of the sale. Once again you pay this via a bank, but will need to visit the town hall first, and maybe even afterwards with proof of payment.

Inscribing your deeds in the Land Registry and updating the Cadastre

Once the ITP has been paid you can inscribe your title in the property register (via the local property registry office). The law does not oblige you to inscribe your title but there are significant advantages in doing so such as:

• Being considered the only true owner of the property.
• Protection from the vendor’s creditors.
• No one else can register a claim on the property without your consent.
• Being able to secure loans against your property.

The sooner you inscribe your title in the land register the better, so it should be done straight after paying the ITP.

To inscribe your title in the property register you will need the following:

• The original deeds (copia autorizada).
• Receipt to prove that ITP has been paid.
• Copy of the vendor’s latest IBI receipt.
• Photocopy of your identity document.
• NIE number (or NIF number in some cases).

The inscription process should be completed within 15 days, after which the deeds can be collected. If the inscription fails for whatever reason you will be informed of this and told what you need to do to correct the problem and inscribe successfully.

Once your title has been inscribed in the property registry the deeds (copia autorizada) can be collected. You may find it more convenient to have your lawyer to keep them safe for you. Otherwise you need to keep them in a safe place.

Updating the cadastre

You have to inform the Cadastre that you are the new owner within 2 months of the date of signing the deeds. If you fail to do this the town hall will be unable to collect municipal rates (IBI), and if you fall behind with these payments your property can be embargoed, and ultimately sold off. In theory the property registry office and the Notary will inform the cadastre of your new title but they might not provide the cadastre with the information in needs for collecting payments, so you should also have your lawyer or gestor inform the cadastre as well.

The most convenient place to update the cadastre is usually the town hall. Take along a copia simple plus a photocopy of your identity document and your NIE number. You should provide the cadastre with your correspondence address (if different from the property) and your bank account details so that you can pay by standing order.

Utility contracts and the Community of Owners

An important task after taking possession is to sort out contracts with the utility companies (water, electricity, gas, and telephone).

Usually you have 2 options when sorting out the utilities.

The cheapest and easiest option is to take over the vendor’s contracts. This avoids you having to set up new contracts with each company, and may save you money. However to do this you do need to have a recent copy of each utility bill from the vendor. Assuming you have copies of the relevant bills you can ring up each utility company (the telephone number to ring is always given on the bills), quote the policy number on the bill, and then change the name, correspondence address and bank account details to yours. You will also have to give each company your NIE number. It is usually possible to provide a correspondence address in the UK if that is where you wish to have the bills sent to. You can also carry out these changes by visiting the nearest consumer services office of each utility company, or in some cases online.

Utility companies tend to charge bi-monthly or quarterly so it may be simpler for you to set up new contracts than try and coordinate the payments during the changeover period with the vendor (and risk being cut off). The process for setting up new contracts varies by utility company and region, though in most cases the process can be started by submitting an application online or by ringing the company. Alternatively you can visit the nearest consumer services office of each utility company.

To set up new contracts you will usually be asked to provide your name, NIE number, the address of the property, your bank account details and a copia simple of the deeds. When setting up contracts for a newly built property you will also be asked to produce a first occupancy licence (licencia de primera ocupación) but for resale properties that have already been receiving utilities this is not usually necessary. If you are asked to produce a document certifying that the property is habitable it will be the cédula de habitabilidad, which you can get from the town hall. It’s always a good idea to have several photocopies of your passport when dealing with the utility companies as they may ask for this. When you set up new contracts someone may have to come round to read the meter, and you may be charged anything from 50 to 100 Euros for setting up each new contract.

Generally speaking you will find it problematic dealing with the utility companies if you don’t speak Spanish. You are advised to hire a gestor or property management company to make all these changes for you.

Community of owners

If you have bought a property that forms part of a community of owners you will have to provide the administrator or secretary of the community with your bank account details and contact details so that you can be charged your community fees and participate in the management process if you wish.