Conveyance in Spain: valuable tips

Conveyance in Spain is a very complicated process for foreigners, so it is highly advisable to hire a local experienced lawyer but it is also recommendable to have a global idea about such a process. Please, read these  tips for non-residents wishing to buy a property in Spain.

0) Contents

  • 1) Process of acquiring a property in Spain
  • 2) Common Expenses
  • 3) FAQs

1) Process of acquiring a property in Spain by a non resident in short

1.1. Capital flows. Money coming from abroad into Spain

Under Spanish law, you can only enter and leave Spanish territory with a capital not exceeding 10,000.00 euros per person and trip. Larger amounts must be declared to customs control. You should also find out what the limits of tax and customs in your country of origin are to avoid offenses and administrative infractions.

1.2. Private documents of sale.

Conveyancing in Spain - Rodríguez Bernal LawyersThe conveyancing process takes place in several stages. Some occur between private persons and take place before a notary public. Generally, the seller agrees with the buyer that the property should be reserved for some time, prior deposit of about 10% of the price of the property. This operation is formalized in a private documents, which can have many different names and have certain differences in their legal nature: earnest money contract (contrato de arras), purchase option (opción de compra), reservation document (documento de reserva), promise of sale agreement (promesa de compraventa), etc. In these documents we could find the basic conditions for the future purchase, like the deadline of the signature, purchase price, distribution of expenses and taxes between buyer and seller and the consequences of failure to formalize the future sale (usually the loss of the deposit -if the buyer defaulted- and the return of twice the amount paid -if the seller defaulted-).

1.3. Signature of the deed of sale

It is made before a notary public and it contains the sales contract. Generally, on the date of signing of the deed the full price is paid, the key is delivered and, with it, the possession of the property. According to the rules of Money Laundering Prevention, payment must be made with bank intervention, usually with a check drawn from a non-resident current account. Therefore the buyer must open a bank account in Spanish territory. Also, before the date of signature, you must have obtained the NIE (identification number for foreigner).

1.4. Mortgage

If you need a mortgage, a representative of the bank has to appear at the notary public to sign simultaneously another deed: the mortgage loan agreement. Before signing the mortgage contract, bank and buyer will have had to agree to the terms and conditions: financing, repayments, and so on.

1.5 Paying taxes.

After signing the deed you should pay the taxes. For this purpose, the buyer must be registered in the Spain´s Agency for Tax Administration (Agencia Tributaria) as a taxpayer, otherwise you will not be able to pay taxes.

1.6. Registration in the Land Registry.

Once you have paid the conveyancing taxes, the property must be registered in the Land Registry in order to enjoy the maximum legal protection. Conveyance taxes must be paid to make the registration enter into force.

2) Conveyance Common Expenses

2.1) Taxes (in force on the date of 2011/06/24)
2.1.1) Second hand property

Normally in Andalusia (Costa del Sol) conveyance taxes are distributed as follows:

Paid by the buyer:

– Tax on property transfers (ITP – Impuesto sobre Transmisiones Patrimoniales): 8% on the price of the sale.

Paid by the seller:

– Tax on the increase in value of urban green field sites, local tax (Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana

– Plusvalía: A variable amount to be determined in accordance with the cadastral value of the land and other factors. This amount may be _ small or large, and could be as much as three thousand euros. It is advisable to get information from the Town Hall before signing any contract or document.

2.1.2) New properties / homes

Paid by the buyer:

– Value-added tax, VAT (Impuesto sobre Valor Añadido, IVA): 10% in the case of houses and garages attached to housing; 21% in the case of independent garages and premises.

– Stamp Duty Tax (Impuesto sobre Actos Juridicos Documentados- I.A.J.D.): 1,5 % on the price of the sale.

Paid by the seller:

– Tax on the increase in value of urban green field sites, local tax (Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana

– Plusvalía: A variable amount to be determined in accordance with the cadastral value of the land and other factors. This amount may be _ small or large, and could be as much as three thousand euros. It is advisable to get information from the Town Hall before signing any contract or document.

2.1.3) In case of mortgage financing

In Andalusia, to be paid by the buyer:

– Stamp Duty Tax (Impuesto sobre Actos Juridicos Documentados – I.A.J.D.): 1,5% on borrowed capital, interest and court costs.

2.2) Notary fees

According to custom in Andalucia, fees will be paid by the buyer

2.3) Land Registry fees

Paid by the buyer.

2.4) Lawyer fees

Buyer and seller will pay the bill of their respective attorneys, or will split the fees between them if only one lawyer is hired by mutual appointment.

3) Frequently Asked Questions

3.1) The seller (or the Real Estate Agency) wants me to give 30.000 € in cash as a deposit, do I pay?

You should be aware that some Real Estate agencies or some sellers want to be given money without any explanation. That can be a big problem. As mentioned above, if you intend to pay that amount in Spain you must comply with the rules on capital movements. If you bring more than 10,000 euros without declaring at customs in Spain, then you can not justify that amount in the deed of sale. It is a common mistake you should avoid.

We recommend that before making a transaction, contact a lawyer in your own country to guide you through the process to avoid committing a crime or administrative infraction of money laundering. We can help you from the start.

3.2) Should I open a bank account in Spain? ¿Can I open it in my country without having to travel to Spain?

You should open a bank account at the earliest opportunity. Firstly, because you must justify the origin of the money to pay the sale price at the time of signing the notarial deed and avoid incurring penalties for breaches of money laundering regulations. Secondly, because of a basic principle of security: you must not move too much cash. Thirdly, because after the purchase you must pay into your bank account many bills for home maintenance: electricity, water, telephone, some taxes, and so on.

You can open a checking account from your country of origin without having to travel to Spain. Some banks offer this possibility. In any case, you can open one with a power of attorney. We can help you in this effort too.

3.3) I want to buy my home with mortgage financing, can you help me?

If you intend to finance the purchase of your property, we can help you in two ways:

  • 1. If you have a bank of choice, we can review the mortgage loan, conditions and, where appropriate, negotiate.
  • 2. We also offer tailored mortgages through banks we work with.
3.4) After the purchase, what expenses will I have to keep a property in Spain?

Usually, expenses are:

  • Property Tax (IBI). Annually.
  • Rubbish Tax. Annually or quarterly.
  • Expenses for supplies: water, electricity, gas and all services hired by the owner.
  • Tax on non-residents’ income (IRNR).

If you have a mortgage:

  • Home Insurance, whose first beneficiary is the bank.
  • In some cases, life insurance, whose first beneficiary is the bank.
Most commen lawyer fees include:
  • Advice and consultancy throughout the whole conveyancing process.
  • Drafting and checking of contracts and private documents.
  • Checking of titles and documents relating to property.
  • Preparation of the notarial deed of sale and presence of a lawyer at the Notary Public.
  • All formalities until complete registration of the property in the Land Registry. Registration of the new owner in the Register of Taxpayers in the Treasury (Agencia Tributaria).
  • Payment of all relevant taxes related to conveyancing.
  • Representing the buyer or seller, by means of power of attorney for this purpose.
Conveyancing fees:

1 % on the total price of sale (minimum fees: 1.200 euros). Expenses and VAT (21 %) not included. Ask for an estimate without obligation.