If you have always dreamed of owning a home in Spain and you are beginning to realise that dream by starting your property search, the very best advice you can take, which is the advice of the UK Government, is to select an independent lawyer right at the start. The Spanish conveyancing system is very different to the system we are used to in the UK, so it is of vital importance to make sure you engage qualified, experienced Spanish property solicitors who can start to guide you, and steer you away from the common pitfalls from the moment you begin your search.
Of course, you are going to want to converse with your chosen lawyers in English, so that there is full clarity over everything. Giambrone’s Spanish property solicitors are based both in Spain and in the UK, and speak fluent English. We work independently and only in the interests of our clients, which is imperative. It is important to realise that some Spanish property lawyers are connected to property agents or developers in some way, and would therefore not be fully focused on your individual interests. This is definitely not the case with Giambrone.
Clear Explanations from English Speaking Spanish Property Solicitors
When you are buying a property in Spain, or indeed if you are selling one, you are naturally going to have numerous questions. You can rest assured that with Giambrone, all those questions will be answered clearly by our English speaking Spanish conveyancing solicitors. Not only will they fully explain the fundamental differences between selling and buying property in Spain and the UK, they will also put your mind at rest over the common issues that you may have been warned about.
And the advice does not stop there. They will also go on to inform you about how everything works in regard to deposits and buyer / seller taxes and fees, as well as your ongoing liabilities as a new property owner in Spain, such as non-resident taxes and inheritance tax, together with any applicable community charges, insurance and IBI (council tax) that you will need to budget for. Sometimes these costs can be overlooked, and may come as a surprise to the new Spanish property owner.
In the following section we will be tackling some of the most frequently asked questions about buying a property in Spain.
What are the main differences between buying a property in Spain compared to buying in the UK?
Probably the main difference is that once you have found the property you wish to buy, you are required to pay a holding deposit. This will usually be held by the estate agent and allows them to take the property off the market. The deposit will usually be €3,000 for lower priced and €6,000 for higher priced properties. It is very important to realise that this deposit will not normally be refundable, and that with the payment you will be entering into a reservation contract.
In the UK, you will only usually be required to place a nominal deposit, and the property will continue to be marketed. If you wish to pull out there is obviously not such a substantial deposit to lose, but by the same token, there is a chance that another buyer will come along and make a higher offer. This cannot happen in Spain.
A Spanish conveyancing solicitor should be consulted before signing the reservation contract, so they can check the terms are fair, and if required, suggest and negotiate any amendments. The reservation contract will stipulate a deadline by which a private contract will be signed, at which point you will normally be required to place a larger deposit. It is vital therefore to ensure there is plenty of time to allow your solicitor to undertake the necessary checks and searches, and of course to make arrangements to finance your deposit if necessary.
What is involved in the Spanish conveyancing process?
The private contract is the next step in the Spanish conveyancing process, and the role of Spanish property solicitors leading up to this point is a vital one.
The solicitor will make numerous preliminary enquiries, including checking to ensure the vendor is entitled to sell the property; ensuring there are no unpaid taxes against the property; inspecting various certificates, declarations and receipts and in the case of a property that is housed within a complex or building, the community rules and minutes of the most recent AGM. It may also be necessary to order surveys, particularly if the building is particularly old or of non-standard structure.
Once the private contract is agreed and the deposit paid, a date will be set for completion. This will involve both parties attending the office of the Notary Public. On this date, the balance of the purchase price is paid and a new title deed prepared and signed by the Notary.
The deeds are then signed and submitted to the land registry for registration. All of these tasks fall under the responsibility of your Spanish conveyancing solicitor, which is why it is so important to choose carefully.
What are the common issues people have when buying a property in Spain?
One of the main problems when buying a property in Spain is the fact that much of the time you are not actually going to be in Spain. With much to organise and sign, this can prove a challenge. However, there is a solution, and that is to grant power of attorney to your Spanish property solicitors.
By acting as your power of attorney, our trusted Spanish property solicitors will be able to take care of many aspects on your behalf, such as visiting the police station to apply for your fiscal identification number (‘NIE’); the set-up of your Spanish bank account; arranging utility transfers and direct payments and acting for you on completion day as well as signing your ‘escritura’ or title deed, which means that generally, you won’t need to be present. Naturally you will be kept fully informed at every stage, so that you are fully aware of how things are progressing.
Are there taxes or stamp duty to pay on Spanish property?
There are various taxes that must be budgeted for, as in total they will often come to around 10 per cent of the purchase price.
Transfer Tax applies to resale properties and VAT to new properties. If you are buying a new property then you will need to budget for stamp duty. There are also land registration fees to pay as well as Notary and solicitor fees. Giambrone’s Spanish property solicitors will set all of these fees out to you clearly at the outset, so that you are aware of how your budget will be affected: another good reason to engage a solicitor right at the start.
Are there any rules or restrictions for UK residents buying property in Spain?
Foreigners are permitted to buy property in Spain. You will require a fiscal identification number, known as a ‘Numero de Identificación de Extranjeros) or ‘NIE’ for short. This can be obtained from the police station local to the area in which you are buying your property, and your Spanish solicitor will accompany you to organise everything if required. There is a nominal charge for the NIE, which has to be paid at a bank and a receipt obtained in advance of the police station visit.
Unfortunately there is a misconception that non-resident property owners in Spain are not liable to pay taxes. However this is definitely not the case. Good Spanish property solicitors will advise you on your responsibilities with regard tax and will take care of your applicable annual returns. At Giambrone many of our clients appoint us as their fiscal representatives, allowing us to handle tax matters on their behalf and ensure everything is in order ongoing.
One tax that you should be aware of as a non-resident property owner in Spain is ‘Property Owner’s Imputed Income Tax’. This tax is payable annually and is based on the rental income that would be deemed correct for your property, and calculated on its rateable value. Income percentages vary from region to region in Spain. If you do not keep up with your non-resident tax liabilities, it could cause issues when you come to sell your property, or when it is inherited.
How do Spanish mortgages work?
You can use a Spanish mortgage to purchase a property in Spain, even if you are a non-resident, although you will usually only be able to fund 50 to 70 per cent of the purchase price. It is worth considering though that the associated fees for setting up this type of finance can be fairly significant, and if you thought the early repayment charges in the UK were harsh, you may be shocked to learn what they are in Spain.
The costs you need to factor in when using a Spanish mortgage are the valuation fee; an ‘opening commission’; Notary fees; mortgage tax; registration fees and mortgage conveyancing fees. You will also have to consider exchange rate fluctuations that could affect your repayments from month to month.
There is a benefit however to taking out a Spanish mortgage, which is that it can potentially reduce any Spanish inheritance tax that may be payable. At Giambrone our specialist Spanish property solicitors will fully explain to you how funding your purchase with a Spanish mortgage will affect you, and whether you will meet the eligibility criteria of Spanish lenders, which varies from those in the UK.
Can I buy a property to let in Spain?
You can buy a property to let out either short term or long term in Spain, however there are various considerations that must be made.
Firstly, if you are renting your property, you will need to have an energy efficiency certificate in place. This is something Giambrone’s experts can help you obtain.
If you are letting to holidaymakers, then you will need to follow Spanish law by the letter. The law does vary from region to region, which is why you need to take advice from Spanish property solicitors with experience throughout the country. At Giambrone we regularly guide property owners as to the rules set by the local town halls and tourist departments. Without this guidance it is all too easy to fall foul of the strict regulations governing the letting of private residential property to tourists in Spain. Such breaches can be very costly in terms of fines, which can run into tens of thousands of Euros.
When letting long term, national rental law applies, although it is advisable to take legal advice to ensure you are compliant, and to make sure your rental contract is correct.
Tax wise you will need to declare your rental income to the Spanish tax authorities, even if you are a non-resident. Specialist professional advice is absolutely vital, as the processes are known to be complex.
Giambrone: the specialist assistance you need with all aspects of Spanish conveyancing
The importance of the best possible legal advice when dealing with the purchase of Spanish property cannot be stressed enough. At Giambrone we offer highly respected expertise in all aspects of Spanish conveyancing, and with offices in Spain and the UK and our fluent English speaking experts, you can rest assured of the utmost in quality when it comes to advice, and service.
If you are ready to start your search for a dream home in Spain, do not delay in making contact with our helpful specialists. It really could make all the difference.