About Completing on Property in Spain
The buying stage can be the most exciting part as this is where it all becomes real. You've done all your homework, you've trawled through the internet, scanned pages and pages of particulars and visited numerous potential property candidates before finally locating your ideal property!
Offer to completion process
During the buying process you will be required to sign official documentation and hand over the required cash to make the property legally yours. Buying property abroad can sometimes become a complicated process and you should note that in many countries, the process varies significantly from that of the UK. It is strongly advised that, before committing, you arm yourself with all the relevant purchasing information and complete all necessary financial and structural checks relating to your property. Before signing any official documentation you should make sure you fully understand the legal complexities involved in your purchase and, if possible, make sure you have a solicitor who is fluent in both English and Spanish, so they can explain to you exactly what you are signing.
To get an initial snapshot of the property’s legal status, you can apply to the Land Registry (Registro de la Propiedad) for a ‘Nota Simple’ and this can be ordered through the website, for a small fee. The estate agent sometimes will have this on file. The Nota Simple allows you to check who the legal owner is, and whether there are any restrictions or injunctions associated with the property. Be sure that your property is actually registered on the Land Registry otherwise you will be unable to obtain mortgage finance. You can do a private deal between yourself and the vendor if it is a cash purchase, but the property will not then be registered and you may find it difficult to sell in the future. Before you hand over any money to continue the buying process, make sure that you have checked the land registry to confirm the legal owner, any outstanding debts, and any restrictions.
Whether you have found a new build or an old farmhouse, this is the time to instruct a lawyer. It is also highly advisable to get your prospective property purchase surveyed. The Royal Institute of Chartered Surveyors (RICS) has members in several areas in Spain – just look for the RICS qualification when searching for a surveyor. Members of RICS will be able to provide independent, impartial advice in English and they are bound to a strict code of conduct in their professional duties. Sometime the vendor will try to refuse access to the property until an offer has been agreed. If this happens, make sure you have inserted a get-out clause in the initial agreement if the survey brings up any issues.
The advertised price of a property is generally a guide price so don’t be afraid to enter into negotiations if you feel it is over-priced. Do some research on similar sized properties to ensure you are paying a fair price. If the agent’s fee is included in the price, you may actually be negotiating their commission rather than the price of the property. Sometimes the local taxes end up being paid by the buyer so this should also be taken into consideration when placing an offer. You will have to agree who is to pay the local IBI tax for that year, and ensure that it is clear who will pay the Plusvalia – this is the vendors responsibility but can be passed on to the buyer.
Note that you will become responsible for any outstanding debts once you become the owner. Ensure the deeds describe the property accurately and in detail. Check that the town hall has agreed to all the necessary planning permissions. You should also access the Catastral certificate (which tells you the boundaries of your land) and the licence of first occupancy which you will need in order to be connected to water & electricity. Ensure that it is agreed who will be paying any outstanding taxes and utility bills.
So, you've found the perfect property in Spain and now want to invest? Unsure of your next steps? The following process outlines the general buying process for your Spanish property. You must:
- sign an initial contract called the 'opcion de compra'
- arrange the mortgage & pay the deposit for the property
- instruct the notary
Opcion de Compra
Once you have had an offer accepted on a property, a legal document known as the ‘opcion de compra’ will be drawn up and a deposit of around 5-10% becomes due. It is normal to give your deposit to the agent or your lawyer who will hold it safely until the purchase is completed. The ‘opcion de compra’ is a legally binding contract and is written in Spanish although you can ask for a translation too. The contract contains the details of the vendor, purchaser & the agent, the purchase price, a full description of the property, including floor space measurements, any fixtures or fittings that are included in the price, who is responsible for what fees, the mortgage arrangements, and any get out clauses that have been agreed & corresponding penalties should the buyer or vendor withdraw from the sale. The get out clauses are important if you are unsure about the success of your mortgage application, or if the vendor has agreed to certain repairs in the property.
For new build properties, there will be specific payment plans that you will need to agree with the agent or the developer.
You may also want to sign an agreement which protects against gazumping, or from the seller withdrawing - the 'clause crio'. This security deposit will be lost if you decide not to proceed, but the seller will have to pay you twice that sum if they decide to withdraw. The security deposit (along with your initial deposit) is subtracted from the purchase price when completion day arrives.
If you are thinking of arranging a Spanish mortgage, you can expect to get 60-70% of the purchase price if you are non-resident. In a similar fashion to those in the UK, the mortgage company will send a valuer to the property to ensure that the loan is proportionate. Associated fees and charges can be negotiable. Life assurance is required to take out the mortgage. If your Spanish is a little rusty, you can employ a mortgage broker to liaise between yourself and the bank. The bank will also need proof of income (pay slips or accounts if self-employed) and copies of your tax return. Of course, a Spanish bank account will also have to be opened.
As you near the completion date, you will need to instruct a Notary. The Notary is a public official who oversees all property transactions in the country. It is a legal requirement to use a Notary – the notary is the only person who can transfer your name on to the title deeds which confirms you are the legal owner. The Notary is responsible for ensuring all the documentation used in property transfers is true and legal – confirming the vendor’s title deed, checking for any outstanding mortgages on the property, transferring the deeds etc. The Notary fee is controlled by the state.
Once finance is in place, you need to instruct the notary to request the funds in time for the completion date. Make sure you have buildings insurance in place for this date. On the date of completion, an Escritura (final deed of sale) will be signed by the buyer, the vendor & the notary. If you cannot be present for this signing, you can give power of attorney to someone to sign on your behalf. The remainder of the purchase price must be paid at this time and the associated taxes should be paid within 30 days. Your title deeds will be sent to you a couple of months later, and the original will be returned to the notary for safe-keeping. Copies are available on request.