[Gerry Pridham]

Hi,

My Spanish lawyer has this on his website, and I thought it may be useful to post it on here. The translation is not perfect, but he's a very open minded person and a great contributor to his local society.

Enjoy.

The steps of purchasing house in Spain
Basically, once you have decided on the property that you want to buy, the process is this:
Nota simple informativa
With this document from the Property Registry (Registro de la Propiedad), you'll find out if the property is free of debt, if it really belongs to the seller, and if the description of the property matches what the buyer has been told (to avoid surprises about missing square meters).
The pre-agreement
This is a contract in place between the seller and the buyer to be signed before the public deed of purchase is ready. It's a document in which the seller express his intention to transfer the property to the buyer, and the buyer express his will to buy at the price and conditions agreed.
Usually at this stage, the buyer also gives to the seller a percentage of the agreed-upon price, a booking deposit or "arras" in Spanish and which matter is regulated on the Spanish Civil Code: If the buyer do not proceed further, he loses the deposit; if the seller backs out, he has to pay twice the amount given in deposit. Of course, the buyer and seller may choose another type of "arras" if they prefer.
The mortgage
The documents required by banks might vary depending on whether you are self-employed or an employee. If you make a search of different Spanish banks, you could find the usual paperwork required and their most competitive offers and rates on mortgages. We do not have any link or tie-up with any bank, so anyone you will choose is fine. We will help you in the procedure to obtain the mortgage, if you wish.
Usually, the mortgage paperwork starts by getting an appraiser (tasador) to value the property. The bank requires this to be sure themselves that their loan to you is safe in relation to the property value. You will need to pay the appraisers usually between 200-500 euros. Please, kindly note that the tasador (appraiser in Spanish) by law is an architect, so you will get also an appraisal about the structural integrity of the house and its stage of maintenance, construction, etc.
The closing
By the Spanish law the property transfer must be certified by a Notary. The deed of purchase will be given to the buyer after the notary reads it, and the parties do agree to the contents of the deed. The notary will specially check the following things: proof of identity (or power of attorney) of both parties, the seller's title of property (a form that reports the investment to the Central Register), and the buyer's payment. The buyer and seller sign the contract; beneath their signature, and the notary signs it by his firma protocolizada and the deed is ready, to go with it to pay for taxes and to register the property to your name.
• Taxes to be paid:
For the buyer: transfer tax and stamp duty (Impuesto de transmisiones patrimoniales y actos jurídicos documentados).
If the seller is an individual, the buyer pays a tax of 6% in Canary Islands of the deeds price. If the seller is a developer and the building or land to be built on represents a first-time transfer, then the buyer pays IGIC (Local VAT tax in Canary Islands) instead, at the rate of 5%.
You must add the stamp duty (another tax), in this case reduced in Canary islands to 0.5% of deeds price.
For the seller: a local tax called the plusvalia.
With a copy of the deed, the seller must go to the Town Hall/Council. After filling the form, the seller will receive a letter with the notice of how much they have to pay. This amount is calculated based on the number of years since the property was initially bought, and it is calculated over the cadastral value of the property. Be aware that usually sellers, in 99,99% of the cases try to pass this cost to the buyers. It's best to ask to your lawyer about this payment, and if agreeing to pay it (Most of the contracts are drafted on this way) at least you can calculate how much it will be.
Property Registry
By the Spanish legal system, if you want to be sure that your ownership rights are protected, you must register your title deeds in the land registry at the local office. You will be charged a standard fee (about 0.4% of the first 6010 euros, going down to .02% for over 6,010,121 euros).


What are the possible pitfalls in buying a property in Spain?
1. The property is not registered, most likely because it was illegally built. Many unregistered properties are tried to be sold to foreigners, since foreigners are less likely to check the registration.
2. Too many brokers are involved. Besides communication difficulties, each broker may be getting their percentage. Solution: Ask the broker for their contract with the owner.
3. The seller wants the declared price in deeds to be less than what I am paying: It's a known practice, but not so common, it might be a bit more when both parts, seller and buyer are Spanish. What happens? The seller wants to have less capital gains so they can pay less taxes. The problem for you as the buyer is that when you go to sell the property down the road, you will then have to pay more capital gains (unless you also find a buyer willing to make this deal).You will pay in taxes all that the current seller didn't pay. So why would anybody accept this? It's because some people in Spain have a sizeable amount of money never declared as earnings to the tax office. Giving this money as cash to the seller effectively launders it. If this is not the case with you, then don't make a deal with the seller. In fact, this should be made clear in the pre-agreement, so the seller doesn't try to force in this provision a week before the closing.
4. What land can I build on? Spanish legislation classifies land as one of three types: suelo urbano, suelo urbanizable and suelo rústico. This classification is listed in the Planes Generales de Ordenación Urbanística of every city. The possibilities of construction on each is very different. You should check it with your lawyer.
• Apart from National applicable law, the Canary Islands have their own urbanistic law and each island is self-regulated by its own urbanistic planning law; where and where you cannot build a house, its topology, forbidden areas to build, etc. The fact is that to protect the privileged environment the Canary Islands has, there are a lot of restrictions. Then you should always check the legal situation of the land or house you are buying here. We can be of some help as we were working in "El Cabildo Insular"(Island's Goverment) when it was drafted and approved the urbanistic law of Fuerteventura(PIOFT).

What information should I get from my real estate agent and/or the vendor?
• If it's a new construction, you should get:
• A registry listing (nota simple) of the full plot of land.
• The CIF and full name of the construction company.
• The construction permit (licencia de obra).
If it's an existing house, you should get:
• A registry listing (nota simple) of the property.
• A copy of the deed (escritura).