The process of buying a property can be really tedious. We are not talking about the purchase of a pair of shoes or a loaf of bread. The purchase of a house implies a much bigger outlay. And that is why it is crucial to completely understand everything involved in the procedure. Which are the required steps, what fees will you need to pay throughout the purchasing process, what taxes will you pay once you become the owner… And the list goes on and on. In order to simplify your life, we have written this blogpost. Whether you are an expat or not, you will find the main things you should consider when buying a house in Spain below.
What are we going to cover exactly?
SHOULD I HIRE A LAWYER?
That is one of the first questions individuals ask themselves when starting the process of searching and buying a property. Should I hire a lawyer to help me out? Is the cost really worth spending?
The answer is straightforward: YES.
Acquiring a house is really complex. There are several contracts and contingencies, and being able to foresee possible problems is crucial if you want to avoid future problems.
A clause in the purchasing contract that is not well specified or that goes against your interest can easily cost you thousands of euros. Something we can easily avoid.
That is why having a reliable lawyer next to you, from beginning to end, is essential.
What is he or she going to do for you?
CONCRETE TASKS A PROPERTY LAWYER WILL DO FOR YOU
First of all, and probably most important, is checking if the property you are buying is 100% legal. Your lawyer will speak to the president of the community in order to detect anything strange and to make sure that the construction does not have any hidden damages.
Furthermore, the lawyer will be in charge of the boring part: preparing all the contracts. You may consider that something easy. But it is not. The contracts must be written under the proper structure, and include all the relevant clauses that will completely defend your interests. It is not uncommon that you will forget to include really important paragraphs or intentions, if you prepare the contracts yourself. A lawyer has dealt with many cases like yours and knows exactly what needs to be included.
He or she will be in charge of other accessory matters. Let’s say that you are a foreigner, you just arrived in Spain and you are in the process of buying your new home. Our lawyer will help you to get your NIE and bank account, prepare contracts for water and electricity etc. Crucial steps in the process of buying a house.
Our advice is simple: Hire a local real estate lawyer that can guide you through the whole purchasing process. In the end, the cost of the lawyer is just a tiny fraction of the total investment you will make. So if you would like to enjoy a hassle-free process and avoid surprises… go with the attorney.
WHEN EXACTLY SHOULD I HIRE THE LAWYER?
You should do it even before placing the deposit. When exactly? Use the following rule of thumb: as soon as possible.
And you will easily understand why.
Like many things, the purchase of a house requires preparation. The property lawyer will recommend you the best structure to follow when buying your new property.
Depending on your particular case (family relations, if you have a company, etc.); one path to follow will be more advisable than the other. That is why having the right lawyer next to you from the beginning will save you time afterwards. He or she will plan all the steps you must follow in advance. Again, no surprises.
As they say, failing to plan is planning to fail.
BE AWARE OF THE PROCESS AND ITS REQUIREMENTS
There are several steps you need to take when buying a property in Spain. Knowing them in advance will be key in order to be prepared for any possible inconvenience.
Shortly, the process goes as follows:
First of all, as a foreigner, you will need to obtain your NIE number. The NIE is the basic identification number for foreigners in Spain, and it is essential for any kind of legal and economic procedure in the country. To open a bank account, to start a company, and to buy a house.
Once you find the house or apartment you would like to acquire, the legal process starts.
You will be asked to sign a reservation contract and to pay a small fee. At that point, the property will be taken away from the market for a limited period of time. Usually, that period is no more than 30 days.
Bear in mind that those 30 days will be the last option you have for legal checks to the property.
Also, the contract of the sale, “escritura de compraventa” in Spanish, will be drawn up. And that implies that you make a series of payments. The first one is usually 10% of the total price of the property, and it is non-refundable.
Finally, you will need to pay various fees and taxes (we will analyze them below), and the property will be registered at the land property in Spain.
BUYING OR RENTING?
This is a really good question, and we will dive into a difficult debate. Is it better to rent or to buy a property in Spain?
Well, there is something to say for both options.
Usually, expats who start their new life in Spain, choose big cities like Madrid or Barcelona to settle. And exactly those cities have experienced a sharp increase in prices, due to Spanish market conditions. It is becoming more and more difficult to rent a flat in Barcelona for a decent price, a trend that will not get to a halt in the near future.
That is why our advice is the following:
- In case you are unsure whether you will stay in Spain for the long-run, rent first and then buy a property. Here you can find a complete guide on renting in Spain.
- On the other hand, if you are completely sure that you will remain in the country for a long period of time, buying will really save you money.
WHAT COSTS ARE INVOLVED WHEN BUYING A HOUSE IN SPAIN?
This may be one of the issues that worries people the most. What are the costs I end up paying when acquiring a property? Apart from the agreed price of the house or apartment, you should take into consideration an additional 10 to 15% on top for fees:
- If you are buying a new property, you will pay 10% VAT, plus 1,5% for the stamp duty, and the notary and registry fees, which can be up to 1% of the total price. Furthermore, if the property is part of a larger complex, maintenance charges (in case of a swimming pool for example) will also be added here.
- In the case that the property is being resold, you will pay 8 to 10% of property transfer tax, and 1% notary and land registry fees.
DO YOU HAVE RIGHTS TO CLAIM AGAINST DEFECTS?
This is one of the many reasons it is so important to be careful and to foresee the possible contingenciesin advance.
What if the property you bought had defects you did not detect before paying?
Will be you able to claim against them after the deal is made?
Well, that depends:
- If you are buying a resell, you don’t have any right to claim against defects after buying. Nevertheless, if there is hidden damage, you can claim against the vendor, provided that you do so during the first 6 months.
- If you are buying a new property you will be much more covered legally. The developer has to provide legal guarantees, guarantees that are required by law. In that sense, you will have a 1-year guarantee for minor defects, 3 years for installations, and 10 for the building guarantee. For electric devices and conditionings, you will have a 2-year guarantee from the time of their connection.
TAXES YOU NEED TO PAY AS A PROPERTY OWNER IN SPAIN
First of all, an important caveat: the Spanish tax system is really complex. Why? Because you will need to pay your taxes at three different levels:
- Central government
- Autonomous region
- Local municipalities
That is why our advice is to hire a tax lawyer that can help you out planning and optimizing the taxes according to your specific situation.
But let’s dig a little bit deeper. What are the specific taxes a property owner in Spain needs to pay?
- The IBI or council tax. Depending on the type of property you acquire and its location, the exact amount will differ. It is mainly calculated upon the cadastral value of the property.
- Wealth tax.
- Income tax, also if you are a non-resident. If you are from the EU, you will need to pay 19% income tax. If you are a non-European Union citizen, this will be 25%.
BE CAREFUL WITH THE CAPITAL GAINS TAX
The seller of the property will need to pay capital gains tax on the income received from the transaction. This tax ranges from 19 to 23% on the profit obtained on the purchase.
Often sellers will ask you to under-declare part of the value of the property to the authority and pay a proportion of the price in cash, so the seller can reduce the amount of capital gains tax to be paid.
If the seller offers you this option, run away from the deal. We are talking about a completely illegal practice, and it can put you in danger.
NOW IT’S TIME TO GO ON WITH YOUR ACQUISITION
We have now covered the most important issues you have to take into consideration when buying a home in Spain. Analyze and understand them carefully, and your acquisition process will run smoothly.
However, we would also like to offer you a possibility.
Maybe you don't want to worry about all the boring stuff when buying a house. You just want to enjoy your new life in your new house, and don’t get caught up in procedures and paperwork.
If so, let us guide you. Our expert property lawyer team is ready to help you out in the process from beginning to end. No unsolved doubts, no missing paragraphs in contracts, no unexpected costs.
Would you like to save time and money and avoid legal problems? Then… HIRE US