Buyers and Sellers guideVillas & Fincas
Buying a property in Spain with Villas & Fincas
Once you've chosen a suitable property and the purchase price and conditions are agreed, Villas and Fincas will prepare a letter of intent, to be signed by both parties. The letter of intent states the conditions of the sale and the reservation period during which your lawyer is to check the property on legal details and to draw up a private purchase contract. If you haven't already appointed a lawyer now would be a good time to do so.
What to expect from your Spanish lawyer
As well as giving legal advice at each stage of the process, your lawyer will check the property registry to investigate any encumbrances or debts registered against the property. If anything untoward is discovered he will advise on how best to deal with it and whether you should, in fact, proceed at all. In case of proceeding your lawyer will draw up a private purchase or option contract which states all the conditions of the sale. When completion takes place your lawyer will lodge the title deed with the land registry and then take care of any remaining formalities such as opening accounts with local utility companies in your name and the payment of any transfer taxes.
Exchange contracts
With the offer accepted and the letter of intent signed, the next step is to exchange private contracts, 'Contrato privado de compraventa', or Contrato de opción de compra’,which states all the conditions of the sale. This usually happens within two weeks from the offer being accepted and is where your lawyer really starts to earn his money by conducting property searches and making sure that there are no outstanding debts or problems attached to the property, for which you may be liable.St the signing of the private contract you will be required to pay a non-refundable deposit of 10% of the purchase price.
Final completion and registration of the title deed
Final completion takes place when the title deeds are signed before a notary and you pay the balance of the purchase price. The signed deed is lodged with the land registry and your lawyer will take care of the remaining formalities such as payment of the relevant transfer taxes. In addition to the purchase price of your new property, you will also need to pay transfer tax, lawyers fees, notary fees and registry fees. The purchaser should budget to pay app. 10% on top of the value of the purchase price.
Each year, owners of Real Estate must pay IBI, which is a tax issued by the local council for all owners of property. If you are purchasing a resale property, your lawyer will ensure that you are given copies of previous receipts as proof of past payments.
The final tax to mention is a wealth tax, which is charged annually in connection with the value of the property you own.
Conclusion
It is important to prepare for the purchase as much as possible in advance. Choosing the right professionals to handle the sale is essential. Knowing all of the costs and taxes in advance is particularly recommended in order to avoid unexpected costs after the purchase. The following is rough breakdown of the costs for the buyer:
Transfer Tax – 7% of purchase price up to 400.000€ and 8% over the remaing sum if the purchase price is higher. Legal Fees – approximately 1% of the purchase price Notary & Registration Fees – approximately 1% of purchase price Municipal ´Plusvalia´ Tax is Tax paid every time a property is transferred and based on the increase of the value of the land during the time that the seller has owned the property and calculated in accordance with the rateable values, it does not depend on the selling price. This payment is subject to negotiation between vendor and purchaser and is stated in one of the clauses of the private contract as to who is responsible for this cost. Not to be confused with the Capital Gains tax. This is a form of income tax, to be paid over the difference in purchase and selling price at the moment you sell your property.
Selling a property in spain with Villas & Fincas
Villas and Fincas has good knowledge of the local area and market, worked with several property surveyors and is therefore able to provide a accurate valuation on your property. We provide a clear and simple sales commission agreement, giving a description of the property and specifying the total selling price and commission for the completion of the sale. Any furniture, paintings or fittings included in (or excluded from) the selling price should be clearly described to prevent misunderstandings at the time of sale. The vendor is asked specifically not to withhold any important information with reference to the property and to provide a copy of all documents required by law. The vendor must be aware that by law we will keep all the data with reference to the property till 5 years after the sale.
Letter of intent
When we’ve come to an agreement with a purchase, Villas and Fincas will prepare a letter of intent, which will be signed by both parties. The letter of intent is a token of good will from both parties. It states the sales conditions and the time reserved for the purchaser’s lawyer to draw up a private purchase contract. Which is the next step: to exchange private contracts drafted and negotiated by respective lawyers and monitored by Villas and Fincas. This usually happens within two weeks after signing the letter of intent. In the private contract (contrato de compraventa, or contrato de opción de compra) the parties, the property, the price, the method of payment the date of completion, and other important conditions must be specified and described clearly and in detail. The completion normally takes place at a public notary when the possession is handed over to the purchaser and the balance of the purchase price is received by the vendor.
The Vendors Costs
Estate Agent's Commission is 5%, plus IVA. These costs can be deducted when calculating Capital Gains Tax.
Legal Fees Normally a standard lawyer's fee is 1% plus IVA and can be deducted when calculating Capital Gains Tax.
Capital Gains tax or Impuesto sobre el Incremento Patrimonial (Capital Gains tax):
18 % on the difference between the original purchase and current selling price. Both residents and non-residents have several possibilities for deductions. It goes too far to specify these here. It is best you ask your lawyer or fiscal adviser how to proceed.
Withholding Tax:
When the vendor is a non-resident in Spain or a resident that cannot proove fiscal residency, the purchasers lawyer will withhold 3% of the purchase price and pay it directly to the Tax Office within a month as a payment in advance on account of Capital Gains Tax.
Municipal 'Plusvalia' Tax paid every time a property is transferred and based on the increase of the value of the land during the time that the seller has owned the property and calculated in accordance, it does not depend on the selling price. This payment is subject to negotiation between buyer and seller and should be stated in one of the clauses of the private contract as to who is responsible for this cost. If nothing is stated in the contract, by law the vendor is to pay this tax.
Conclusion
It is important to prepare for the sale in advance, to check the title deed and relevant documents to make it easier for the potential buyer and to smoothen the process. Choosing the right professionals to handle the sale is essential. Knowing all of the costs and taxes in advance is particularly recommended in order to avoid unexpected costs after the sale. It is also extremely helpful to have the following prepared:
- - Make sure any home improvements, updates, extensions have been registered.
- - Copies of most recent water, electricity and telephone bills and IBI bills.
- - Rates, garbage collection, community regulations/statutes, alarm contract, insurance policy, building plans and administrative licenses.
- - Title Deeds (Escritura).
- - Indication of Plus Valía Tax from the townhall.
- - Certificate from the Community of Owners.
THIS IS A GUIDE ONLY AND IS NOT TO BE TAKEN AS READ PLEASE CONSULT A LAWYER
