What are the legal formalities, when purchasing property in Spain?
A lawyer and a financial advisor (for tax issues) need to be involved in the purchasing process and we can recommend highly qualified professionals in both fields.
Property ownership appears at the property registry, so, once this is checked, you can rest assure that the property is free of liens.
Usually, step 1 would be drawing a private contract of purchase and paying a deposit as negotiated (most commonly 10% of the price).
In case of properties bought “off plan”, several partial payments can occur, the last one at the date when the project is finished. The buyer is entitled to request renegotiation or part of the money back. Also, he should request an insurance policy from the developer, to cover potential construction defects.
When the property is paid in full, the new owner will get the public deed of conveyance from the seller, in front of the Notary and will pay the Transfer Tax (for second hand property) or the Stamp Tax (for new constructions).
The costs when purchasing a property:
Transfer Tax – For resale property this is 8% on the first €400,000, 9% on the next €300,000 and 10% on anything in excess f €700,000 – Payable by the buyer for the purchase of any second hand real estate.
VAT -10% and STAMP DUTY – 1.5% – Payable by the buyer of any new property, when he buys directly from the developer.
VAT – 21% and STAMP DUTY – 5% – For land of commercial premises, where the vendor is a developer, promoter or habitual trader.
Notary fees and property registry inscription fees – paid by buyer – Between 1% and 1.5%. The cost might vary according to the complexity of the title deed. The property registry inscription fees also depend on the complexity of the transaction.
Lawyer’s fees – 1% of the purchase price + VAT (21%). This percent can be negotiated for larger transactions.
Municipal Added Value Tax (PlusValía) – paid by seller – It represents an “added value” tax based upon the increase of the Town Hall index value of the land only, from the prior purchase to the present sale. The amount of this tax can vary substantially – due to the several factors involved in calculating it – and should be verified before proceeding with the purchase.
Congratulations! You now own a property in Spain. What costs of ownership should you expect?
Annual Property Tax – calculated from the cadastral value which takes into account the value of the land plus the value of the building. The sums vary a lot, but just to have a general idea, a detached large villa in Marbella costs annually approximatively €2.800.
Rubbish collection & water rates – the rubbish collection tax is payable every 6 months. Water consumption is calculated by the water meter consumption in cubic meters and is payable every 3 months – usually by direct debit form your bank account.
Electricity – The monthly bill varies according to the amount of electricity your house uses, but there is a minimum charge of between €40 and €75 per month. Charges for a villa are from about €100 to €150 per month, depending largely on the extent of the electrical installation. General usage is €0.08 per Kwh plus tax. All rates are exclusive of taxes.
Community fees – they can vary substantially according to the services provided, and normally include salary and social security of the hall porter, common garden maintenance, lift maintenance, repairs to common elements, rubbish collection, water for watering community gardens, electricity for lighting communal areas, insurance, security, and administration fees. They can start at €120 per month and go up to €600 or more per month in a high luxury building with a large community staff and many services.
Insurance – a standard insurance cost for a €300,000 apartment with contents valued at €48,000 would be €395 per year. Be advised that the individual’s insurance policy for the apartment need not cover the entire value of the apartment, but only damages to the interior of the apartment, its contents, and third party liability.
Gardeners – The hourly rate of a gardener is about €16. Apartments and townhouses have the communal garden areas tended by a contracted gardener and the cost is included in your community fees. A villa on a plot of 2,500m2 might require a gardener a few hours a week.
Cleaning service – Cleaning service hourly rates vary from €10 to €15.
Fixed-line telephone – The telephone bill is charged monthly. Standard rates vary according to the equipment installed, but can be in the region of €15 per month including a touch dial telephone and ADSL WIFI.