The process of buying a property can be really tedious. We are not talking about the purchase of a cheap product. The purchase of a house implies a much bigger outlay. And that is why completely understanding everything involved in the procedure will be crucial. Which are the required steps, fees you will need to pay throughout the purchasing process, taxes to pay once you become the owner… And the list goes on and on. And, in order to simplify your life, we have written this post. In it, you will find the main things you should consider when buying a house in Spain, whether if you are an expat or not.
What are we going to cover exactly?
SHOULD I HIRE A LAWYER?
That is one of the first questions individuals ask themselves when starting with the process. Should I hire a lawyer to help me out? Is the cost really worth spending?
And the answer is straightforward: YES.
Acquiring a new house is something really complex. There are several contracts and contingencies, and being able to foresee possible problems is crucial If we want to avoid future problems.
A clause in the purchasing contract that is not well specified or that goes against our interest… and we will suffer the consequences. And those consequences could imply thousands of euros.
That is why having a reliable lawyer next to you, from the beginning to the 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 something really important, checking if the property you are buying is 100% legal. She will speak with 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, she will be in charge of the boring part: preparing all the contracts. And 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, doing it by yourself, you forget to include really important paragraphs or intentions. A lawyer has dealt with many cases like yours and knows exactly what needs to be included.
She will be in charge of other accessory matters. For example, let’s say that you are a foreigner who has just arrived in Spain and is purchasing what will become her new home. In that case, the lawyer will also help you get your NIE, prepare the contracts of water system and electricity, help you open a bank account, etc. Steps that are crucial when acquiring a new home.
In this sense, our advice is simple. Hire a local real estate lawyer that can guide you throughout 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 be followed 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. She will plan in advance all the required steps you must follow to satisfy your interests.
As they say, failing to plan is planning to fail.
BE AWARE OF THE PROCESS AND ITS REQUIREMENTS
There are several steps you will need to follow in order to buy 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. For example, in order to open a bank account or set up a company, you need this number. Buying a property is not an exemption.
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, just for a limited period of time. Usually, that period is no more than 30 days.
Bear in mind that those weeks will be the last time 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.
SHOULD YOU BUY OR SHOULD YOU RENT?
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 for sure.
Usually, expats who start their new life in Spain, choose big cities like Madrid or Barcelona to settle. And those are cities that during the recent years are experiencing a really high increase in prices due to Spanish market conditions. For example, it is becoming more and more difficult to rent a flat in Barcelona at a decent price, and this trend seems not to stop in the near future.
That is why our advice is the following:
- In the case that you are unsure whether you will stay in Spain for the long-run, rent first and then buy a property.
- 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.
WHICH ARE ALL THE COSTS WHEN BUYING A HOUSE IN SPAIN?
This may be one of the issues that worries people the most. Which are the costs I will need to end up paying when acquiring a property? Apart from the agreed price of the house or apartment, you should also take into consideration an additional 10 to 15% on top. This amount stands for the fees to be paid, which are:
- If you are planning to buy a new property, you will pay 10% VAT, plus 1,5% in regards to the stamp duty; and, finally, the notary and registry fees, which can be up to 1% of the total price. Furthermore, if the property is contained inside a complex, the maintenance charges (for example for the swimming pool) will also be added here.
- In the case that the property is being resold, we will pay 8 to 10% in terms of property transfer tax, and 1% regarding the notary and land registry.
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 in advance the possible contingencies. 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 again:
- 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 enjoy 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, before knowing which are the specific taxes you will need to pay, our advice is to hire a tax lawyer that can help you out planning and optimizing the taxes according to your individual circumstances.
But let’s go deep into what is important. Which are the specific taxes you will need to pay as a property owner of a house or apartment in Spain?
- 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, as a non-resident or not. If you are from the EU, you will need to pay 19% in regards to this tax. Conversely, as a non-European Union citizen, the exact percentage 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 within the transaction. This tax ranges from 19 to 23% on the profit obtained on the purchase.
On many occasions, sellers will ask you to under-declare part of the value of the property to the authority and paying a proportion of the price in cash, offering you to pay a bit less in return.
She does that so she can reduce the taxable amount in regards to the 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 may take into consideration when buying a home in Spain. Analyze and understand them carefully, and you will ensure that your acquisition process runs smoothly.
Nevertheless, we would also like to offer you a possibility.
Because maybe you don’t want to be worried about all the considerations you may have when acquiring a property. Maybe you just want to enjoy your new life in your new house, and don’t want to worry about boring procedures and paperwork.
Then, let us guide you. Our expert property lawyer team is ready to help you out throughout the whole property purchasing process. We will accompany you from the beginning to the end, so there are no doubts unsolved. We will prepare all the required documents and check that everything is how it should be.
Would you like to save time and money and avoid legal problems? Then…