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An in depth guide to the Spanish property buying process
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photo by Malcolm Lee Copyright © |
The Spanish legal system operates very differently from that of the UK, and the only way to avoid frustration, misunderstanding or even fraud is to secure the crucial services of an expert. The following guide summarises the main stages involved in the purchase of a property in Spain and should be of assistance in illuminating the purchasing procedure. It almost goes without saying but these details must be regarded as a general guide and no substitute for specific legal advice that may vary according to the circumstances of your transaction.
Stage one: Identifying the right property In recent years the plethora of agents based in Spain has contracted to the extent that those that remain are increasingly expert in their part of the Costas from Barcelona in the East, Murcia and Almeria in the South East, Marbella in the South to Cadiz in the West.
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Stage two: What can you afford? Thousands are leaving their home countries every year. With UK property prices at an all-time high many are considering selling up, buying a home abroad and investing the remaining capital to provide for their retirement years. Equally, many are buying a second home. In both cases there are certain costs that must be taken into consideration in addition to the price of the property. Having found a property and you have decided to make an offer, your first step will be to ensure that you have the funds available to pay the 10% deposit. You’ll also need to budget for the costs associated with your purchase. They can be a further 10% to 12% plus on top of the purchase price. Applying for a mortgage in Spain is a fairly complex procedure and I’d recommend that a bilingual broker be retained to represent your interests.
Stage three: Getting the best out of your Euros When buying any property in the Euro zone, you will ultimately have to convert your hard-earned sterling into Euros to actually pay for your new home. This requires serious planning, especially if you are buying into a new off-plan development where there are several ‘stage payments’ that fall due during the construction of your property. Even those people buying a resale house will have to put down 10% of the purchase price when entering into a purchase contract. Generally speaking, the high street banks and building societies are not in the best position to devote the time and attention required advising you about buying currency. Specialist currency brokers are the safest means of ensuring the conversion of your Sterling into Euros is done safely and with the minimum of risk. Once you have the necessary funds, and have decided which property to buy, your next step is to contact the vendors and instruct your legal representative to check that they have a good legal title to the property and carry out the relevant searches at the local Property Register.
Stage four: Protecting your interests The Spanish Legal system is far removed from the British one when it comes to buying a property, so when seeking legal advice and deciding who should represent you for your purchase, there are a few key rules that should be observed. Seek guidance from a specialist in Spanish law - ensure that the lawyer you appoint is an Abogado (Solicitor) - a member of the Colegio de Abogados local Spanish Bar or Law Society. A Gestor is not a lawyer but an administrator who works in a privately run office (a Gestoria) that deals with matters related to Spanish bureaucracy, including property issues and tax declarations. There are also Spanish based specialists, such as, Spain has a fairly pro-consumer legal system and legislation exists to protect a purchaser of an “off plan” property against the developer’s bankruptcy, for example, during construction and pre-completion. This is called an “Aval Bancario” or Bank Guarantee. The law requires a developer to guarantee the amount of the deposit paid by the off plan purchaser plus 6% annualised interest. This should be achieved either through a bank guarantee of an insurance policy to the same value. Your lawyer should ensure that evidence of the guarantee or insurance policy is obtained at the time of signing the Contrato de Compraventa (see below). A mechanism should also be agreed for the guaranteeing of additional sums paid by way of stage payments. This is a very important protection for the purchaser and without these guarantees being firmly in place your interests are obviously exposed.
Stage five: Checking your property Once a legal representative is appointed the property you are considering buying should be thoroughly searched by your Spanish lawyer before any contract to purchase is signed. There are a number of formalities and checks that should be carried out. The first step is to check whose name appears on the title deeds and to confirm that the property was built with planning permission and that it definitely exists! Further checks should focus on the legal description of the property and its boundaries – and they actually accord with what you think you are buying. All Spanish property must be registered in the name of the owner at the local Registro de la Propiedad or Property Register (the equivalent of the English Land Registry). The only people who are able to legally transfer full ownership of the property to the buyer are those who are registered as the legal owners. Therefore, an investigation at the Property Register will show who the legal owners are, and it is their names that must appear in the contract to purchase.
Stage six: Compraventa – the conveyancing process The first stage in property ownership is the Contrato de Compraventa - the private purchase contract – containing the conditions of the purchase/sale. Due to the pace of the market, an “off plan” reservation contract, is now a more commonly first step. Signing of this document will involve the paying of a small deposit – perhaps €3000 or €6000 but it has the impact of removing the property from the market. It is vital to know and understand what these conditions apply to your purchase before you proceed.
Stage seven: New and “resale” properties Buying a new rather than a resale property demands a different conveyance process. While a resale property requires the above background checks, purchasing a new property offers different pitfalls. Legally, a Bank Guarantee must be supplied by a developer to the purchaser to cover the amounts advanced by the purchaser. Whilst this is a legal requirement, it will fall to purchaser’s lawyer to push the developers lawyer into receive written confirmation of the precise level of the guarantee. If a developer can avoid giving this they invariably will. This will leave a gap in your paperwork. The effect of this is to protect the purchaser’s investment should the developer go out of business before the property’s completion. Obtaining a licence that stipulates you may occupy the property as a dwelling from a builder before handing over any final payment is also crucial.
Stage eight: Completion of purchase/sale In Spain there exists a system of a public Notaries. Attending before a Notary is the final stage in the purchase/sale of the property with the signing of the Escritura Publica de Compraventa and every title deed signed by both the seller and purchaser has to be completed in front of a Notary, who is essentially an official witness. It may be that either the buyer or seller provides a Poder (Power of Attorney) to a trusted representative to sign on their behalf. Having completed the purchase, the Abogado then organises for the property to be registered in the name of the new owner. At this stage a number of property transfer taxes will have to be paid, together with the property register fees including the Notary’s and Abogado’s fees. The Spanish government fixes the Notary’s fees. A copy of the Escritura will be returned to the owner by the Property Register within about three months bearing the official stamps that confirm the property is yours and that your ownership is protected by law.
Article written by
© The Rights Group SL 2006 (Marbella) Mark FR Wilkins
mark@therightsgroup.com
www.therightsgroup.com (under review)
+34 600 343 917
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