As promised here is the first in a series of articles to inform you about the processes and fees involved in buying or selling a property in Spain. Part 2, Purchasing a New property off-plan, will be here tomorrow.
Purchasing Costs
There are various taxes and costs associated with?the purchase of property which will add approximately?another 10% to the purchase price. The?various charges are:
Transfer Tax
The transfer tax, called ?Impuesto de Transmisiones?Patrimoniales? in Spanish, is levied at 8% of?the purchase price. It will be 9% for all purchase?prices higher than 400,000 euros up to 700,000?euros. Higher than this figure it will be 10%.
Plusvalia
The other tax to be paid on a property purchase?is the ?arbitrio sobre el incremento del valor de?los terrenos?, which is the municipal tax charged?on the increase in the value of the land since its?last sale, using the official value of the land as the?taxable base which tends to be always lower than?the market value. The land is officially revalued?periodically for this purpose. This tax may be?paid by either the vendor or the buyer, as agreed?between the parties.
Warning to buyers
Since January 1, 1999, the ?plusvalia? tax can be?charged directly against the property itself, meaning?that should the vendor be liable, and ?forget??to pay it, then liability for payment will pass to the?new buyer.
Notary Fees
The notary fees are fixed by an official scale and?the fee varies according to the size of the land, the?size of the dwelling and its value.
Land Registry Fees
This will be a similar amount to the notary fees,?and relates to the entry of the property in the land?registry (?Registro de la Propiedad?).
Appointing a Legal Representative
It is highly recommended to appoint a legal representative?as early as possible in the purchase process.?Your lawyer will explain to you the legalities?involved in the purchase and also carry out the?due diligences on the property, including advising?you of any debts, provide you with an estimate of?the annual running costs of the property and prepare?all the documentation required to complete?the transaction.
Power of Attorney
Should you not be able to be present to sign all?the necessary documentation related to the purchase,?then you may grant power of attorney to?your legal representative or to another third party.?The power of attorney would list all the duties that?can be carried out by the third party, which may?include buying and selling property, opening and?administering bank accounts, applying for and accepting?a mortgage, representing you with respect?to utility companies and the tax authorities etc.
The power of attorney would be signed before a public?notary in Spain, and should cost approximately?60 euros.
Should you not be able to visit a notary public in?Spain and need to formalise the power of attorney?in your home country, the procedure is different.?Your lawyer will prepare the document in Spanish?and English, and this will need to be signed before?a notary in your home country and then?provided with the ?Hague Apostille? at the Foreign?and Commonwealth Office in London. Some?notaries will take care of this process too. More information?on the procedure can be obtained from?their website: www.fcogov.uk
Deciding on a Property
Once you have decided on a property, you will?need to pay over an initial deposit/reservation fee?to ensure that the property is taken off the market.?The fee may be placed with the real estate agency?or with your lawyer. A corresponding ?offer and?reservation document? should be signed on making?the payment, indicating the basic terms of?the purchase, i.e. the price, details of the vendor?and buyer, details of the property, and the date by?which the ?private purchase contract? should be?signed.
The Private Purchase Contract
The private purchase contract will then be signed?approximately 20-30 days after payment of the?initial deposit/reservation fee, and once due diligences?have been carried out on the property.?Normally a 10% deposit would be paid; however,?this may vary according to the vendor?s wishes.?The contract will stipulate all the terms and conditions?of the sale, including the final date by which?the title deeds must be signed and final payment?made, and this will then give the buyer time either?to obtain a mortgage or get together the money?required to complete the balance. Should the buyer?fail to complete the sale by the final date, the?buyer would lose the deposit. On the other hand,?should the seller decide to pull out of the sale, or?should the seller find another buyer who offers to?pay more, then the original buyer has the right to?claim back twice the amount of the deposit.
Mortgage
It is important to note that should you consider?applying for a mortgage in Spain, this will add approximately?another 2% to 3% to the purchase?costs. For a non-resident buyer, the mortgage is?usually limited to around 70% of the valuation of?the property. Once the mortgage is approved by?the Spanish bank based on your proof of income,?the bank will issue a binding offer which can be?compared with other bank?s offers.
Due Diligence
Apart from checking the legalities of the property,?your lawyer will also check that all running cost?and local tax payments are up to date. This will?also enable your lawyer to advise you of the approximate?annual running cost of the property.?These checks will include:
Utility Bills
Utility bills usually refer to electricity, water, gas?and telephone. If you as a buyer are faced with?unpaid utility bills from the previous owner, you?should be aware that these are in fact personal?bills issued by private companies. They are not?attached to the property so that only the person?who signed the contract with the utility company?is liable for them. If left unpaid, the company will?cut off the services. However, on payment of a?reasonable fee, the utility company will conclude?a new contract with you for these services. This?fee is exactly the same as the charge for changing?the electricity contract into your own name, which?you would have to do anyway.
Community Fees
These fees are charged by the community of property?owners which is the legal body that controls?all the elements of the property held in common.?This includes the lifts, gardens, swimming pools,?roads, etc. Each owner is assigned a quota or percentage?of the expenses which must be paid by?law.
Your lawyer will request a copy of the rules and?regulations of the community, together with a?copy of the minutes of the last AGM so that you?can ascertain the current situation with respect to?any community issues.
Decisions are taken by majority vote of the owners?at each year?s AGM and these actions are recorded?in an official document that you are entitled to inspect?when you become the property owner.
IBI (local rates) and BASURA (refuse collection)
The IBI is the municipal real estate tax and BASURA?is the local refuse collection tax. When purchasing?the property, your legal representative must check?the IBI receipts and BASURA for the last 5 years,?since you can be liable for five years of back tax.?The IBI tax can be as low as 120 euros or as much?as 2,000 euros per annum.
It is recommended to have these local taxes paid?automatically from a bank account each year, in?order to avoid unnecessary surcharges, and also to?benefit from discounts for early payment, which?can be as much as 10%.
The Title Deed and Registration
The ?Escritura Publica? or ?Title Deed? is the final?document of the sale and is signed between?the buyer and vendor when the final balance due?on the property is paid. The signing takes place in?the presence of a notary public, which makes the?document legally binding. The notary public is an?official of the state, and his duty is to certify that?the contract has been signed, monies paid over,?and that the buyer and vendor have been advised?of their tax obligations. The notary public keeps?the original of the document and the purchaser?is issued with a second authorised copy, which is?then entered in the property registry (against the?payment of the stamp duty or transfer tax). This?means that if the buyer loses the buyer?s copy, then?the notary public can always issue another copy.
Property Values
When going through the purchase process,?you will come across different values which are?attached to the property. It may be helpful to understand?these different values:
- Catastral value
- Fiscal value
- Valuation value
- Market value
- Declared value/Sales price
Catastral Value
The ?catastro? office is the second form of property?registration, and deals more with the exact?location, physical description and boundaries; unlike?the property registry which deals more with?ownership and title. The ?catastro? office is also?the source of the ?valor catastral?, which is the?assessed value of the property used in calculation?of local rates. The figure is normally considerably?lower than the real market value. If you are purchasing?a new property this will not have been?assigned a ?valor catastral?, it therefore becomes?the buyer?s responsibility to register the property?at the ?catastro? office for this tax. An existing?property should already have its own ?valor catastral?.?The annual real estate tax IBI, charged by the?municipality, will be calculated based on the ?valor?catastral?.
Fiscal Value
This is the value assessed by the tax authorities,?and is the minimum value that should be declared?on the title deed when a sale takes place.
Valuation Value
This is the value assessed by a bank for mortgage?approval purposes.
Market Value
Depending on the market, a real estate agent or?property valuer will give an estimate of a property?s?current market value.
Declared Value/Sales Price
The declared value is the sales price of the property.?All the costs and taxes are based on the sales?price.
Part 2 ? Purchasing a property off-plan in Spain ? available Tuesday, March 20th.
Purchasing a property off plan in Spain means you?pay in advance for a property not yet built. However,?you make great savings in the end. This is?because the builder gives very favourable terms?to the buyer because the buyer is financing the?project and the property will have increased in?value when it is eventually finished. Continued tomorrow?
Thanks to Perez Legal Group.
Tel: +34 952 833 169
www.perezlegalgroup.es
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Source: http://realestatemarbella.wordpress.com/2012/03/19/purchasing-a-resale-property-in-spain/
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