Buying a property in Spain could be regarded as a pretty stressful thing to do – especially if you’re not aware of what’s involved.
That’s where our ‘Ask the Expert’ series comes in.
In this edition we hear from someone who knows what it takes. Esther Arroyo is a property lawyer working in Spain, and she explains everything you need to be aware of. Moving to Spain? This is a must-read.
Your questions answered
What is the process of buying a property in Spain?
Private contract – The first step of the process of buying a house in Spain is to sign a private contract with the real estate agent or the seller of the property. It is very important to hire the services of a Spanish lawyer who will check the terms of this initial contract carefully, as it will bind both parties until completion at the Notary office. There are various kinds of private contract but all of them include seller and purchaser particulars; property details; price; date of completion and it is usual to set up a deposit, which is non-refundable if the buyer pulls out.
In the event that the seller pulls out, either the deposit will be refunded or the buyer compensated with the double of the amount paid. In those cases the private contract is cancelled.
It is possible to skip the private contract if completion date is very close to the moment of the reservation and all the paperwork is already provided by the vendor.
Public deed – Once the searches on the property have been concluded, the purchaser and the vendor will sign the public deed before the Notary who certifies that the transaction is made following the Spanish Law. The vendor and purchaser must be identified by the Notary so both of them must bring Spanish identification or passport and NIE number (foreigner’s identification number).
The price must be paid before the Notary, if there are previous payments, for example, deposit or instalments, it will be necessary to show the receipt of those containing where, when and how those payments have done. The deed will be ready some days after completion, however. The Notary informs the Register of the Property in advance that the purchase has been completed so; even if you do not have evidence in writing that you have bought the house, legally you are the owner of the house.
Taxes – If it is a new property, VAT should have been paid on completion to the vendor (10% homes or 21% premises). In addition, after completion, stamp duty must be paid – approximately 1.5% of the price of the property depending on the area of Spain. If there is a second hand property, transfer tax is applied – approximately 10% of the price of the property, again depending on the region of Spain where it is located.
Registering the Deed – Once taxes have been paid the Deed must be brought to the Property Registry, to be registered which will protect your rights on the property. The Property Registry is public and contains the relevant information about the property, owner and deed, including date of completion, Notary name and Notary reference.
What tips would you give to British expats when choosing a mortgage to buy a property in Spain?
When looking for a mortgage to finance the purchase of a property, it is important to know:
Mortgage rate: Usually it is applied variable rates although it is possible to find fixed rate mortage. The vast majority are linked to the Euribor rate (based on the interest rates at which a panel of European banks borrow funds from each other; the highest and lowest 15% of all the quotes collected are not included in the calculations). The interest rate most commonly used to calculate mortgage payments is Euribor plus a margin above it.
Repayment period: The range of the repayment period goes from 20-30 years.
Loan: It is usual to allow 60 to 70% of the valuation or the purchase price, the lower of them.
Early repayment charges: It cannot be higher than 0,5% following the Spanish Law.
What things do they not tell you in the guide books about what’s involved in choosing the right mortgage?
When choosing a mortgage it is important to know the reputation of the bank you have chosen.
It is difficult to negotiate the general clauses of a mortgage, but if there are many abusive clauses (those deemed ‘unwritten’) in the offer, it could be presumed that the bank does not work in its customers’ interest.
The bank must give you a binding offer before completion; it must be enough time to accept the mortgage being fully aware of its terms. The mortgage deed must contain the terms of the binding offer which should have been signed before completion. Sometimes the banks bring to the Notary office all the documents and the client have to sign them quickly before completion. The customer has the right to study in depth the conditions of the proposal and he should not be pressed in any situation.
There are some bank products which are offered by the bank with the mortgage. For example, the law expects you to take a fire insurance, but you are not bound to take the insurance with the same bank. Any other insurance policy is not forced by law although could be used to negotiate the conditions of the mortgage.
What part of the process of buying a home in Spain should expat buyers be most wary of?
The expat buyers should be wary of the initial step. The choice of the right professional to assist them before any obligation is undertaken is the most important decision in my opinion. Finding the right mortgage is also relevant.
However, the key moment of buying a home is completion date. The examination in depth of the Deed is essential as it shall prevail over any other agreement.
How important is it to have an English speaking lawyer, and one that’s qualified in Spanish land law?
It is very important to have an English speaking lawyer to assist the expat buyer in the process of buying a home in Spain as they are the only qualified professional to give legal advice. There are several laws, decrees, bylaws etc. related to the buying process which could affect the future position of the buyer. Legislation and documents are written in Spanish, which makes difficult for an expat to understand the full process, rights and obligations.
The qualification of a lawyer is guaranteed by the Bar Association, every Spanish Lawyer must be registered in a Bar Association which certifies his qualification and grants a liability policy.
On the other hand, the British Consulate provides a list of English Speaking Lawyers which could help to choose the right lawyer to assist you in the buying process.