Buying Guide

If you are interested in buying a property on the Costa del Sol, you may have heard that the process in Spain is very different from your own country, and you may have even heard some bad stories about the challenges others have faced. We have prepared a general guide, which explains the steps involved and what you need or are advised to do at each step.

Step 1: Reservation Deposit
Once you have found your new home, the first step is to pay a holding deposit to the Estate Agent or your lawyer (usually €6,000) and sign a Reservation Document to take the property off the market. This document will be signed by you, the seller and, sometimes, the Estate Agent, confirming that all parties involved agree to the accepted purchase price and the time frame of the transaction.

Step 2: Private Contract
About 7-10 days after the holding deposit has been paid, both parties sign the Private Purchase Contract (or in Spain referred to ARRAS), usually together with the payment of the second deposit.

For re-sales, 10% of the agreed price is usually paid at the signing of this Private Purchase Contract (Arras), minus the initial deposit already paid (€6,000).
For “Off Plan” developments, this percentage will be determined by the developer and will include the proportional amount of VAT (IVA).

This Private Purchase Contract (Arras) is similar to the initial Reservation Document, but includes the final terms and conditions of the offer ie inventory, date of completion, etc. This stage is the first real legal stage and the supervision of a lawyer (abogado) is strongly recommended.

The lawyer will carry out a full property investigation to find out the legal status of the property, that it is free of debts, charges and encumbrances, and that it has all necessary planning permissions and licences. Here in Spain, most debts regarding the property are attached to it and not the owner, and are, therefore, transferable to the new buyer.
For this reason, it is very important to carry out a complete and detailed research process.

The conveyance carried out by your appointed lawyer will check, among others, the following issues regarding the property (if unsure about any of the terms, we will explain):

1. ‘Nota Simple’ (probably the most important document during a sale as this document holds some of the most relevant legal details relating to the property from the very first day)
2. First Occupation Licence (LPO)
3. IBI (property tax)
4. Community fees and statutes
5. Existence and duly registration of an Energy Efficiency Certificate (CEE) – obligatory by law in order to sell property in Spain
6. Utility bills

Step 3: Completion
The purchase is formally completed when the Title Deeds (Escritura de Compraventa) are signed before a Public Notary. At this signing, the balance of the agreed* purchase price is paid to the vendor and the ownership of the property is passed onto you, the buyer (together with the keys of your new Spanish home!). The Title Deeds always stipulate that the property is sold free from charges and encumbrances unless pre-agreed before hand.
Important:
Allow approximately an additional 10% of the purchase price for costs and expenses for a resale and 13% for any new build or off plan
The most important costs involved are:
Tax (Rates applicable in Andalucía)
When buying a re-sale property: Transfer Tax. This is rated at a fixed 7%.
When buying an off-plan property: VAT (IVA) and Stamp Duty Tax. The first one is rated at 10% and the second one is rated at 1.2%.

Land registry and notary costs: The notary is a public official who is present at the signing of the Title Deeds (Escritura de Compraventa) to make sure both parties agree and understand the Title Deeds that are being signed.

Lawyer fees: usually 1%+VAT(21%) of the purchase price. They will provide the legal guarantees for the purchase of the property ensuring that Spanish legal requirements are met and that the property is bought free of encumbrances, charges, debts and is up to date with all its payments of local contributions and community charges. In addition, they can take all the necessary steps to carry out the purchase on your behalf if you grant them a power of attorney (POA), which is very comfortable and convenient for buyers who do not currently live in Spain.

Mortgage costs: if you need a mortgage, we can recommend local brokers or banks. The bank will charge their additional costs.
Various: Allow for extras such as applying for an NIE number (Foreigner Identification Number), opening a bank account on your behalf, setting up Power of Attorney or a Spanish Will after completion.
Complementary tax
We must advise that in Spain there is something which is called “Complementary Tax”. This is something that rarely happens but that can happen, and it occurs when the Authorities consider that the agreed purchase price is too low so that the corresponding tax paid is likewise too low. They have the power to assess a value which they believe the property should have been sold at and, therefore, ask you at a later stage for the difference between the amount of Transfer Tax you already paid and the amount of Transfer Tax you should have paid if you had taken into account the purchase price they consider suitable.
This procedure was created because the Authorities sometimes collected less taxes than due when buyers and sellers agreed to pay a part of the price “under the table” or consider an important part of the purchase price as furniture price (which is taxed at 4% only).
So, there is a real possibility of receiving a Complimentary Tax demand after you have concluded a purchase but, the important point is that it usually happens in very few cases (around 5% of the time) and the difference to pay is usually small if you have truly agreed on a reasonable purchase price.
In any case, if you have any doubts about this when making your final decision on which property to purchase, your appointed lawyer can make the necessary enquiries to advise you if you would be likely to receive such tax demand or not and when.
Documents Needed by the Buyer
Passport or ID.
NIE (Foreigner Identification Number): issued by the national police. In Spain you will require this for almost every economic transaction, as purchasing a property or hiring utilities services.
Basic documentation that proves your financial situation for the anti- money laundering requirements.
Spanish bank account to set up the corresponding direct debits regarding utilities. (This can be easily done by your lawyer if a POA has been granted in his/her favour.)
We can assist with the above and recommend suitable lawyers and or accountants.
After Sales
Once you have bought your property, you will then need to change into your name: the ownership of the property (both in the Land and Cadastral Registries), utilities contracts, community fees, etc. Your lawyer will usually manage this on your behalf as well as set up direct debits to your new Spanish bank account for greater comfort.
Also if you have an imported car, or wish to take pets over, your lawyer can take care of these “aftersales” once the purchase is completed.
You may find the above a bit daunting, but with the right advice and putting reliance on the right professionals, buying a property here can be as simple as in your own country (and even faster!). We pride ourselves in giving the best customer service and we will help and advise you before, during and after your purchase. Over the years we have gained the local knowledge and experience and are more than happy to help, any way we can. We also have many reliable contacts on the coast; lawyers, notaries, banks, insurance, etc., which we will gladly recommend to you during the process and at the appropriate stage.