REAL ESTATE LAW

Buying a property in Spain is a simple process if you only take one step at a time and hire the right experts.

Step 1:  Examine thoroughly

If you are on holiday in Spain and suddenly find the perfect home, then you might want to hurry up and make a bid before you go home. Stop! This is where a lot of people make a mistake. Impulse buying may be appropriate in certain situations – especially when it comes to clothes or a gift of some kind. But when we talk about such an important investment as a home is, it is not a good idea at all.

It is important to take your time, get to know the area, consider the needs you have, not only now, but perhaps also in five- or ten-years’ time. To throw yourself into a home purchase is probably the biggest mistake that people make.

Step 2: Find an independent lawyer

Once you have found the right home, you must make sure that you use the help of a good expert to investigate the legal part. Your choice of lawyer is an important step in the process of buying a property in Spain and it is important that they safeguard your interests.

Your lawyer should:

• Be able to communicate easily with you – make sure that they speak your native language well or a language that you yourself master at a really good level.
• If you are staying abroad during the buying process, how do you communicate?
• have a good reputation – always try to make sure you talk to someone else who has used them before
• be established for a long time – you want to make sure that your lawyer has a solid experience and is reliable
• be unbound to all other parties to the process. You should know that your lawyer works for you and you alone.

Step 3: Due diligence of the dwelling

Ensure that the correct housing checks are carried out such as checking:

• The legal situation of the dwelling
• That it is debt-free
• That electricity, water and the homeowner’s association is paid
• That any extensions and renovations have all the correct permits and building permits

Your lawyer should do these checks for you and you should ask for confirmation that it is done.

Step 4: Sign the private contract

The next phase of our steps to buying a home in Spain is when your lawyer certifies that the residence meets all the criteria and you can sign the private contract. The private contract is not registered in any official register but is legally binding and must be checked by your lawyer before it is signed.

When you sign the contract, you must pay a down payment. If you as a buyer break the contract, you will lose the deposit. If the seller withdraws from the transaction, you as a buyer are entitled to twice the deposit as compensation under law if nothing else is stated in the contract.

Step 5: Acquire NIE and possible power of attorney

During the process of buying a home in Spain, you need to get an NIE number if you do not have one already. This  Número de Identificación de Extranjeros  means that you are registered with the Spanish tax authorities. You have to apply for this in person at the National Police Office for Foreigners.

If you cannot be in Spain when you must apply for your NIE then you can also apply for this using a power of attorney (Poder Notarial). You can appoint a trusted person to represent you in certain transactions and you must then write a power of attorney before a notary. This means that the purchase process can continue even if you are not there.

Step 6: Signing the title deeds

The title deed must also be signed before the Notary. In this step you also make the final payment and get the keys to the residence.

When you sign the title deed, you will not receive the original title deed at once without an official copy called Copia Simple. If you have a mortgage loan, the bank will sometimes retain the original deed until the loan is fully repaid.

Step 7: Register the title deeds with the Land Registry

Once you have signed the title deed, the purchase must be registered in the Land Registry and you must notify the electricity and water companies of the change of ownership.

Step 8: Pay the bills for the purchase process

You must now supplement your payments with your legal representative.  You should then ask for a detailed list of costs instead to accept only a grand total. You must also be able to obtain all documentation and original invoices for notary costs, land registers and the taxes you have paid. It is important to keep all these documents, invoices, documentation and guarantees in a safe place. You never know when you might need them, and they are deductible expenses on the day you are going to sell the home.

Step 9: Pay ongoing taxes

It is important that you arrange for someone to take care of paying your taxes for your property in Spain. What you must pay annually depends to some extent on whether you are a resident or not in Spain. Both residents and non-residents must pay the Municipal Property Tax – IBI. Residents then also pay income tax and declare them in Spain, but it is important to remember that even non-resident homeowners must file an annual tax return. It is for the payment of an income tax imposed in Spain that is calculated based on the value of the dwelling.

Steg 10: Congratulations!

Now you have reached the tenth and final step in the process of buying property in Spain. You have now purchased a home in Spain step by step and should feel confident that the purchase has gone right. By taking advice from good experts, one step at a time, you can now look forward too many years as a homeowner in sunny Spain.

This information should be a general advice and recommendation as the application of this process may vary from region to region.

The examples given below refer primarily to UNCOMPLICATED cases.

Example) You live and are registered in a country in northern Europe and you are the owner or part owner of a property in Spain that you want to sell:

• Everyone who buys or sells property in Spain must apply for a NIE number. In other words, even in the case of an estate, everyone involved must apply for an NIE number.
• When you are thinking of selling a property, regardless of whether it is a house, apartment, etc. then you should start with and investigate WHO you want to have as an agent in Spain.
• You cannot handle all the formalities yourself without a law firm in Spain.

Start by investigating whether you can get in touch with a well-known local lawyer who speaks your language.

• Before you decide, you should ask for references and you should check if someone you know has hired the company before.

Selling is much more complicated than buying, this is because the authorities are strict in controlling your right to sell and there are no legal heirs who can come later and make claims, after you have sold. Inheritance law is different in some respects in Spain, which is why detailed documentation is required that nothing stands in the way of a sale.

Documentation

The following documents are required for a sale.

1) Power of attorney

Immediately begin to present all the facts for the preparation of a power of attorney in Spanish to the person who will represent you / be an agent in Spain;

1. The person’s full name and address
2. The person’s ID number, if a non – Spanish citizen resides in Spain, their passport number, nationality, and Spanish residencia number are required, if married / unmarried / divorced.
3. If it is a person of Spanish nationality, his D.N.I number is required, if he / she is married / unmarried or divorced.
4. All your information is stated in your identity card, which is why it is not necessary to mention more than that here. see below under point 2.

(If it is a complicated power of attorney, your Spanish representative should write the power of attorney so that it corresponds to your needs).

1. All information on the property to be sold is on Escrituran / legal title.
2. The power of attorney shall include your agent’s right to file a tax return, pay tax, etc. Without a certificate that tax has been paid, you cannot sell, and the buyer cannot get his Escritura / title deed.
3. Do you have an N.I.E. or N.I.F. number, it must be stated on the power of attorney.

Think carefully about how much the power of attorney should contain in the rights of your representative.

2) Personal identity card with genealogy, is not a stated requirement from Spanish authorities because a corresponding system is missing, but it is your duty to prove who more than you can have a claim on a sale, it does not help if you alone are registered on Escrituran and not your spouse as an example. Your spouse must then also be involved in the power of attorney together with you.

An identity card (which must be translated) and legalized by the Notary Public, Apostille stamp, makes it easier for those in Spain who investigate a sale and speed it all up considerably.

3) Passport copy, a photostat copy that has the quality that the photo is clearly visible, The photocopy must be legalized at the Embassy, ​​it is not enough that 2 people or ex. bank verifies the original. If it is about minor values ​​and no complicated divorces, you can request the identity card from the tax administration in English, so you save a translation cost, however, the document must still be legalized.

4) Receipts of paid taxes (property tax) in original, must be sent to your agent.

Keep in mind that the more complete documents you send at once, which avoid a lot of follow-up questions, the faster it goes with Escrituran / law enforcement and sales.

If all the documents are ok, you can expect it to take 1-2 months, but that presupposes that all the documents are ready without a lot of questions from the Spanish authorities, because then it takes time.

5) The actual sale can take place with a so-called. pre-purchase agreement, which obliges you that all documents are in place so that the buyer can receive his Escritura, another common rule is that your agent contains the sale price until all documents are ready.

6) For some time now, 5 – 10% of the sale price has been withheld on behalf of the Spanish Tax Agency. This is to ensure that taxes are paid. In some localities, 10% is calculated on the assessed value. After the declaration is approved, the difference is refunded, which is why it is important to have all tax receipts available. Expect this to take time, usually up to 6 months.

7) When the power of attorney has been printed and ready, all owners who must sign it must contact a Notary Public, only before this can the power of attorney be signed.

All owners must visit the same Notary Public or a local at their place of residence with the documents.

If you have had a divorce:

8) If a property has been acquired several years ago and, in the meantime, the original owners have separated by divorce, the following applies:

Swedish estate register and division of property (must be copied) and (translated) if there are major values ​​involved, this must be done by an authorized translator, Notary Public, Apostille stamp.

9) If there are children of legal age, they must, in a special power of attorney, waive any claims, or without reservation approve a sale. Which must be signed before the Notary Public in Sweden and an Apostille Stamp or in the country where the child / children live when the power of attorney is drawn up.

10) If the children are minors and the selling party is not a guardian, the other party must draw up its own power of attorney where it approves the sale and makes no demands.

11) If the selling party has meanwhile remarried and in the new marriage the child belonging to the other party, who is of legal age, accompanies them, they must also approve a sale.

12) Identity cards are also required for all those involved with genealogical information, (translated) and must be certified by a Notary Public, Apostille stamp, (see paragraph 2).

13) Passport copy of all, if any (see point 3)

Get a License and Pay your Taxes

Homeowners who rent out their home must register their home with the municipality. This applies to all types of rental of housing – apartment, villa, or room in housing.

What counts as tourist accommodation?

All homes in that are offered for overnight stay by the owner for a fee and that are advertised via advertising on the internet or at tourist agencies and rental companies.

Are there exceptions?

If you rent for more than 2 months to the same person, you do not need to register in the tourist register. This is regulated in the ordinary tenancy law.

Does the accommodation need to be specially equipped?

Yes. First and foremost, you need to have a housing license (Occupation license included in the law) that you get when you buy the home. The bedrooms must have ventilation and blinds / curtains. There must be fans or AC as well as the possibility of heating in winter. Kitchen equipment, first aid kit, information about the area, map, and a special complaint book (purchased in bookstores or through us) must also be available. The home must be clean and bed linen must be available in at least 2 sets. The telephone number of a contact person if problems arise and information about rules that apply in the area must also be available.

When can you start registering?

3 months after the law enters into force, ie May 2016, this register must be up and running. It is proposed in the meantime until then to prepare all documentation, obtain your housing license and tourist maps, install AC and update the home according to the rules. If you do not register, the fine can be as high as 150,000 €.

What documents are needed?

Below you have the documents needed to apply for a turist license in Valencia.

• PASSPORT
• NIE Number
• SUMA (council tax bill)
• HABITATION CERTIFICATE or APPLICATION OF “LICENCIA SEGUNDA OCUPACION“
• TOWN HALL REPORT OF TOURIST USE or CERTIFICATE OF COMPATIBILITY
• NUMBER OF BEDROOMS AND BEDS (Maximum occupation)
• APPLICATION FORM SIGNED (original signature is required)
• DEEDS

What are the tax rules?

Same as before. You pay tax on the profit you have made after deducting costs for the home and any rental companies or similar.

When you rent out your property being non-resident in Spain you must pay a rental tax every quarter, in January, April, July and October. If you only rent out the property short term you will have to submit the form in the corresponding quarter.

To calculate the tax it is needed the following information:

• NIE of any of the owners
• The rental contract (in the case it is long term rental) (copy)
• Rental dates
• Money received
• Property expenses:
• Council tax (copy of the bill)
• Community fee
• House insurance.

Does every tenant have to get a contract?

Yes, even if it’s only one night, a contract must be signed. All documentation must be saved for one year. The name of the person / company renting the accommodation must be included as well as the code, how many people live there, date of arrival and departure and a telephone number they can call in an emergency. You do not need to issue an invoice; a regular receipt is enough. The tenant must present an identity document upon arrival.

Financing your property purchase

Release of capital

If you already own a property and can use it to finance your purchase of a property in Spain, we recommend it. This is a cheap way to finance a purchase in Spain. But if for some reason you want to finance your purchase here in Spain, there are great opportunities to do so at the Spanish banks.

Real estate loan in Spanish bank

You can apply for a loan for the property you intend to buy in Spain at a local Spanish bank. We have good contacts and long experience in dealing with local banks so we can help you get a loan in Spain. Banks we recommend are Sabadell, Solbank, Deutsche Bank and Bankinter. Most banks have staff who speak different languages ​​and are used to working with non-residents. Our experience is that Sabadell can often give a very quick advance notice without requiring an evaluation and they can also do this via email. If so, the final mortgage size depends on the valuation. Many of our clients send the required information to the bank via email and have no personal contact until they come to close the purchase, and everything has been arranged and approved by email in advance.

You will notice that the cooperation with Spanish banks is pleasant. It is very personal, and you can contact the staff at your bank office directly by phone or email. There are no automatic answering machines here. You have contact with people and not with machines.

Typically, a Spanish mortgage loan has a maturity of up to 30 years for non-residents. However, the maturity depends on your age (or the average age of those who take the loan), as most banks want the loan to be repaid before the borrower turns 65. Exceptions can be made regarding this age limit, but it all depends on your personal situation.

After the 2008 financial crisis, banks have become more conservative, but they still lend money. If your income level permits and you can prove that you can easily repay the loan, (interest plus amortization) then it is possible to get a loan. The bank wants to make sure that the loan repayment amount does not exceed 30-35% of your net income. The interesting thing is that the banks only take into account the current interest rates, which are historically low. They do not calculate future increases.

In ordinary cases, it is possible to get an amortization-free period of up to two years, which you can avail at any time during the loan term.

Most Spanish loans are based on a variable, not fixed rate. The loans are mostly based on the EUR Ibor index, which is usually better than IRPH, which some savings banks offer. Although the difference between what the bank offers is higher on the EUR Ibor index than it offers on the IRPH index, the choice of EUR Ibor is usually more favorable. You can watch the development of these two indices yourself and decide for yourself.

The size of the loan for non-residents, if it is a holiday home, is usually a maximum of 60% of the lowest amount, either of the valuation or the declared purchase price. If you are a non-resident, but the property you lend to should be your permanent residence, then most banks lend up to 70% of the lower of the two rates. If you are a resident of Spain and the property will be your permanent residence, then you can borrow up to 80%. One of the first questions you should ask the bank is, how much they would most lend to you. Some banks say they will lend a high percentage, but then they give a low valuation of the property so the effective percentage they lend is the same, as the other banks with lower percentage, but with realistic valuation.

In the case of non-residents, the bank is more interested in the income level than in the total expenditure and ownership of property outside Spain’s borders. Spanish lenders do not seem to care about any rental income, which can be achieved through the property you intend to buy.

The bank will ask for the following information

1. Copy of your passport
2. Your Spanish NIE number (not required for the first registration)
3. The declaration of the last two years
4. Your 3 latest paychecks
5. Bank details for the last 6 months across all your bank accounts, including pension funds, investment funds and restricted capital
6. If you own another property in Spain, a current “note simple” / legal act for each property