The Buyers Guide to Spanish Homes
Let us guide you through the process
The team at Jason Callow Homes specialises in new and off plan purchases, homes that you will be the first owner of. This choice of property gives you greater control and flexibility of the units location and configuration. It is quite normal to be able to customise and upgrade your property if buying off plan or during construction. This allows you to change specifications and perhaps fully customise a basement area into a living space perfect for your needs.
Unlike buying a re-sale property, buying off plan homes gives you a longer period to spread the cost. Typically, with a new build property, you are given a 10 year building guarantee and all purchase instalments are bank guaranteed by law. All the modern off plan projects than jasoncallow.com sell are built to the latest eco standards and therefore are much more economical to run compared to older buildings. Features such as underfloor heating, aerothermal air conditioning/heating and home automation systems are installed as standard.
The Buying Process
Our experienced sales executives will work along-side you to hand-pick the finest properties available in the best locations to suite your requirements. There is an abundance of developments on the market, so trust us to only deliver the most relevant and best selling projects so that you can enjoy the buying experience.
Online Tours and Site Visits
We have now implemented online tours and video calls across our property portfolio. This means we can show you, live, the shortlisted properties remotely giving you an insight into the project before you visit.
The Buying Process
The Reservation Deposit
In order for a property to be removed from the market, it is customary for the potential buyer to place a deposit of between 6,000 – 10,000 Euros (this amount varies depending on the property purchase price). This deposit can generally be paid to the property developer or initially to your legal representative.
Due Diligence / Searches
Once the deposit has been paid, your lawyer will request the real estate agency to provide them with the contact details of the vendors lawyer to notify them of their representation and to request from them the necessary documentation in order to carry out the appropriate due diligence in which they will verify all relevant aspects related to the property, such as:
Due Diligence / Searches
Purchase from a Developer (Off Plan & New Properties)
1. The legal identity of the owner/the seller of the immovable property you intend to buy;
2. That the property under construction is legally registered in the corresponding Land Registry;
3. That the property is free from charges (mortgages, liens, encumbrances, etc.) It is customary for the developer to have finance to build which may take the shape of a mortgage. Should the buyer not be interested in taking over the proportional part of said finance in the way of a mortgage on the property, then it will need to be cancelled prior to completion, with all the cancellation costs paid by the developer.
4. That the property has been granted the corresponding municipal building permit and habitation licence (where applicable) by the Town Hall in question, and respects local urban planning rules.
5. That the construction specification or quality specifications are made available to the buyer and included in annex to the purchase agreement.
6. That there is a Bank Guarantee or Insurance Policy in place in order to provide guarantee for all monies paid to the developer during the construction process.
7. Confirm and check the content of the mandatory 10 year insurance guarantee (Seguro Decenal) that will provide coverage for any structural defects on the property.
8. Revision of the purchase contract drafted by the developer in order to assure that its content respects the buyers rights and that it is fully understood by the buyer and to ensure that this document respects the buyers rights.
Due Diligence / Searches
Purchase from an individual (Resale or second transfer)
1. The legal identity of the owner/the seller of the immovable property you intend to buy;
2. That the property is legally registered in the corresponding Land Registry;
3. That the property is free from charges (mortgages, liens and encumbrances, etc.)
4. That the property has been granted the corresponding municipal building permit and habitation licence by the Town Hall in question, and respects local urban planning rules.
5. The study, preparation and signing of whatever private contracts (reservation agreement, option contract, sale contract) or public, notarial, documents (purchase/sale deed) which are deemed necessary to execute the purchase operation. The standard procedure is to first sign a private contract normally with the payment of 10% of the purchase price, and after a reasonable lapse of time, to sign the public deed of sale/purchase.
Services Covered by Your Lawyer
• Obtaining your NIE number. The NIE number is a tax number in Spain for foreigners. You need this number in order to be able to register your purchase in the land registry office and pay your taxes. This number is also needed to arrange your contract with service suppliers such as water, electricity, telephone, and other services.
• Verification of existing debts on the property, such as Council Tax Rates (IBI), horizontal property (community) charges, outstanding utility bills, and calculation of the Plusvalia Tax that is applicable in cases where the vendor is non-resident and in accordance to Spanish law must be retained from the purchase price.
• Payment of the corresponding expenses and taxes arising from the public deed of sale/purchase and the registration thereof in the corresponding Land Registry.
Taxes & Expenses
The expenses and taxes arising from the execution before a Notary Public of the corresponding deed of purchase are as following:
New Property:
• VAT 10% for residential properties. | VAT 21% on plots, garages and storage rooms.
• Stamp Duty (for Andalucia) 1.2%
• Notary fee: notary fees are calculated according to a scale agreed by the authorities and is dependent on the nature of the purchase and the number of sheets contained in the deed of sale/purchase. Therefore all notaries charge the same fee for the same concept. The notary fee for the purchase of a typical residential property would vary between 500-1,800 Euros
• Land Registry fee: land registry fees are calculated according to a scale agreed by the authorities. Normally, the land registry fee amounts to 50-70% of the notary fee.
• Legal fees 1% of the property purchase price plus 21% VAT
Resale Properties:
• Transfer tax: 7%
• Notary fee: notary fees are calculated according to a scale agreed by the authorities. Therefore all notaries charge the same fee for the same concept. The notary fee for the purchase of a typical residential property would vary between 600- 2,800 Euros
• Land Registry fee: land registry fees are calculated according to a scale agreed by the authorities. Normally, the land registry fee amounts to 50-70% of the notary fee.
• Legal fees 1% of the property purchase price plus 21% VAT
Private Contract
The Process:
Once the Lawyer completes the due diligence, and providing that everything is in order, in a period of 2-3 weeks from the signing of the reservation deposit, they will proceed with the preparation and subsequent signing of the private purchase contract with the payment of the amount previously agreed with the vendors.
Upon the signing of the private purchase agreement it is customary for the buyer to pay to the owner an amount equivalent to 10% of the purchase price in the case of resale property and an amount equal to 30% of the purchase price in the case of off plan properties.
The private contract is a very important step, as herein they will set out the terms and conditions of the purchase; therefore they will carry out all the necessary negotiations with the vendor’s legal representatives in order to defend the client’s best interests.
Power of attorney. Many clients choose to grant power of attorney in the lawyer’s favour in order to act on their behalf in Spain during the buying process. This will enable your lawyer to sign the relevant paperwork related to the purchase and the mortgage, if necessary. The power of attorney can be granted in Spain by a public notary, which is the easiest way, with an estimated cost of 70 Euros, or at the Spanish Consulate in your country of residence.
Furthermore, it can also be granted in your country of residence before a public notary, but in this case it should then be legalized with the Apostille of the Hague Convention or through Consular legalisation for it to have legal value in Spain. In any event, your lawyer will also assist you during this process should you choose to grant power of attorney, here in Spain or abroad.
Public Deed of Purchase
After the signing of the private contract, in a period of 4-6 weeks, depending on the conditions agreed with the vendors, the public deed of purchase will be signed by the buyer with assistance by your lawyers or by your lawyer with the aforementioned power of attorney. At this moment the balance of the purchase price must be paid to the seller, with the buyer taking physical possession of the property.
Utilities, rates, garbage collection, community fess and taxes
Your lawyer’s office will take care of contracting and/or changing the title of all the contracts with supply companies as well as the relevant taxes concerning the property, and if you so wish they can arrange the direct debiting of those bills (direct payment made by your own bank in Spain). A bank account in Spain will be needed in order to set up the direct debit for the utilities, rates, household waste collection and community fees. Your lawyer will assist you in the opening the Spanish bank account.
Other cost you should bear in mind
The non-resident income tax
Regardless of whether your property is rented or not, you will always have to pay income tax as per the following rules:
• If you do not rent out your property, the Spanish authorities will assume that you have what is called “Deemed Rental Income” which is subject to Non-resident Income Tax. This legal rent is obtained by applying the percentage of 1.1 on the cadastral value (rateable value) of the property, on this base amount the rate of 19 % is applied for European Union Citizens and a 24% for the non-European Union Citizens. This cadastral value is listed on the IBI (tax council rates) invoice and is usually lower than the purchase price reflected on your title deed.
• If the property is rented out, the rate applicable is based on the net rent obtained by the landlord of the property and is 19% for European Union Citizens and 24% for the non-European Union Citizens. According to the new Law, citizens from the EU are allowed to deduct the expenses incurred during the period the property was rented out: electricity; water; community fees; home insurance; interests on mortgage; Council Tax Rates (IBI) & waste collection; maintenance; cleaning services; legal fees for dealing with the income tax returns as well as a 3% annual building depreciation.
•In this case, a Tax Residence Certificate, issued by the tax authority of the country where you reside, must be submitted together with the tax forms (one for each tax payer).
Other cost you should bear in mind (cont..)
Wealth Tax
Wealth tax at present is abolished.
Solidarity Tax
The Temporary Solidarity Tax on Large Wealth is a state tax and starts for a non-resident when the individual has assets of over 3,000,000€ in Spain.
The applicable example tax rates in force are:
– Purchase of a €5M property = €34,000 tax
– Purchase of a €8M property = €95,600 tax
– Purchase of a €12M property = €197,860 tax
Capital Gains Tax
When selling your property there is a tax called Capital gains. This is applicable if you sell the property for more than you purchased it for. The Tax is relevant to the seller only, and is calculated as 19% of the upturn for non-residents.
Community Fees
Council Tax (IBI)
Rubbish Collection
Electricty, Water, Wifi
Home Insurance
Jason Callow Homes provides this buyers guide for information purposes only, it is not intended to replace professional advice and should be just used as a guide.
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