After the financial crisis, the prices of Spanish properties have decreased and now it is a good moment for buying real estate in this country, if you want to investin this sector. Foreign entrepreneurs who are interested in purchasing properties in Spain should know a few details about this procedure in order to maximize their profits and avoid losses.
Our team of lawyers in Spain can help both investors and natural persons with in-depth assistance on the legislation regulating the purchase of a local property, on the due diligence procedures, as well as on the provisions that must be included in any purchase contract. For in-depth information on this subject, you can always send your inquiries toour law firm in Spain.
Why you need a property lawyer in Spain
If a foreign investor doesn’t know the Spanish real estate market and the main regulations related to purchasing a property, it is recommended that he/she contact a Spanishlaw firm, where he/she will find an experienced property lawyer in Spain for the due diligence process and the legal assistance for buying the property, no matter if it is a residential building or a commercial space.
Due diligence is of high importance when purchasing a property and this is why any person should request the professional services of our property lawyer in Spain. Due diligence refers to the set of activities through which a specialized person verifies if the property itself meets all the characteristics that are mentioned in the sale agreement.
This means that our team of lawyers in Spain will verify the identity of the owner, the land registry documents, the features of the property, if there is any mortgage opened on the respective property, any debt or legal proceeding, any environmental issue that would infringe the applicable environment law and other matters that are generally of interest when purchasing real estate.
You may choose a Spanish attorney who is expert in land and real estate legislation, even if you already collaborate with a local real estate agent who is able to handle the entire process on his own. You will need a property lawyer in Spain also if you are involved in a dispute related to a propertyyou want to purchase or you have already bought it.
For buying a property, you may also need a translator if you don’t know Spanish, because all of the documents must be translated in order for you to understand their provisions and sign them only after you are sure that you agree with all the provisions.
Prior to purchasing a Spanish property, it is advisable to verify the taxes that are applicable to the respective sale, as well as the tax rates the buyer must pay. You should calculate if you can afford to pay the taxes required by the local authorities and eventually if you have to renovate or repair the property after you buy it.
Those who want to purchase a property here can also receive advice on how to start a business in this country. Our lawyer in Spain has the necessary expertise in opening companies, registering a legal entity for taxation, obtaining business permits, applying for a Spanish EORI number and any other matters related to the business environment.
What you should check before purchasing a Spanish property
After you decide what property you want tobuy in Spain, you should check a few details in order for the process to be completed. You will need an extract from the Land Registry containing the details about the property to be bought, that must be the same with the characteristics of the property mentioned in the contract and the sellers must be the owners of the building/land you buy.
When you or your property lawyer in Spain do the due diligence process, before buying the property, it is necessary to check if there are any debts, mortgages or any other charges on the property. Additionally, you must check if there is any litigation related to this property and, at the ending of these, if there is a possibility to lose the property.
The steps to buy a property, helped by our property lawyer in Spain
The first step when purchasing real estate in Spain is to reach an agreement with the seller by singing an option contract in order to make sure the owner does not sell the property until the purchase-sale agreement is completed. When signing the option contract, the buyer must deposit from 5 to 10% of the purchase price.
The purchase itself takes places that the moment when the person selling the property and the person purchasing it sign the public deed of sale, a document that is signed in front of a Spanish public notary. You must be aware that the whole process must be supervised by a Spanish public notary.
Once the property is bought, the new owner should register it with the Land Register, as not all properties are registered in Spain. For more information about buying real estate in Spain, please watch the video below, with information provided by our property lawyer in Spain:
Taxes related to buying real estate in Spain
Foreign citizens buying real estate in Spain must pay attention to the taxes to be paid when buying the property and the annual levies. During the sale of a property, it is necessary to know that the following property taxes will apply: the notary fees, the land registration tax, the property transfer tax and the value added tax (VAT), applicable in the case of properties bought from a real estate developer.
The taxes imposed on the sale of properties in Spain will vary greatly not only based on the region in which the property is located, but also on the specific situation of a property. For instance, the taxes can differ if the property is old or new, if the property has had a previous owner, if it is sold through bank or whether the direct seller is the construction company that build a construction project (a district of houses, an apartment building or another type of dwelling).
The tax rates can also be influenced by the valuation price at which the property is sold on the Spanish market. One of the common taxes applicable in this case is the capital gains tax and you can find out in-depth information on the manner in which this tax is applied from our property lawyer in Spain. The transaction itself can include the following taxes:
the transfer tax – it varies based on the region where the property is located and in Spanish regions such as Ceuta and Melila it is applied at the rate of 3.1%, while inValencia, Catalonia or Galicia it can increase up to 10.1%;
the capital gains tax applicable to the sale of a Spanish property is charged at a rate of 19% for Spanish citizens, citizens of the European Union (EU) and those of the European Economic Area (EEA);
the residents of countries outside these structures are charged with a capital gains tax applied at a rate of 24%;
newly built properties in Spain are imposed with the value added tax, charged at the standard rate of 10%;
newly built propertiesthat are bought here are also charged with the stamp duty, imposed at a rate of 1.5%, payable by the buyer;
the transfer tax on a resale of a property can also vary based on the region and the valuation price of the property and it may range from 8% to 10%.
Required documents for selling a Spanish property
When selling a property in Spain, the seller will need to provide the following: the passport, the residency certificate or the NIE, the original title certificate of the estate you are selling, the last invoices for water, electricity etc., the keys, the energy performance deed, the community receipts payments and the tax receipts.
It must be noted that the energy performance deed, or the energy performance certificate, represents a necessary legal document that must be presented when selling a property in Spain, as per the European directives on energy and other environmental matters. The document must be issued by a qualified technician in Spain, but those who want to purchase a property should be aware that the document is not necessary in given situations.
For instance, the owner of a property in Spain does not need to provide the energy performance certificate if the property has a useful surface of less than 50 square meters or in the case of properties that are not used for more than four months a year. Our property lawyer in Spain can further advise you with regards to this regulation.
Some of the documents need to be notarized and, depending on the region of Spain in which the property is located, the costs can be distributed between the two parties and, following the Spanish law, the proportion should be: 25% paid by the buyer and 75% by the seller. If you want further details or you wish counselling in selling or buying a property, you can ask our property lawyer in Spain.
Sale of a property by residents in Spain
The gain from selling an estate by a Spanish resident is taxed on the actual sale which must be declared in the annual tax return. You can be granted the rollover relief which is available when the sale's proceeds are being reinvested (within two years after the sale), in the new residence of the taxpayer.
He/she must have lived for three years in the premises of the property prior to selling it and sell it for a number of reasons (change of job, divorce, marriage etc). The absolute relief is granted when the seller is over 65 of age and has lived there for minimum three years.
Rules for non-residents in Spain
For complying with the EU rules of non-discrimination, in 2007, capital gains tax rules have been modified for both residents and non-residents. When a property is sold by a non-resident in this country, the buyer has to withhold 3% of the purchase price and then pay it to the authorities in charge of the Spanish tax as an advance of capital gains tax on behalf of the seller. For a foreigner, the tax may also be due in the country of origin. Our property lawyer in Spain can offer more details on this issue.
Buying property in Spain
A property lawyer in Spain can help you before the actual property purchase by making sure that the contracts signed with the landlord are accurate and the characteristics of the building are the same as those in the title deed. Any property needs to be registered with the Spanish Land Registry and also at the Cadaster.
After the registration, a title deed is issued in the name of the new owner. In case of property sales, the new owner must register himself as the proprietor in order to have ownership rights over the property. A lawyer can help you make this ownership transfer. As the new owner you will also need to observe the tax rulesfor property and/or for income from rental activities.
Property inheritance in Spain
The inheritance law in Spain does not differentiate between foreign owners or inheritors and native ones. The laws governing the will in which the property is passed on can determine the manner in which real estate property is distributed among the heirs. This means that foreigners can draw up wills that will be enforceable in Spain according to the laws of his/her country. However, the foreign jurisdiction can refer the inheritance issues back to Spain.
Legal beneficiaries in Spain include children and their descendants, parents, widows. Beneficiaries are usually granted the same portion of the inheritance. Different rules apply to widows according to their legal relationship to the deceased individual and you may request legal advice on this legal aspect from our team of lawyers in Spain.
The Spanish property law
The Spanish property law governs all actions related to the sale or purchase of property and/or land as well as renting and dividing property for joined ownership purposes. The team of lawyers at our law firm in Spain specializes in all areas of property law and our lawyers can also help you with commercial law issues.
We can help you clarify any disputes that arise in the following areas: property litigation claims, the division of joint ownership, forced sales, the termination of sale/purchase agreements or the disputes between landlords and tenants and many others. The court hearings will be carried out in Spanish.
As mentioned earlier in this article, properties in Spain have to be registered with the Spanish Land Registry. The Spanish Land Registry has as a main function the registration of properties and property deeds, cadaster matters and any other legal documents related to real estate and land in Spain. The institution has a national jurisdiction, as it is in the case of other EU countries, where local Land Registries have been set up. Currently, the interests of EU Land Registries are promoted and sustained by the European Land Registry Association.
Solutions for solving property disputes in Spain
Court litigation for property disputes is subject to a statute of limitations. In Spain, there are several time-frames within which an individual can initiate legal action: 30 years for real estate disputes and 20 years for mortgage disputes. Any legal disputes that arise from purchase agreements and can evolve to property litigation cases have a statute of limitations of 15 years.
Alternative dispute resolution methods in Spain include negotiation, mediation and arbitration. One of our lawyers in Spain can help you with court representation or either one of these alternative methods. More details on the procedures related to due diligence in Spain applicable when purchase a real estate property can be offered by our team of Spanish lawyers.
Our Spanish law firm will help, through its property lawyer in Spain, with legal representation and legal assistance when purchasing a real estate property. You can rely on our team for advice on how to sign a real estate sale contract and on the legislation in the field.
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Federico Richardson is a lawyer experienced in dealing with international clients interested in doing business in Spain especially in corporate and real estate sectors. He is a graduate of the University of Navarra, took part in various businesses and now he coordinates the engagements at Lexidy Law Boutique SLP. Contact us for details
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