Top Legal Tips When Buying Property in Spain
Spain is once again the top destination for international buyers and investors. This article sets out the key legal issues to consider before buying a property.
- Buyer beware
Property is one of the few legal areas where consumer laws do not generally apply. Therefore, in the event of any issues arising after the purchase, it is very difficult to sue the estate agent or the seller, or to otherwise undo a transaction. This is particularly relevant in Spain, as there have been some instances of developments lacking the relevant permits or having other issues affecting title. As a result, it is essential for international buyers to instruct an independent lawyer to protect their interests prior to paying a deposit or entering into a contract.
- Know your specific challenges and needs as an international buyer
Although it is advisable for almost everyone to instruct an independent lawyer before buying a property in Spain, a Spanish buyer will face less legal risks than an international buyer. For example, he will possess better linguistic skills and familiarity with local practices in order to raise relevant enquiries.
Most of all, the legal and tax requirements of foreign nationals are more complex than those of Spanish buyers. For instance, the former may want to mitigate the effects of Spanish inheritance laws, will require NIE numbers or may not be tax domiciled in Spain (and will therefore need to file yearly tax declarations).
- Choose the right lawyer
Your choice of lawyer should not solely be determined by how much he is charging. Although fees should not be excessive (and should be capped in respect of most conveyances), it is a grave error to simply instruct the cheapest lawyer without considering other factors. Any international buyer should make sure that his lawyer possesses the following attributes:
Independence. A lawyer who is not independent because he was appointed or recommended by the estate agent or the developer will not fully represent your interests. This may not only be counterproductive, but will ultimately harm your position. The lawyer may not reveal serious liabilities that may prompt you to ask for a discount or to walk away from a bad deal.
Your lawyer should be a “real” lawyer. Unfortunately, there are numerous unregulated individuals in Spain who claim to be “legal professionals”, “conveyancers” or “paralegals”. It is prudent for international buyers to instruct real lawyers registered with the Spanish and local bar associations and covered by all applicable professional insurances.
You should receive clear advice in English. It is not uncommon for some lawyers in Spain to hire English-speaking paralegals or secretaries in order to liaise with international clients, as they may not speak English themselves (even if their website and literature claim otherwise). This should be avoided as your lawyer must be able to understand your concerns and explain complex legal issues clearly and directly.
Your lawyer should specialise in advising international clients. It is simply not enough for a lawyer to speak English. You should instruct a lawyer who is knowledgeable of all the legal and tax issues that will affect you as an international buyer during and after the purchase. In essence, your lawyer should foresee any challenges that may arise in order to become your long-term advisor.
Your lawyer should be familiar with local practices and procedures. It is not necessary to instruct the lawyer whose office is closest to the property that you intend to purchase. However, your lawyer should have experience in the region where the property is based to effectively liaise with the relevant registries and parties to the transaction (either directly or in association with a local firm to ensure that all filings are duly completed).
- All costs should be made clear from the outset
Before proceeding with a purchase, your lawyer should inform you of the transaction costs due on completion.
Transaction costs – Generally speaking, transaction costs for most properties amount to circa 11% of the purchase price. This figure is largely composed of land transfer tax (8%), notary and registry fees (circa 1.5%), legal fees (circa 1%) and miscellaneous costs and taxes (circa 0.5%).
In the event that a buyer is securing a Spanish mortgage, the overall transaction costs may increase to 13.5% due to additional taxes and registry fees.
NB: The above transaction costs apply to second-hand properties on the Costa del Sol. Land transfer tax in other Spanish regions such as Costa Blanca may be 10% instead of 8%, so overall transaction costs would be higher. In addition, VAT of 10% applies to new-build properties instead of land transfer tax.
Ongoing costs – A good lawyer should also inform you of the key ongoing costs applicable after completion:
(i) IBI – Which is the Spanish equivalent to Council Tax and is calculated in accordance with the property´s cadastral value.
(ii) Community fees – Which are the service charge fees paid to the community of owners for the upkeep of communal parts (such as gardens, swimming pools, painting, etc.)
(iii) Utilities – A good conveyancing lawyer should ensure that utilities such as water and electrify are not cut off, in addition to being duly apportioned on completion.
(iv) Non-resident owner´s tax – This applies to owners who are not tax domiciled in Spain. This tax is not substantial but will require the filing of a yearly declaration in Spain.
(v) Other taxes and costs – Depending on the location of the property, owners may need to pay a rubbish collection fees to the local authority. A competent lawyer should inform you of such costs and file the relevant declarations on your behalf.
- Do not make a firm offer or pay a deposit without first consulting your lawyer
You should never make a firm offer or pay a deposit without first consulting your lawyer.
Ideally, you should ensure that the funding is in place before making an offer. However, if a deposit is required to take the property off the market, your lawyer should properly advise you of the risks and insist that the transaction is conditional on financing, so you will not be in breach of contract or lose the deposit if your bank refuses or delays financing.
Moreover, even if there are no financing issues, before paying a deposit your lawyer should analyse the contract and complete a basic legal due diligence, to ensure that you are not putting your money at risk.
- A site viewing is a must
Although it may be tempting for some international buyers to make an offer on a “bargain” property listed on a website without incurring the time and effort of flying down to the Spain, this option is not advisable under any circumstance. Prior to making an offer, a buyer should become aware of the facts on the ground and have a face-to-face meeting with his lawyer.
It is not always necessary to instruct a surveyor. However, a site viewing may reveal relevant issues, such as construction defects, incongruences of the title deeds or the presence of occupants at the property.
- Look at the big picture
Many properties in Spain (and in particular those purchased by international buyers) form part of communities or urbanisations with communal gardens, swimming pools, parking, etc. Therefore, you should ask to inspect the common areas and the status of the community as a whole. Your lawyer should at the minimum confirm that the property in question is not in arrears in respect of the community fees (i.e. the service charge). Moreover, a prudent lawyer would also analyse the minutes of the latest meeting of the general assembly of owners, to ensure that there are no major issues affecting the development.
About the Author
Lucas Bornico is a Partner at BF Solicitors (Bornico, Farquharson & Associates). He is a Solicitor (England & Wales) with numerous years of experience in London and Spain (where he is duly registered as an EU lawyer with the Spanish Bar Association).
BF Solicitors is a boutique law firm of English and Spanish lawyers, which specialise in advising international clients on the Costa del Sol.
Their partner-led practice is able to provide a comprehensive service in respect of the areas that matter most to our clients, including property, conveyancing, tax, wills & inheritance, wealth management, family law, litigation and cross-border commercial & corporate transactions.
This article is intended to provide a general overview on the purchase of a property in Spain and should not be deemed to constitute legal advice. Before relying on this article and entering into a transaction, readers are strongly advised to contact BF Solicitors for a free and confidential consultation.
Head Office: Av España, 146 – Third Floor, 29680, Estepona (Malaga), Spain
www.bfsolicitors.com / Email: email@example.com / Tel: +34 952 000 031 (Spain) / +44 (0)20 7442 5810 (UK)
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