1. Reservation
When you have chosen a property, which may or may not be a new build, you pay a deposit to make sure the property is taken off the market. A reservation contract is signed in which the price and the maximum period for signing the private purchase contract, are established. Simultaneously many buyers choose to hire a legal representative to assist during the buying process. When the reservation is made it is time to apply for the NIE-number and to open up a Spanish bank account number.
2. Private contract
This document will show the way in which the sale/purchase will be carried out. By signing it, you and the seller are bound by the obligations within. The owner and his/her legal representative, will forward to you and/or your lawyer the property’s paperwork, to be able to study the state of the property from a legal, tax and urban planning point of view.
The contract will include a description of the agreed means of payment and anything else you may have agreed with the agency (move in date, whether or not it’s furnished, etc.). Signing the contract will likely entail a payment of between 10% and 20% of the total price, with the rest due on signing the title deed and completing the sale/purchase.
How long will it take to go from reservation to private contract?
Between 0 and 15 days. If the property in question is a new home, this may take a little longer, as the contract will be signed when the property developer specifies and always when they have obtained the building permission.
3. Title Deed
Approximately a week before signing the title deed, your legal representative will ask you to transfer the necessary funds to complete the purchase payment and cover the relevant expenses. To this effect, the control protocols regarding investment must be met and it is compulsory to certify the payment methods. This is part of your lawyers job and he/she will deal with this matter. To do so:
- The lawyer will arrange the means of payment.
- The lawyer will retain the necessary amounts to cover any potential debts.
- The lawyer will obtain the necessary certificates from the bank with regard to the overseas origin of the invested funds and which entered Spain through the banking system.
What expenses does the purchase entail?
The expenses can range between 10% and 13% of the sale/purchase and are:
- Property Conveyance Tax of 8% for transactions up to €400,000, 9% in the bracket between €400,001 and €700,000, and 10% from €700,001 and above. If the purchase is made directly from the property developer, the tax will be the applicable VAT at that time (at the moment 10%).
- Legal Acts: Only if the purchase is made directly from the property developer, this will be 1.5%.
- Notary, Land Registry and administration expenses.
- Costs of signing up for electricity and water.
- If you purchase a property with a mortgage, you will need to add a mortgage deed, the costs of which are: evaluation, notary, registration, legal acts about mortgage responsibility and the bank’s administrative expenses.
- Lawyers fees.
How long is the transition from step 2 to step 3?
It varies and depends on the agreements made in the contract. When it comes to second-hand homes, it usually takes 1-2 months and for properties sold off plan it can be several months.
4. Utilities
The deed has now been signed and you have the keys to your new home. Congratulations!
The most technical and legal part of the sale/purchase is over, but the lawyers job is not done yet. There are a number of small but important procedures to carry out:
- Direct debit and connection to electricity and water. The previous owner may have turned off the water/electricity that were in his/her name (they are entitled to do so). It may be that they are more cooperative and leave the connection so that you only have to change the name of the title-holder. In both cases you may request a technical certificate to show that the installation meets existing regulations or ask for a technician to be allowed inside the property to check the installation. If the property is old, you may have to modernise the installation and this would be an additional expense.
- It is important that you bear in mind that there will be a gap of 15 days from the moment the contract is signed with the electricity/water company to the moment it takes effect. To avoid any unpleasant situations we recommend that you communicate with your lawyer regarding when you expect to move in.
- You need to register as the property owner in the Cadastre office and at the Town Hall. You also need to arrange a direct debit to pay for the IBI (local property tax) and the duties or rates that are issued by the local council (garbage collection, vehicles, sewage, etc.). Your lawyer will help you with this.
- Depending on the purchase date and on the date the bills are issued by the council, it’s possible that your ownership and direct debit may not be effective until the following year. You will be duly informed.
- You will need to be registered as an owner with the community of property owners and arrange a direct debit to pay for the relevant fees.
