Overseas - Spain legal QA

Spain – answers supplied by Manuel Sánchez Vélez, a member of the Property Lawyers Abroad Network (PLAN)

Introduction

From our point of view the current market in Spain is based more on the quality than on the quantity. Spain has become one of the top countries, offering services for tourists with easy facilities to travel into our country and with plenty infrastructures in such a way that it is considered like the “Californian area of Europe”.

What should the buyer be looking out for when purchasing in Spain – any legal problems/issues specific to these countries?
 
During our years of extensive experience in conveyancing we have noted that the main concerns raised by non-national clients when acquiring a property in Spain are:
 
1.- Conveyancing formalities and procedures.
 
2.- Guarantees
 
3.- Tax Liability and Compliance
 
If clients are properly informed and well advised from the outset on conveyancing procedures and the various types of documents involved, then they will be able to embark on transactions with greater assurance and peace of mind.

Could you briefly talk UK property buyers through the legal process and how it works in Spain? What should a lawyer be doing on their behalf?
 
It is essential to advise the client that the first step in the proceedings is the pre-contract reservation agreement, signed when the booking deposit is paid to secure a property. The reservation agreement should state the name(s), address and I.D. Card/Passport number(s) of both vendor and purchaser or purchasers.  Obviously, the pre-contract agreement should include a brief description of the dwelling, and any other appurtenant property included in the transaction (garage parking facilities, lock-up storage unit, etc.). The agreement should also clearly specify the price of the property, the amount of the booking deposit, and the deadline for signing the Contract of Sale, which is usually between four to six weeks.
 
It should be remembered that where the vendor is a non-resident you, the Purchaser, must retain 5% of the purchase price stated in the Deed of Conveyance. This 5% must be lodged with the Spanish Inland Revenue as a payment on account, on behalf of the vendor, to cover the Vendor’s eventual capital gains liability generated as a result of the sale. Your lawyer is the person best qualified to deal with all these matters.
 
Before embarking on your property investment, it is worth while considering whether you wish to have the deeds signed in your own name only, or jointly with your spouse, if you are married. 
 
You may also wish to consider the advisability of registering the property in the name of a company, bearing in mind that these options may help you to avoid unnecessary expenses in the future.
 
Before having your deeds registered at the Land Registry you must first apply for registration with the police department as a non-national (Identification Number for Non-nationals). This is a mere formality, for which you only require a certified copy of your passport, and a signed application form. 
 
You will require this identification number for non-nationals should you wish to open a bank account in Spain. 
 
Newly-built homes: In most cases the developer will offer a standard contract of sale, requiring an initial down-payment and a number of interim or staged payments, which are generally linked to progress of construction and completed work stages. In most cases, the final payment is made on completion of the works, when the Deed of Conveyance is signed. 
 
Likewise, if the developer has financed the development through a mortgage loan, the purchaser has the option of assuming the mortgage, on a pro rata basis, in lieu of the final payment. Should you not wish to avail of this facility, the developer must discharge the mortgage insofar as the mortgage affects your property, and the developer will be liable for any expenses or outlay entailed in the discharge of mortgage. 
 
Any interim payments you make to the developer while construction is in progress must be guaranteed by a performance bond/bank guarantee or insurance policy
 
As we have already remarked, before having your deeds registered at the Land Registry you must first apply for registration as a non-national (Identification Number for Non-nationals). 
 
Nowadays the majority of developers will raise no objections should you decide to sell on the property prior to completion, i.e. assigning the rights and obligations under the contract of sale to a third party, thereby recovering any moneys you may have paid to date, including V.A.T., plus any potential profit you are likely to make upon assigning the contract (re-selling).

Registration of your deeds at the Land Registry usually takes six or seven weeks from the date on which the deed was signed before the Notary Public.
 
Proof of registration is unequivocal proof of title, and that title is guaranteed by the Land Registry.
 
What legal costs can buyers expect?

The approximate costs and disbursements entailed in the entire procedure, including taxes, notary’s fees, Land Registry fees, professional fees charged by the solicitor, etc. amount to approximately 10% of the purchase price, unless application has been made for a mortgage to cover part of the price, in which case a further 5% must be added to the costs. This additional 5% would cover taxes entailed in the mortgage, the mortgage arrangement fee, mortgage protection insurance (life and home insurance) valuation fee, notary public’s fees and Land Registry fees entailed in processing the mortgage.
 
 Should buyers trust legal services offered by their developer or agent?
 
Manuel Sánchez Vélez comments: “It is common practice in Spain for the estate agency to suggest a lawyer. However, the agent is merely making a recommendation and you are entirely free to retain a solicitor of your own choice. Regardless of whether you take up the agent’s suggestion or decide to seek a solicitor yourself, it is always advisable to consult the solicitor at the outset on a wide range of issues to ensure that you get the best level of service to meet your requirements.”
 
 Is it safe to buy in Spain?
 
Thousands of property transactions take place each year on the Costa del Sol. In the vast majority of cases these transactions prove to be an excellent investment, bringing many advantages to the investor, provided that the procedures and formalities are properly handled and supervised by a lawyer. Your lawyer will answer all your queries and ensure that risks are kept to a minimum.
 
What is the most important piece of advice you would give to someone looking to buy in Spain?
 
Manuel Sánchez Vélez comments: “We would advise prospective buyers to employ a solicitor who specialises in drawing conveyances, with extensive experience and knowledge of all the legal and fiscal aspects of property transactions in Spain.”

Your decision to employ a lawyer will provide you with peace of mind and save you considerable expense in the long run.