Your Spanish Property Purchase Checklist
If you are buying a property in Spain, whether a house, an apartment, a piece of land to build on, or a farm, here you will find a list of the items that you ought to be considering in detail. If you have appointed an independent legal representative, or intend to do so, then this is what he or she ought to be considering before advising you.
Who owns the property?
Be certain that the person selling to you owns the property and that it is registered in the name(s) of the seller(s). If not, find out why.
Does the estate agent have authority from the seller to offer the property for sale?
The estate agent should be happy to provide you with evidence of his or her authority.
Are you paying the market price for the property?
Do your research well. Try not to buy a property in Spain if you have only viewed properties through one estate agent, as that estate agent may have artificially increased the prices of all of them. Try to view properties through as many estate agents as possible. Do not limit yourself to British or other northern European estate agents. Even if Spanish estate agents do not speak particularly good English, their job is to show you the property. Once you have found the property you ought to be handing the matter over to your independent legal adviser.
Do you know what the purchase costs will be?
Different areas of Spain have different purchase tax and value added tax rates. New properties attract value added tax as well as stamp duty. If you are borrowing money then two documents will need to be notarised and registered, not just one. Tax is payable on the amount secured by a mortgage. Be certain that you are clear as to your total liability to tax and the other purchase expenses, including the likely fees of your independent legal adviser, before you agree on a purchase price. Try not to rely on rough guides based on a percentage of the price of the property, as these may be inaccurate. Ask your independent legal adviser to work it out, which is a very simple calculation for someone specialising in Spanish property work.
If you are asked to pay a deposit, even a small reserve deposit, have you taken independent advice first?
If you pay a deposit but do not complete the purchase, you will lose your deposit, unless there is something fundamentally wrong with the property such that you cannot purchase what was offered to you. It is vitally important therefore that you are certain that you want to go ahead with the purchase before making any payment at all.
Are you planning on using the services of a legal adviser who may be a close contact of the estate agent, or the seller?
If so, that legal adviser will not be independent. Always use an independent legal adviser whom you have identified yourself, without recommendation from the seller, or the estate agent, or anyone who knows the estate agent or the seller. Arguably, in a small locality everyone will know everyone else. There is absolutely nothing wrong with engaging a lawyer who is not located in the area in which the property is situated. Lawyers specialising in property law almost never visit the properties that their clients are purchasing. That is true in the UK as well as in Spain and elsewhere. All work is done on the telephone and in written communication. The only reason that a lawyer’s personal presence is necessary is at a Notary’s office at the completion of the transaction. Well established firms of lawyers have representatives throughout the Spanish mainland and the islands who can attend to matters where a lawyer’s personal presence is required.
Was the property built with planning permission?
You can determine this by asking to see documentation issued by the local authority confirming that the build was signed off after completion. A certificate signed by a private architect is insufficient. That a description of the property appears on the property register is also insufficient.
If you are buying a rural property, that is any property that is not built on a street with pavements and streetlights, you need to be extra vigilant. Depending upon where in Spain you are purchasing and the time that has passed since the property was purchased, the property may or may not be considered a "legal" build.
If there is a Community of Property Owners (“Comunidad de Propietarios”):
- How much is the annual service charge?
- Do many of the members of the Community of Property Owners default on their service charge payments?
- Are there any expenses that are about to be met by the Community of Property Owners that you will have to contribute to once you have purchased?
It is important that you see the minutes of the last two annual general meetings to understand how the Community of Property Owners works, i.e. whether the community is at all dysfunctional.
Are there any charges registered against the property? If so:
- How will they be paid?
- Will the seller arrange for the chargee / mortgagee (such as a bank, or other creditor) to attend the completion meeting and receive payment there?
- Or will you have to retain an amount to make payment of the funds owing to a lender?
This is very important. If a secured debt is to be repaid on the day of completion then that is preferable. If you have to retain funds to repay the debt and cancel the charge, that may cost you more money. Your independent legal adviser ought to be able to deal with either situation, but beware.
Are the utilities connected to the property, or is that something that you will have to deal with after you purchase?
When buying bank repossessions in Spain, often the utilities have not been paid for some time and the utility companies have removed the meters. It is far more expensive reconnecting the supplies when meters have been removed. A bank may not be prepared to compensate you for that, but it is important to know so as to be able to budget.
Do you know what your ongoing obligations will be?
You will have to pay various taxes, particularly property tax (IBI) and non-residents income tax. Your independent legal adviser ought to be able to assist you with those matters. Upon sale of the property, further taxes will be payable, such as a municipal tax charged by the local town hall, and capital gains tax.
Will you have the property surveyed?
If you are buying a single family home in Spain, or for that matter any structure that is not part of an apartment block, it is essential to have the property surveyed. You may not consider this to be as important if you are buying a property that has just been built, as it is unlikely that any latent defects will yet be visible. Of course, that is a risk that you may be prepared to take. If you are purchasing an apartment, provided the apartment block has been standing for some time, you will be able to see whether there appear to be any obvious problems with the structure. You will be able to determine from consideration of the minutes of recent annual general meetings of the community of property owners whether there is a structural problem with the building, as this will almost certainly been discussed. Hence, you will be able to take an informed decision as to whether a survey is necessary. That said, many people have a property surveyed in the same way as they use an independent legal adviser to advise them in respect of the purchase.
Plans to develop
If you have plans to develop property in Spain, such as to build a pool, or to extend, or to fence the grounds, it is very important to ensure at an early stage, so before you pay any money to an estate agent, whether and to what extent your plans will be realisable. If you can achieve what you are hoping to achieve then you ought to have a fairly good idea of the cost of those improvements. That means taking a builder to the property and asking for an estimate. In Spain, any work that requires planning permission will require plans to be drawn up by an architect licensed to practise in Spain. The architect will have to be involved in the project until its conclusion and will need to sign off on the build when it is complete. That means that anyone working on the job will have to be registered to work in Spain, paying tax and social security. Otherwise they will not be insured and the architect may not be prepared to allow them to work on the job.
Is it possible to rent out the property?
In some parts of Spain there are rules governing the rental of property for short term lets that require the owners to register their properties as rental properties and / or to comply with a series of rules. If you intend to let the property on a short-term basis, so for holiday lets, it is essential that you determine prior to making any deposit payment that you will be able to do so. In some places, such as the city of Barcelona, it is very difficult to obtain a new rental licence, so that if you intend to let out your new Barcelona apartment you ought to buy one that already has a rental licence. The same is true of Ibiza, for example. If a rental licence is not necessary, but compliance with rules is a requirement, then be certain that you are aware of the cost of compliance, as well as practical requirements that you may need to negotiate.
The above are some of the most important questions to be asking when you are purchasing Spanish property. Of course, if you are engaging an independent lawyer with expertise in Spanish property transactions, he or she will raise these points with you at the outset.