Spanish Buying Guide,  Italian Buying Guide

Property for sale in Spain
Updated January 2012

Over the years we have been asked on several occasions to provide a simplified guide to buying property in Spain. Brightline Villas have produced a step-by-step guide, which will enable a person serious about Property for Sale in Spain to use.

Location

We advocate at all times that professionals i.e. solicitors and registered agents are used. Once you have decided on the area that you are purchasing, e.g. Southern, Mid or North Costa Blanca , use an agent that specialises and knows the local builders and developers, as an agent's information is invaluable regarding the quality and the builders reputation, but more important is that the local council have given a building licence to build on this site..

Finance

If you require finance for purchasing Spanish Real Estate now is the time to decide whether you want to raise the finance in the UK or Spain. If you decide to arrange a mortgage in the UK there are several ways this can be done and a discussion with Brightline Villas can put you in touch with either a specialist UK company, or if you decide to use Spanish finance, this is normally through a Spanish Bank and this can also be discussed with Brightline Villas.

Viewing properties

Brightline Villas arrange inspection visits from all major UK airports.

New or resale property

New. When purchasing new property you can normally decide through us with the builder, if you require any alterations to the plans. It also has the advantage that there are stage payments required by the builder and these can be adjusted to suit the client's finances accordingly. There are normally three stage payments; on signing the contract, at roof level and on completion.

Resale - when buying resale property it is normally sold fully furnished or part-furnished, with the garden if any , laid out. One of the disadvantages of buying resale property is that you are buying someone else's ideas in colour schemes and also the people selling look to make a profit on the furnishings etc.. However, an advantage of buying a resale property is that as soon as the sale is complete you can move in and simply unpack your suitcase!

Reserving a property

Having chosen your property and agreed terms and method of payment with the vendor, it is normal practice in Spain to place a holding deposit, usually 3000 Euro as your official confirmation that you intend to proceed with the purchase of that property. In the case of a resale property this is called an option contract or reservation contract. This acts as a signed receipt for the deposit and is normally valid for thirty days, giving the purchaser's solicitor time to carry out searches etc. this amount is then made up to 10% of the sale price . Once the thirty days, or sooner, if agreed by both parties, has passed, the escritura (title deeds) is signed by both parties in Spain before a notary. If it is difficult for the purchasers to attend it is normal to grant their lawyer a power of attorney enabling him to complete on their behalf.

The option contract

This has conditions, which protect both the purchaser and the vendor, should the purchaser decide to withdraw from the sale his deposit would be forfeited in favour of the vendor. However, should anything arise in the conveyancing to dispute the legality of the property, the purchaser will have the option to cancel the contract and the deposit is refunded. In the case of building a new property the option contract reserves the plot of your choice giving the solicitor 30 days to carry out searches on the plot, after which the main contract is signed. At this stage the payment structure would be agreed. The main contract protects the purchaser's legal status to the property. It clearly states both the purchaser's and the vendor's (builder or developer) contractual obligations and responsibilities.

Lawyers (solicitors)

Unlike the UK where when buying a property you normally instruct solicitors, not everyone does so in Spain. Everyone can recount stories where people have bought property in Spain and later found that it either has no planning permission or problems of other sorts, yet these types of cases could easily have been avoided by using a professional service in the conveyancing of their property. Buying a property in Spain, as long as you use the appropriate legal profession, is as safe as buying a property in the UK. The Spanish legal system is quite different from our own and it is strongly recommended that you use a professional company. The Spanish term for this is abogado and is a member of one the Spanish bars and, therefore, protected by the Spanish government.

Notaries

These are not to be confused with abogados. The notary's function is to witness the signing of all public documents before their registration in the property register. It is his responsibility to verify title to the property before signing in front of him. He receives the transfer tax (resale properties only) on behalf of the Spanish tax authorities (hacienda). Notary fees vary according to region.

Completion

When final payment, or in the case of resale property, the main payment, is made the vendors together with the purchasers abogado will sign over ownership of the property before the notary. This document is known as the escritura (title deeds). The original escritura is kept by the notary and a simple copy is made and stamped by the notary, the original is sent to the land registry depending on which area the property is registered, in the purchasers name, free of all charges and encumbrances. Depending on the workload the deeds are usually ready for collection from the notary after being fully legalised between 1 and 6 months! It is recommended that these deeds be placed either with your bank or solicitor for safe keeping, as they are your title deeds to your property in Spain. If these deeds are lost or misplaced, the notary that acted for you can make a second copy at cost to yourself.  IF applying for a Mortgage/Loan the escritura/deeds will be kept by the lender.

NIE (fiscal number or foreigners identity number)

This is a number that is given to all non-residents buying property in Spain. The solicitor acting for the purchasers will obtain these numbers for you. This must be in the hands of the purchaser before a completion takes place as from January 2007.

Transfer tax

All resale properties bear a transfer tax charge of 7% on the mainland and Balearic Islands but is exempt from IVA (VAT). The transfer tax is paid to the notary, who receives the funds on behalf of the hacienda (transfer tax is not paid on new property although a duty of 0.5% is imposed when a newly built property is declared on a plot). 

Stamp duty

From 1^st January 2002 stamp duty on new property only @ 1% of the declared price will have to be paid to the Spanish government.

IVA (VAT)

VAT is known as IVA in Spain and is applicable to the sale of all new property. There are different ratings which are as follows:

 - Plot only 18%

 - Plot with construction (assuming the land owner is the same as the developer) 8%

 - New completed properties 8%. Good news from the Spanish government that the 4% VAT rate on new property will continue without restrictions until December 31st 2012.

Plus valia

This is a local tax calculated as a percentage of the difference in the increased value of the property from when it was last sold. This calculation is based on the rateable value and not the real value of the property and is a one-time payment charged when property changes hands and due within one year of purchase. Each town hall defines its own percentage and it varies according to locality, not all town halls enforce this tax. Although legally it is the responsibility of the vendor, it is customary for the purchasers to pay the tax.

Capital gains tax

Although this is not a tax that purchasers need make at the moment of purchase it is nevertheless something that they should be aware of. As from 1^st January 2007 all property owners will be treated equally, the capital gains tax will be 19% of the declared gain.  If a resident is aged 65 or over they are exempt from this tax, as long as they have lived in the property for 3 years. In addition, the existing 5% retention will be reduced to 3% and this can be subtracted from any capital gains tax that has to be paid. 

It is also recommended that if purchasing houses for sale in Spain you discuss with us the arrangement of a bank guarantee, which is based on the amount of cover required and is a type of insurance against losing any monies paid prior to completion. This is arranged by the builder/developer and paid for by the purchaser.

The above is for guidance only and we recommend that if you require further clarification you should speak to a solicitor conversant with Spanish law. We can supply names of solicitors if requested.

When purchasing a property in Spain we recommend as a rough approximation that you allow 10% of your purchase price to cover all costs and taxes involved.

Details on conveyancing costs in Spain

Please remember that Spanish Property for sale need not be a problem to purchase if the correct procedures and professionals are used - would you do it any other way in the UK?

Italian Buying Guide

Easy steps to Italian property purchase |

Once you have found a property that you would like to purchase, the following is a brief description of the process of what you can expect to happen with regard to legalities.

The first written step in the negotiations is the proposal of purchase, by which the buyer will bind himself irrevocably for the period of the validity of the offer, to buy the property at a particular price. This offer is normally valid for a period of from 5 to 30 days. When the offer has been accepted by the vendor, a 10% deposit is paid.

The next stage is the preliminary contract of sale (compromesso). This is the contract by which the interested parties agree in writing on the formalities of the sale, the date by which the completion (il rogito) must be entered into, and the name of the Italian notary who will execute the deed. At this stage, there is normally another payment of between 20-30%. This normally takes place some 4 to 6 weeks after the first step.

The completion (il rogito), is the definitive passage of title to the property from the vendor to the buyer by a public document, or by a private contract authenticated by a notary for the purpose of registration.

If you buy a property from a company, you will pay VAT (IVA), but if you buy from a private individual you will pay Italian State Tax and not both. The percentage currently for a second home is 10%.

Property Insurance in Italy

As soon as you complete the contract for buying your property in Italy you will need to cover the buildings against the major perils and the contents once they are in place. Unless you are Italian the policies in Italy are extremely hard to understand and if you are British you may want to consider a UK insurer. There is a company here that specialises in insuring Italian property: Andrew Copeland International Ltd. They have a comprehensive cover in plain English wording so it's easy to understand. All premiums and claims are paid in sterling and there are some valuable benefits that you don't get from the local policies:. One important liability is tenant, (if you let the property it is essential to cover this), subsidence, landslide and earthquake cover (although these are rare it is prudent to have this covered, check your Italian policy has this cover) You are also covered for emergency travel to the property to sort out a claim should it occur whilst you are in the UK.

Perhaps you would like an example of the cost of a policy> If you insure your property for £30.000.00 and would like contents cover of £5..000.00 , the cost of a policy at present would be about £110.00 per annum.

If you do think of insuring the property in Italy it will probably be cheaper at present , due to the exchange rate. However check that the same liabilities are covered and think how much more stress free it will be to have a policy in English!!.