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Buying a property in Spain can be a dream come true, whether for your own holiday, as a retirement home or as an investment in a property. However, when buying a property abroad, there are some special features that need to be taken into account. In addition to language barriers and different legal standards, there are numerous bureaucratic hurdles that need to be taken into account. In this blog post, I will show you what is important when buying a property in Spain - from inspecting the property to tax considerations. Translated with DeepL.com (free version)
The first step is, of course, choosing the property. You should make sure that you choose a property that meets both your personal requirements and the legal requirements. The property market in Spain is diverse, from modern flats in the cities to traditional fincas in the countryside. But the building fabric is often noticeably different from properties in other European countries.
Once the property has been selected, a reservation contract is usually concluded between the estate agent and the buyer. This already sets out the basic conditions such as purchase price, etc. The reservation fee is usually between €3,000-8,000 (this can be higher for very expensive properties). This takes the property off the market and reserves it for the buyer. As a rule, it is no longer possible to withdraw from the reservation contract without forfeiting the reservation fee, unless this is stipulated in the reservation contract.
Once the property has been selected and the reservation contract has been signed, the private purchase contract, known as the ‘arras contract’, is concluded in Spain. This is a private contract between the buyer and seller that sets out all the main terms of the purchase. The buyer pays a deposit of 10% of the purchase price (or more), less the reservation fee already paid. If you cancel the purchase, this deposit is forfeited. If the seller cancels the contract, he must refund twice the deposit to the buyer.
In Spain, the Land Registry and the Land Registry are two separate institutions, which differs from the regulations in many other countries. It is essential to check both institutions before buying. The land registry registers the properties by location and area, while the land registry documents the ownership structure. Only the entry in the land registry gives you legal certainty as to who owns the property. It is not unusual for the information on square metres etc. in the land registry and the land register to differ. This is particularly the case with older properties or properties in the countryside.
Another important aspect is to check whether the property is subject to mortgages or other encumbrances. These could be, for example, liens or other claims that could be transferred to the new owner after the purchase. It is always highly recommended to involve an independent advisor in good time when considering a purchase.
There are many estate agents in Spain who are very conscientious in checking the ownership and legality of the property, but unfortunately this is not the case with all estate agents. Many agents see themselves as good salespeople and unfortunately often represent the interests of the seller, as they usually receive their commission when the property is sold.
Before buying, you should make sure that the property is legally sound and fulfils all building regulations. There are many cases in Spain where houses have been built without the required building licence. There is a risk that the property will be subsequently demolished or heavily fined. Check that all building and utilisation permits have been obtained.
The notary plays a central role in the purchase of a property in Spain. Unlike in Germany, where the notary is neutral, the Spanish notary essentially represents the interests of the state and monitors the proper execution of the purchase. However, it is advisable to appoint an independent advisor who specifically represents your interests as a buyer. As the buyer, it is your responsibility to prepare the notary appointment. In some cases, the estate agent will do this for the buyer, but here, too, it is advisable to appoint an advisor who works for you to take on this task.
Before the notary appointment, you must obtain a so-called NIE number. This is mandatory for foreigners in order to purchase property in Spain. The NIE number serves as a tax identification number and must be presented for all important administrative procedures, bank transactions and contracts.
At the notary appointment, the deed of sale, the ‘Escritura Pública’, is signed. This deed is then registered at the land registry. It is important to check the escritura carefully and ensure that all important information is correct. Errors in the escritura can lead to legal problems later on.
The deed of sale is issued in Spanish and the notary must ensure that you have understood the content. If he has doubts that you have understood the content, the notary appointment may fail, possibly with considerable financial disadvantages for you as the buyer. If you do not speak Spanish well enough, you should have an advisor at your side to translate the deed of sale for you.
As a rule, the balance of the purchase price is paid at the notary appointment. This is usually done in the form of a Spanish bank cheque. The notary confirms that the buyer has paid the purchase price and the seller hands over the property. The estate agent usually also receives his commission at the notary appointment. Unlike when renting a property, there is no legal regulation as to who pays the estate agent. The seller usually pays the estate agent, but it is also possible for the buyer and seller to share the commission or for the buyer to pay the commission. It is important to enquire about this in advance, as the commission is usually between 3-5% of the purchase price, but it can also be higher. Even if the seller pays the commission, the buyer is often asked to give the bank cheque to the estate agent at the notary appointment, but then by deducting it from the remaining purchase amount.
When buying a second-hand property in Spain, a property transfer tax is payable. Depending on the autonomous region, this amounts to between 6% and 10% of the purchase price. In Andalusia, the ITP is currently generally 7% in 2024.
For new builds, on the other hand, VAT (IVA) is payable instead of land transfer tax, which is usually 10 %, as well as an additional stamp duty (AJD), which varies between 0.5 % and 2 %.
A property tax is levied annually in Spain by the municipalities. The amount of this tax depends on the cadastral value of the property and is usually between 0.4% and 1.1%.
If the property is not your permanent residence, for example if you are resident in Germany for tax purposes, the so-called Impuesto sobre la Renta de no Residenten (IRNR) is due once a year. You must actively declare and then pay this additional tax on 31 December of the following year (i.e. 31 December 2024 for 2023). The amount of the tax depends in particular on the cadastral value.
If you later resell the property and make a profit, capital gains tax will be levied on this profit. This tax is between 19% and 23%, depending on the amount of the profit realised.
The notary fees for drawing up the deed of sale and subsequent registration with the land registry generally amount to between 0.5% and 1% of the purchase price.
It is advisable to appoint an independent consultant who will guide you through the entire purchase process, check the property, check/negotiate the contracts for you, explain these contracts to you, prepare and follow up the notary appointment and thus monitor the entire purchase process. The costs for this service are usually between 1 % and 2 % of the purchase price.
If you make use of financing for the purchase of the property, you will incur further costs, such as processing fees for the mortgage and possibly mortgage insurance. Banks may also charge a fee for issuing bank cheques.
Since 2013, an energy certificate has been mandatory for the sale and rental of properties in Spain. This certificate provides information on the energy efficiency of the property and must be provided by the seller.
If your knowledge of Spanish is not sufficient to understand all the details of the contract, you should definitely consult an consultant. This is particularly important when dealing with the authorities and at notary appointments, as misunderstandings can have serious consequences. However, your consultant will usually also take care of the translations.
Buying a property in Spain can involve many bureaucratic and legal hurdles, but with the right preparation and professional support, these can be easily overcome. Make sure that you plan the purchase process thoroughly, have all the necessary documents and authorisations checked and be aware of the tax implications. An experienced advisor and notary as well as a careful examination of the land register and ownership structure are essential.
I will be happy to guide you through the entire purchase process if you wish to buy a property in the province of Málaga and put my experience at your disposal. It has been my job for years to assist my clients and protect them from unpleasant surprises.
If you pay attention to all these points, nothing will stand in the way of your dream of owning your own property in Spain.
