Buying A House In Spain

In general, there are two possible scenarios when you are buying a property in Spain. Either you will be buying a property that is not yet finished (off-plan) from a developer or you will be buying a property from a private individual or company (re-sale). The process is slightly different for each, in terms of the searches that are undertaken, but the basic structure is similar.

Deposit and Contract

The first step in the purchasing process in Spain is to secure your chosen property by depositing a sum of money, the reservation deposit, with the vendor. This ensures the property is removed from the market and the price fixed for a certain period of time.

It is essential that when travelling to Spain to view properties you have funds available to pay the reservation deposit. This can be in cash or, more usually, by credit card. A cheque drawn on a Spanish bank account would usually suffice but not a cheque drawn against a non-Spanish bank account, due to the delay in clearing and the uncertainty of the exchange rate.

If you are unable to pay the reservation deposit it is most unlikely that the seller will reserve the property for you or take it off the market. This delay could, of course, mean you lose your property.

Typically, the amount required by way of the reservation deposit is between 3.000 Euros and 12.000 Euros.

At the time of handing over the reservation deposit, a reservation contract should be signed by you and the seller, or your representative, into which the basic terms of agreement are incorporated. These terms can include, for example; the property address, if a garage or storeroom is included, payment terms, estimated date for exchange of contracts and estimated completion date.

It is important to realise the reservation deposit is usually non-refundable, unless it is specifically agreed to be conditional upon certain factors happening eg raising finance or even actually viewing the property, if reserved unseen.

Private Purchase Contract (Exchange of Contracts)

Once the reservation contract has been signed, and the reservation deposit paid to the vendor, there will be an agreed period of time during which your conveyancer will undertake all the necessary searches on your behalf to ensure the vendor is the legal owner of the property and it is free from any debts, charges or encumbrances. As in the UK, Spain operates a Land Registry system enabling your conveyancer to conduct thorough searches of title, giving you added security and peace of mind. During this period, the detailed terms of agreement will also be negotiated by your conveyancer and incorporated into a Private Purchase Contract, ready for exchange of contracts. On exchange you should expect to pay between 20% and 50% of the purchase price when buying off-plan and, 10% when purchasing a resale property.

Your conveyancer will also ensure (if buying off-plan) that the developer is providing a bank guarantee for all payments, as well as a 10-year structural guarantee on completion. A bank guarantee protects your payments and provides for your money to be returned in the unlikely event that the developer does not finish the property, goes into liquidation, or even where they fail to complete on time and you do not wish to wait.

Exchange of Contracts has a similar effect to that in England, in that it fully commits both buyer and seller to the purchase at an agreed price (subject only to fluctuations in taxes). Neither party is able to pull out of a purchase after exchange of contracts without penalty.

Completion

Formal completion takes place when the title deeds (escritura pública) are signed by the parties before a Notary Public in Spain and the balance of the purchase price is paid over.

The Notary is a public official whose role is to act as a witness to the signing of the deeds and to ensure that the parties have complied with the relevant legal requirements in the transaction, such as payment of appropriate taxes.

It is not necessary for you to be physically present at the Notary appointment and you can, instead, grant a formal power of attorney.

Final registration of the title deeds is likely to take approximately 3 months from the time ALL paperwork is given to the Land Registry.

Post completion

Your conveyancer will arrange for the relevant taxes to be paid and ensure title deeds are registered with the Land Registry. They will also arrange for you to be registered with the Local Authority for payment of local taxes such as rates and rubbish collection. These taxes can be paid by direct debit from your Spanish Bank account.

On completion of the purchase of an off-plan property it is unlikely the essential services, such as electricity and water, will be connected on builder supply. Changing can take up to 4 weeks following completion..