Fiscal Representation

A lawyer will provide the legal guarantees for the purchase of the property ensuring that Spanish legal requirements are met and that the property is acquired free of debt and up to date with all payments of local contributions and community charges etc. Your lawyer may also assist the sales team in difficult and complex negotiations with the owner.

Using a lawyer from your home country will increase your legal costs substantially and will certainly delay the sales process.

If you do not currently have a lawyer in Spain, then one of our qualified English speaking members would be pleased to act for you in your purchase, guiding you through the negotiations to completion.

By law, a non-resident owner of more than two Spanish properties must appoint a fiscal representative. Failure to do so may result in a fine between 150 Euros and 6,010 Euros. Those who own only one property do not by law have to appoint one but it is in their interest to do so.

Once you have appointed a lawyer, official notification will be given to the tax authorities notifying them of the appointment and thereafter all official correspondence relating to your affairs in Spain will be directed there. This correspondence may include governmental and local tax notifications relative to the ownership of property or business situated in Spain.

Financial Matters

Once a property has been selected, the ongoing expenses of maintaining the property should be checked. These may include amongst others the Annual Real Estate Tax Referred to as IBI, community fees, charges for rubbish collection, water rates, electricity charges and Wealth Tax.

Once the sales team, together with the lawyer, has discussed terms of the purchase with the owner and there is a verbal accord, the next step will be to formalise those offer terms of purchase by setting them out in writing. Funds should be lodged in a local bank account or with your lawyer in order to show the seller that there is a real intention to purchase. It is usual practice in Spain to include with the offer a sum of money to reserve the property until exchange of private contracts.

Legal fees are usually charged at 1%-1.5% of the purchase value, plus VAT (IVA in Spain currently charged at 16%).

The scale of Notary Fees is fixed by law and may range from 300.50 Euros for lower prices properties to 841.42 Euros for higher priced properties.

There is a Property Registry fee which is usually 40% of the Notary charge.

Other costs to bear in mind are:

• Wills
• Changing of utility contracts and arranging their payment by direct debit
• Fiscal representation
• Insurance
• Water and electricity connection charges

Mortgages

There are virtually no exchange controls in Spain, which means that whether resident or not, you are free to obtain a loan or mortgage against your property in any currency and from any bank in the world. Spanish Banks are quite willing to lend to non-resident purchasers of Real Estate and offer competitive interest rates. The period of the loan will depend on age but can extend to 20 years and the amount borrowed may be up to 75% of the bank's valuation of the property. You will need to provide proof of your capacity to repay the mortgage and most banks will look for earnings per month in excess of three times your expected monthly mortgage repayment.

Documentation required:

• A photocopy of the buyer's income tax returns or P60
• Letter from employer stating net income
• Bank reference letter
• Salary slips
• If self employed, statement of accounts certified by a Chartered Accountant

For more details talk to one of our staff who will be pleased to advise you and guide you through the best mortgage options available.

Procedure

When buying a resale property a Contract of Sale & Purchase is drawn up and a deposit is paid, normally 10% of the agreed sale price, and the contract is by both parties, Vendor(s) and Purchaser(s). This commits both parties to the price and condition of the Contract.

Ask the vendor to show you a copy of the deeds of the property ( Escitura) to verify that the people who are selling are the owners of the property.

Also ask to see a copy of a document from the Land Registry ( Nota Simple) which
shows if there are any mortgages or other encumbrances registered
against the property.

Ask about any costs such as community fees and the actual cost of the transaction.

Your lawyer will ascertain whether there are any outstanding rates or community fees.

A contract drawn up by your lawyer which will include:

• The price and conditions of payment.
• All charges on the property which are the responsibility of the Vendor
  up until the day of signing.
• A complete description of the property, size in square metres, with building
  licences for extra work carried out, not included in the original deeds.
• Full registration details of the Land Registry.
• A clear explanation of payment conditions.
• A clause verifying the fact that the property is free of sitting tenants.
• Unless otherwise agreed.
• A complete inventory of furniture if sold furnished.
• A clause referring to the retention deposit (percentage of the declared purchase price) which is held back from non Spanish Residents selling a property for tax reasons.
• A penalty clause with a specified date for payment and a back out clause.

The purchase is formally completed when the public title deeds of purchase-sale are signed before a Notary Public, the agreed payment of the price paid and the possession given to the buyer.

Four or five days after completion, the deed is collected from the Notary’s office. With the original deed, all the relevant transfer taxes are paid in the different tax offices and eventually the deed is taken to the Land Registry in order to procure formal registration of the title to the property.

Depending on the Land Registry of the area, registration may take about 15 days. The Land Registry will then give notice to the lawyer that the registration has been completed and the deeds are available for collection. Land Registry fees are paid at this time.

During the interval, as from the moment of signing, the purchaser can have a copy of the records by requesting from the Notary Publica ‘ copia simple’.

Wills

Spanish law protects family heirs in that they restrict the testors' freedom to dispose of their estate to anybody they chose.

If a foreign resident dies in Spain without a will, their estate will be distributed according to the Spanish laws of succession. Those laws are as follows:

Where a person dies leaving children, one third of the estate must be left to surviving issue in equal parts. Another third must be left to the surviving children but may be divided as the testor pleases. A surviving spouse will have a lifetime interest in this third. The remaining third may be willed to whomever the testor pleases.

A foreign will may cover your Spanish assets but the legal procedure to enforce it in Spain can take a long time, is expensive and is subject to the court's discretion.

Without a will your heirs will be involved in time consuming expensive legal procedures. Furthermore if you have definite ideas on how you require your estate to be distributed then you must make a Spanish will.

Upon making a Spanish will, you must ensure that your foreign will excludes Spain and that any subsequent will you make in another country does not supercede the testamentary dispositions under your Spanish will.

Tax

Transfer tax (ITP) at 7% or, when buying from a promoter, developer or habitual trader, IVA at 7% or 16% plus Stamp Duty at 1%. The IVA rate of 16% is applicable when purchasing plots of land, commercial premises or garage spaces.

Plus Valia is usually payable by the vendor but it may be stipulated that the buyer pays. This tax may range from a few hundred Euros to as much as a thousand Euros on larger properties.

Annual Real Estate Tax is based on the rateable value of your property and can vary from town to town. In Spain the tax Impuesto Sobre Bienes Inmuebles is more usually referred to as the IBI. Payment of this tax can be arranged by direct debit through your local Spanish bank. A typical municipality such as Marbella many charge 0.65% of the rateable value per year giving tax due of 390.66 Euros per year.

Income From Urban Property For Own Use. The income to be declared is the amount resulting from applying to the catastral value of the property, as shown on the Real Estate Tax (Impuesto de Bienes Inmuebles; IBI) receipt. The percentages are:

• 2% in general
• 1.1% in the case of property which catastral value was revised or modified after 1 January 1994
• This income is chargeable once per year on 31st December
• Tax rate: 25%

Property Wealth Tax. In addition to the Real Estate Tax the Spanish property owner, whether resident or not in Spain must pay Spanish tax on capital assets. the tax is very small and is based upon the real value of the property. For values up to 160,951.04 Euros the tax rate is 0.002. Thereafter the scale is increased as the value of the property goes up.

The current scale for Property Wealth Tax:

Community Fees

In Spain it is quite common practice when buying your property to find yourself in the position of co-proprietor of communal property. Such communal property may include swimming pool and gardens which form part of the whole complex. Each owner will own a percentage of the communal property in relation to the value of his apartment or villas as a percentage of the complex as a whole.

As a community owner you will have certain rights and obligations. Your obligations will include, amongst others:

• Maintenance of general communal installations.
• Maintenance of your own property to good repair.
• The consent of repairs to be undertaken in or on your property which are for the benefit of the community as a whole.
• To permit entrance to workmen to effect any repairs.
• To pay your share of the community expenses.
• To be accountable to the community for failure to observe the community and statutory regulations.

Insurance

Your assets in Spain should be protected by insurance and in the case of a mortgage it is a requirement.

Frequently we are asked to recommend a suitable insurance company on the Costa del Sol to provide insurance for properties, contents, vehicles etc.

In the past we have refrained from becoming involved because we considered this could compromise our independence as a law firm. Nevertheless, it is apparent that many clients have entered into insurance contracts which have transpired to be of little or no real protective value. In many cases it appears that there has been a failure on the part of the insurance company properly to identify the peculiarties surrounding the insurance of a non-resident's property and effects in Spain. Furthermore, there are several ways by which an insurance company may avoid settlement of a claim.

Therefore we have decided to address this issue by offering you the option of contracting insurance through us. The principle benefits are as follows:

• Processing of applications is done in your own language.
• The complex criteria that needs to be observed in line with Spanish Insurance parameters will be explained in your own language thereby ensuring that any cover is tailored to your own requirements and circumstances.
• All quotes can be produced in either Spanish or English.
• All claims can be processed through our offices.
• English speaking loss adjusters will be appointed to visit and record exact details of the claim.
• Depending on the policy you acquire, online assistance will be provided in English.