GUIDE TO BUYING
PROPERTY REGISTRATION AND INITIAL PURCHASE STEPS
The Purchase Process
As in the U.K., there exists a Property Registry which will immediately show if the seller owns the property free oí liens and encumbrances. Frequently, unless an immediate cash payment oí the full purchase price is to be malle, a private contract oí purchase is drawn up wherein the details oí the purchase are reflected together with a legal description oí the property, the purchase price, the form oí payment, date oí completion, date oí possession etc.
Upon signing the private contract, a payment on account oí the purchase price is always malle which can vary substanfially according to the terms oí the sale and the date oí completion. A quite normal deposit
for completion within 30 to 60 days would be 10% to 20% oí the agreed purchase price.
When the entire purchase price is paid for the property (in the U.K called “completion”) the seller will issue a public deed oí conveyance (called in Spanish an escritura) to the purchaser. This deed is issued before a Spanish notary who is a publicly appointed official oí the Spanish legal system. The escritura is then passed from the notary to the tax office to be assessed for stamp duty and is finally presented to the Property Registry for inspection.
Should it be required, a provisional inscription can be malle in the Registry immediately upon taking tifle. It should be pointed out at this point that at the time oí signing of the private contract such contract is binding. This means that the purchasers are committed to paying the balance oí the money due on completion and once completion has taken place the vendors must transfer the ownership oí the land and property to the purchasers. In the event that the property has not yet been built or is under construction a series oí stage payments will be arranged so that the final slice oí the purchase price is only paid when the keys are handed over. This can be as much as a year from the original date oí signing the private contract.
Property Transfer Costs
For resale properties (villas, flats, land, commercial premises and garages) when the vendor is not a developer or normally trading in the business oí reselling property then 6% stamp duty is payable. In the event that the vendor is a developer, promoter or habitual trailer in property then 6 1/2% (6% VAT and 1/2% stamp duty) is payable on any villa flat or garage. 121/2% duty (12% VAT and 1/2% stamp duty) is payable for parcels oí land, commercial premises or commercial garage spaces when the vendor is a developer, promoter or habitual trailer as above.
Plus Valía is an “added value” tax based upon the increase in the Town-Hall índex value oí the price per square metre oí the land from the current vendor’s purchase to the present sale. This tax is theoretically payable by the seller but in common practise it is often paid by the purchaser. As there are several variable factors used in calculating this tax (location, atea oí land, building volume permitted, period oí ownership oí the vendor etc) the amount payable can vary substanfially and should be verified before proceeding with the purchase. It should be stressed that the basis oí the calculation refers to the land value and is unchanged whether or not the land is built upon.
NOTARY FEES AND PROPERTY REGISTRY INSCRIPTION FEES
The amount oí the above two fees should be no more than 100,000 pesetas (approx
500) for smaller properties with a value oí up to 10,000,000 pesetas (approx £50,000) in value and as the value oí the propérty increases the percentage oí these costs diminishes. Thus a 20,000,000 peseta property (£100,000 approx) may cost in the atea oí only 130,000 pesetas (approx £650) for notary and inscription fees and for properties above this figure the fees are increased only nominally. To summarise the above the official total costs involved in purchasing property should be around 8 1/2%,of tYte’purchase price plus plus valía if applicable.
PROPERTY FINANCE AND INCOME DERIVED FROM PROPERTY
It is generally easier, cheaper and quicker to finance the purchase oí Spanish property by re-mortgaging an asset in the United Kingdom. However if for any reason a mortgage using the Spanish property as the secured asset is required, these can be malle available. The mortgage situation in Spain changed dramatically at the beginning oí 1988 and such change is even now continuing. However in general terms a Spanish mortgage will carry a slightly higher interest tate than,in the UK and will be over a shorter period oí time, often 10 to 15 years. In addition the próportion oí the value of.the assset which is loaned will be lower than is normally achievable in the United Kingdom.