April 28th, 2015
Advance preparation for the purchase of a Spanish property can simplify and speed up the purchase process; and minimise transaction costs.
The following is a reminder of some of the principal ‘paperwork’ items to consider, when dealing with a Spanish property purchase.
1. Appointment of Legal Representative. In order to be fully protected in any Spanish property transaction, it is essential to appoint in writing, a legal representative, who is independent- both from the other party to the transaction and also from the estate agent negotiating the transaction. The appointed legal representative must be duly qualified, registered with the applicable Colegio de Abogados (Law Society equivalent) and up to date with their professional practice requirements. They must also carry adequate professional indemnity insurance cover. It is also essential that all communication is in a language which both the buyer and the legal representative speak perfectly. There should be no risk of any misunderstanding or ambiguity. Advice should be obtained also before signing a legally binding contract, as to the structuring of the purchase, for estate planning purposes.
2. Survey. Even if not required for mortgage purposes, a survey by an independent expert is recommended before any Spanish property purchase- both to verify the condition of the property; but also to ensure that the description of the property (in the Property Registry and Town Hall/ rates department) is consistent with the position ‘on the ground’. This avoids later problems. In many cases, there are inconsistencies, which require correction.
3. Power of Attorney. If the buyer does not anticipate being personally present in Spain for the legal / transactional process, then it will be necessary for a Power of Attorney (containing the necessary legal powers) to be signed in favour of the appointed representative/ legal adviser.
4. NIE Certificates. NIE (fiscal) numbers will be required for any Spanish property buyer; and up to date NIE certificates will need to be provided to the Notary on completion.
5. Bank Account. Any Spanish property buyer will require a current bank account in Spain usually- to deal with the purchase funds; and in any event, for payment of the property outgoings following completion. It is advisable to be certain in advance, as to the charges which will be applied in crediting monies to the account; and for making transfers from the account. Spanish bank charges can be surprisingly high; and the manner of funding the purchase price; and transfer/ Foreign Exchange issues, can significantly affect the costs.
6. Mortgage. If mortgage funding is required, the process should be started as early as possible, as significant delays can otherwise occur- as all aspects of the title to the property and its value as security will be scrutinized by the bank’s advisers; and this can be a lengthy process. Also in undertaking any loan in Spain, full clarity on costs must be obtained- not only in servicing the loan, but also the initial/ set-up costs; and any amounts payable to redeem the loan also.
7. Capital Gains Tax/ Accounting. From the very outset of a purchase, attention should be paid to the collation of all financial information and receipts- e.g. construction/ works invoices and other accounting paperwork- principally to build up a solid record of possible future deductions/ allowances for capital gains tax purposes, for the occasion of a subsequent sale of the property.
8. Title Deeds. Following completion, the buyer should receive an official copy of the Purchase Deed (‘escritura’). The Registered Title details can usually be extracted from the Title Deed; as an up to date copy of the Registered Title is usually appended to the rear of the escritura, once the registered title is updated to reflect the sale and purchase of the property.
9. Planning Permission. Proof of compliance with planning legislation; and permission for the legal occupation of the property will be required. Usually for any missing documentation, official copies- or confirmation of legal compliance- can be obtained from the planning (‘urbanismo’) department of the Town Hall.
10. Rates Information. The full rates details for the property will be required, together with proof that there are no rates arrears. Reference numbers can usually be found on the receipts for rates (IBI/ SUMA) sent out by the local Town Hall (‘Ayuntamiento’) or the sellers’ paying bank. Missing information can usually be obtained fairly easily from the rates (‘Catastro’) department of the Town Hall. An apportionment of rates will need to be made between the seller and the buyer on completion.
11. Community Details. Full details of the Community Administrator will be required, together with a copy of the Community statutes and (if possible) copies of the minutes of recent Community meetings. A summary of Community charges over recent years will be needed; and also details of any forthcoming charges, which have already been notified. The most recent statement/ receipt of Community charges will be needed; and before signing the sale and purchase deed (‘escritura de compraventa’) before the Notary, a Certificate by the Community Administrator, confirming that there are no arrears of Community charges will be required. An apportionment of Community charges will need to be made between the seller and the buyer on completion.
12. Services Contracts. Receipts for the most recent payments of property outgoings (principally electricity/ water; and if applicable, gas) will be required on completion, together with the latest contractual terms of supply- in the absence of copies, these can be obtained from the local offices of the services supply companies. Following completion, the services contracts will need to be transferred to the buyer- services apparatus updating works may be required, so the advice of an independent expert is recommended before a contractual commitment is made. An apportionment of costs will need to be made between the seller and the buyer on completion.
13. Energy Performance Certificate. The seller is required to provide an energy performance certificate in relation to the property on completion.
14. Wills. Every purchaser of a Spanish property should ensure that they have an up to date validly executed and registered Spanish Will, which accurately reflects their wishes for the succession of their Spanish property interest in the event of their death.
15. Non-Spanish Resident Tax Returns. Non-Spanish resident owners of Spanish properties have to make an annual tax declaration in Spain. Usually a fiscal adviser is appointed to deal with this, following completion of the purchase.
The above is a non-exhaustive checklist- really just the bare minimum.
The Legal 4 Spain team provides a full property conveyancing service (buying and/or selling) throughout Spain. We are always happy to provide a competitive cost estimate at the outset of a transaction on a no-obligation basis.