PROPERTY PURCHASE ADVICE
I am a German citizen and plan to buy real estate in Malaga. Is there
anything special that I would have to keep in mind or might any
difficulties arise from the fact that I am not Spanish citizen? What are
the main steps to be taken in order to become owner of property in Spain?
I was told that it would be a pretty easy procedure: 1) transfer of money
into bank account in Spain, 2) choice of real estate shown by real estate
agent, 3) getting in touch with a notario and getting the escritura. Is
that really all? Any major surprises (special rules and regulations) that
I should keep in mind? Thank you very much for your help.
1.Other costs involved in a purchase transaction would be:
a) 6% Stamp Duty on the declared value of the property (which is
paid by the purchaser, as stipulated by Law)
b) Plus Valía municipal tax, to be paid by the seller
c) Notary Public's fees, to be paid by the seller
d) Registration fees, in order to inscribe the new ownership in the
official property records. This is paid by the buyer, by law.
Although the Law determines which expenses correspond to either the
buyer or the seller, a real estate purchase transaction, like any other
business transaction, is subject to negotiation. So it would be up to the
parties to determine if any or all of the above mentioned expenses would be
paid by one other than the parties established by law.
2. It would be very difficult to estimate the yearly costs involved in
maintaining a real estate property in Spain, because it obviously would
depend on the type of property, where it is located, etc.. Generally, one
would have to pay property taxes and rubbish collection to the local Town
Hall. If you are not using the property on a regular basis, you would most
likely still want to maintain the electricity service on the property,
which would mean that you would pay whatever minimum is established that
you need for the wattage that
you have in the electrical appliances in the home. Should you wish to have
telephone service, there would also be a minimum fee, to which any
telephone calls you make would be added. Both telephone and electricity
services are paid on a bimonthly basis, so it would be best to keep a bank
account in Spain, accessible to you when you are in Spain, and to keep
enough funds to handle these payments by means of bank standing orders
(this would be helpful, since otherwise you may come to Spain and find that
these services have been cut-off, and there would be a reinstatement fee).
Aditionally, there are two yearly taxes (which, by the way, are also paid
by residents): wealth tax and income tax. In the case of non residents,
wealth tax is a 0,2% of property's value in standard properties, and income
tax is basically a 25% of the imaginary rent or income that a house owner
is attributed to by law (2 % , and in some cases 1.3% of the property's
value) .
3.Yes, it applies to any non resident.
4.I am not certain what you mean by reliable, in terms of a lawyer, but if
I understand it to mean whether such lawyer will do what you retain him or
her to do for you, in an efficient manner, charging you an adequate amount,
etc.,
usually word of mouth and a personal recommendation would be the best
source. You could also obtain a referral from the pertinent Lawyers' Bar
Association, however, they normally would not know of the efficiency of a
particular lawyer, but rather if there have been complaints made by
clients.
t o p
INHERITANCE
I have been informed that I have inherited land in the Province of Cadiz, near
or in the town of Rota. The land was described in the term of "3 Lanzas."
Can you explain this term to me as an American? Also, what is the best way to
go about getting this land evaluated for sale? What documentation must I
present to show my ownership? In terms of hiring an agent to represent my
interests, are the duties & responsibilities of the principal and agent the
same as in the U.S?
It is not a complicated process to become the registered owner of an
inherited real estate property in Spain. Nevertheless, there are some documents
one must provide to
the Land Registry of the municipality where the property is located:
1) First of all, there must be a valid last will and testament, as ascertained
by a competent Authority of your Country (such as a Notary, etc.). The document
should be validated for its use outside U.S.A., normaly, the Notaries will be aware of this procedure.
2)Secondly, you must provide a Death Certificate, also issued by the competent
authorities, and again validated to be used abroad.
3) A third document is a certificate granted by the Madrid Last Wills Central
Registry, whereby such entity declares that no Will appears registered in their
records, dated after the one in question. This document is to be requested by
somebody on your behalf or you directly, and takes a reasonably short time to
obtain.
4) With these documents, and a copy of the title deed for the property that
belonged to the deceased person, you must go to a Spanish (where possible)
Notary, or to the nearest Spanish Consulate or embassy (see "Tuspain" for embassy addresses) and grant a Deed of
declaration and acceptance of Will.
5) You should be prepared to pay an Inheritance tax. It is very difficult to
give you an idea of how much it would be, since there are many factors to be
considered in its calculation, such as value of the property, relationship to
the deceased, and some others.
In my opinion, it would be advisable to retain the services of a local competent
lawyer to ensure that the procedure is handled properly until the property is
duly registered under your name.
With regards to the term "3 Lanzas", I do not know exactly what it refers to,
but the important details of the property are in the title of ownership of the
deceased (Escritura), such as the municipality, province (Cadiz, in this case),
name of the place, measurements, boundaries, etc..
Please clarify what you mean by "agent", if you mean a real estate agent, this
would be similar to the U.S., whereby you could establish the terms of your
agreement in writing, with the corresponding signature of both parties.
BUYING A HOME IN THE CANARIES
Is there any special laws connected in buying apartments or houses in
the Canary islands region?
There are certain aspects on a foreign investment procedure that differ from the Peninsula, but those are basically related to the taxation, which is
considerably lower in the Canary Islands (they are not subject to our Value
added Tax system, etc...). The advantages are quite considerable in cases of
investments through a company.
There are no specific restrictions, if that is what you had in mind.
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LAND VALUE TAXES
Could you give me some estimates of Land value tax? If I wanted
to spend up to 4,000,000 pesetas to buy a bit of irrigated
land and a house in moderate condition in a rural area,
what are the scales for the plusvalia that would apply?
The so called, plusvalia is, by its nature, a vendor's tax, so it corresponds to
the seller unless you agree otherwise. It is calculated via a scale of
percentages applicable on the land's official value (normally lower than market
value) and
proportional to the time passed between the original purchase by the current
owner and the date of the present sale. Those percentages vary considerably
depending on the sort of land we are talking about, and depending on the Town
halls, it may vary, since each Town Hall has a certain margin whereby they could
increase the globally approved percentages.
The good news is that there is not plusvalia tax in cases of rural land. To be
more precise: the so called " fincas rusticas" are by definition excluded of
that kind of taxation.
My final advise, whatever the case, is to consult directly with the particular
town hall, who could clarify whether the land in question is officially
classified as "rustica".
OBTAIN A SPANISH MORTGAGE?
I am a US citizen wanting to purchase a holiday home in Spain, can I obtain a Spanish mortgage even though I am not
resident or should I be seeking finance in another country?
You may obtain a Spanish mortgage for a real estate property in Spain even if you are a non-resident. There is
no legal obstacle to prevent this and, in practice, most banks will be ready to assist you, with the possibility of repaying in foreign currency, if required.
REGULATIONS ON INCOME TAX
As an Arab national, if I purchase property in Spain and reside there for 6 months each year, will I be liable to pay
Spanish income tax?
To reside in Spain for more than 183 days a year, makes you a tax-wise resident. For periods shorter than that, in
principle and without speaking of special cases, you are a non-resident and you are not affected by the "standard"
general income tax. This said, there is a particular situation when the non-resident owns a house or property in Spain
(rustic and non-constructed plots are exempt), and is obligated to declare and pay Income Tax, on a
yearly basis, exclusively with reference to that property. In the cases where
the property is rented, the basis for this tax would be the rent income and in the cases where the house is not rented the
basis would be a so-called presumed rent (from 1,3 to 2 percent of the official value) to which a twenty-five percent tax
is applied.
DO I NEED A LAWYER?
I have been told by a friend that I do not need a lawyer in Spain to undertake on my behalf, the purchase of property in
Estepona. I only need to employ a "Gestor" and visit the "Notario Fiscal", why would I need a lawyer?
As a matter of fact, the lawyer is a professional who not only should understand and control the paperwork related to
a real estate purchase (which would be the main task of a "gestoría"), but a lawyer would also provide these safeguards:
A. Control the contractual aspects of such an operation
B. Give advice as to the fiscal circumstances and consequences of this type of operation
C. Give advice and proceed legally, if necessary, in cases of non-compliance with contractual agreements by the other
party. These actions would be in the range from extra-judicial to proper legal suit prosecution.
D. In connection with point C, a lawyer should play a dissuasive role to potential fraudulent vendors.
These four points should lead to the conclusion that in most cases, you not only would need a lawyer,
but also a good one!
ORIGIN OF FUNDS
As an Eastern European citizen, does Spain require any proof as to where funds for the purchase of property originate?
In principle, this would not be so. There is only one simple step, in cases of investments superior to five hundred
million Pesetas, whereby you merely inform about the circumstances of the investment, but never of the origin of the
funds.
t o p
TIMESHARE?
I am considering purchasing a timeshare apartment in Marbella, does Spain provide any protection for timeshare
purchasers?
There is still a substantial gap in Spanish legislation in what refers to timeshare property.
Until this situation is overcome through specific legislation, the timeshare industry does not stand on completely firm
ground.
Obviously, solutions to the various problems that could arise in relation to timeshare are being handled by the courts
on a case by case basis, but applying existing legal concepts in an analogical way.
SHOULD WE SELL WHILST RESIDENT?
We have a house in Spain purchased in 1990 but not issued its escritura until 1992 and registered in both names, husband
and wife. We are British nationals, but are not resident in the UK as we hold Spanish residence permits. After a work
contract, I am now unemployed and planning to return to the UK shortly. Should we sell the property while we are still
resident or should we wait until we become UK resident again? Is it better to pay Spanish or UK taxes on the house?
There is a very simple reason for it to be more advantageous for you to sell while you are still a resident in
Spain, namely that if you are a resident you would not be obliged to suffer a 10% retention on the price of the sale
(established by the Spanish Tax Authorities as obligatory for non-resident real estate owners, with some exceptions; such
as the one based on ownership of a property for a period of over twenty years, etc.). The retention serves as a
guarantee, and eventual provision of funds on account of the Capital Gains Tax.
Unfortunately, those funds are kept for months by the Tax Authorities (without accruing interest for the seller),
even if the final outcome turns out to be a full refund to the seller (in cases where there is no capital gains, etc.).
On the
other hand, being a Spanish resident, even though it would not prevent you from the obligation of declaring and paying
the Capital Gains Tax, if any, such obligatory retention does not exist.
WHAT IS AN ESCRITURA?
An escritura is a copy of a notarized document (i.e. granted in the presence of a Notary Public), of which the
notary's office keeps the original in their files forever. There are escrituras for many different purposes, such as for
mortgages, company constitutions, new building declarations, powers of attorney, etc., etc., etc.. In the cases of real
estate property acquisition, these escrituras constitute the acquisition agreement itself (i.e. the document that
contains the basic terms of an acquisition, such as price, means of payment, charges and expense distribution, several
tax-wise stipulations, etc.). This type of escritura, of which I repeat, the Notary keeps the original, is the only
document (with extraordinary exceptions) that could originate a record on the Land Registry, establishing your ownership
(or whatever other real estate related rights, in cases of different kinds
of escrituras) in a formal and undisputed way.
t o p
The Spanish Property Legal Forum is hosted by Alberto Mondine and Emilio Pino of Alberto Mondine Abogados, Marbella, Spain. If you would like a question answered by our legal experts on property purchase in Spain please email tuSPAIN.COM, all questions will be published anonymously. We regret that tuSPAIN is unable to reply to letters personally. Please note that this forum is not a substitute for individual professional advice, we suggest you contact Alberto Mondine Abogados for personal counsel. tuSPAIN cannot accept any responsibility for any loss or damage suffered by readers.
