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BRITISH CITIZENS BUYING A PROPERTY IN SPAIN

Despite the uncertainty created by the Brexit, British citizens have not given up their dream of buying a house in sunny Spain. It is true that they are not buying as much as before, but they are still buying second homes and looking for a place to retire or a place to spend family holidays.

beach in Spain

Why should you contract a Spanish lawyer?

If you are buying a property and want to avoid future problems, it is advisable to be advised by a Spanish lawyer/abogado.

Before buying a property, it is essential to carry out some basic research tasks in order to know the legal situation of the property. It could be subject to charges and debts, as well as limitations of the property. A specialist in real estate law will be able to find out all these details and act consequently.

Before buying the property, it is essential that the lawyer may contact the following sources or administrations:

  • Land Registry
    The Land Registry is the first source of information to be consulted. There you can check whether there are any charges, liens or limitations on the property.

  • Catastro
    It is very common for the actual area of a property and the cadastral area of the property to differ. This can be due to several reasons. For example:
    - A simple error when measuring or registering the parcel.
    - Incorrect modification of the cadastral registration of the surrounding parcels.
    - A division of the area due to inheritance, distribution, partial sales or expropriation.
    When these situations happen, it is convenient that the current owner takes care of managing a cadastral alteration.  Your real estate lawyer will be able to assist you and verify that the operation takes place as it should.
    It is very important that the catastro is adapted to reality, since it can affect the valuation of the property, which could have repercussions on the price of a possible mortgage. It will also be reflected in insurance premiums and tax charges. Both the Council Tax (IBI) and the Tax on the Increase in Value of Urban Land (IIVTNU or Plusvalia tax) are calculated based on the cadastral value of the property.

  • Town Hall
    The Town Hall of the town in which the property is located can also provide valuable information on the legal status of the property. As the council manages different kinds of municipal taxes, it will be able to inform you of any outstanding debts that may affect your purchase.
    It may also be interesting to consult the General Urban Development Plan (PGOU), especially if the property you want to buy is in a residential area or has a plot where you can build a storage room, garage, tennis court or similar.
    Some land areas have limitations to their building possibilities. The most basic distinction is that which differentiates between urban and rural land, the consequence of which will be that you may or may not be able to build on it.
    For all these reasons, the preventive assistance of a lawyer will allow you to have a more realistic view of the value and possibilities of the property you are about to buy.

  • Community of owners
    We should remember to find out if the property has a community of owners. If it does, it will be important to contact the President of the community first so that he can inform you about the approximate values of the bills for supplies, charges and taxes. And the cost of the community fee, which is a necessary payment.
    You have to know, that the property is affected to the payment of its debts with the community of owners. So, before buying a house the community will issue a certificate of no pending debts by the previous owner, since if not the buyer will have to take charge of the debts or they will even be able to seize the property.

  • Services and supply companies
    Another common risk in the purchase of a property is that the previous owner may have left debts with services and supply companies. If this is the case, you may find that they try to force you to take over their debts or management costs. It may also be that you have been discharged from services, and you will have to register again.
    To avoid this situation, your lawyer will ask the seller for the latest electricity, water and gas bills, or even request a certificate of connection to the public supplies from an architect or engineer.

  • Calculation of expenses and taxes
    Taxes can represent a significant amount in transactions as substantial as purchase. In addition, these transfers carry other costs, such as notary fees, registration, agency fees... So, you will have to calculate the cost of the purchase well, which is much higher than the price of the property. Your Spanish lawyer will be able to explain to you the reason for all these costs and help you reduce some of these costs.
    In case you have to finance the purchase of your property with a mortgage, you will have to pay other costs, such as opening fees, interest, deeds and management fees, which we will detail in other publications. But, your lawyer will be able to check that the mortgage which you take out does not have abusive clauses.

  • Tax expenses: VAT and ITPAJD tax
    The two biggest taxes on the purchase of a house are VAT and ITPAJD (Tax on Property Transfer and Documented Legal Acts). VAT amounts to 10% of the purchase price, except in the case of council housing, which is lower. This tax is only due on first transfers and commercial transactions.
    On the other hand, the Tax on Property Transfer and Documented Legal Acts (ITPAJD) depends on each Community and whether you are buying a new house or one from another particular owner.
  • When you buy a new property, you will have to pay for it in the form of a Documented Legal Act (IAJD), which is around 1% of the purchase price.
  • However, when you buy a house from another private individual, it will be applied in the form of Property Transfer (ITP), which means that the rate will rise to 6 or 10% of the purchase price.

Once your lawyer has analysed the property you are buying, it is important to ensure that the sale goes through well.

Do not miss the next publication in which we will explain all the details of this procedure until the property is registered in your name.

Written by Elena Escribá

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