Reservation Contract

A Reservation contract takes the property off the market, whilst due dilligence is processed. It sets out the basic terms of sale, and is signed by the buyer and the vendor.

Usually, a 6000€ deposit is enough to reserve a property, whilst due dilligence is carried out, a potential mortgage finalised, and a date for exchange of private contracts is agreed on. This REFUNDABLE deposit can be held in our escrow account, or with a lawyer of your choice.

Your lawyer will then do due diligence, which includes determining the legal owner of the property; checking the property is registered at the correct property registry; checking the property is free from charges and debts; Checking the property has the correct building permits; and making sure the private purchase contract is suitable for all parties.

Once these checks have been made, the sale can go ahead, and this deposit deducted from the final price.

Exchange Private Contracts

Once your lawyer has completed all the legal checks, and negotiated the terms of contract, a private purchase contract can be created.

A deposit of 10% is usually paid on most re-sales exchange of contracts. This deposit is not usually re-fundable for any reason.

This contract also protects the buyer should the vendor decide not to sell, as the buyer is usually entitled to compensation on top of the return of deposit.

All these contracts should also provide unambiguous detail on the buyer, the vendor, the property, the price agreed, the deadline for signing the deeds, vacant possession, debt-free title, how the transaction costs will be paid, clauses that allocate responsibilities, conditional clauses that need to be met for the contract to be valid, and how disputes will be resolved.

Completion At The Notary

On the agreed completion date, the buyer and vendor (or their authorised representatives) will sign the title deeds (Escritura de Compraventa) at the public notary, whilst the final payment is made to the vendor´s legal representative. The notary checks all the required documents, and legally rubber stamps everything.

The notary does not check terms as such, but certifies that both parties have agreed to the terms stated (the notary is in place to only witness both parties' signatures).

The property is now yours, and your lawyer is required to fax the details of the title deed to the local land registry, confirming you as the new owner. The lawyer will also arrange payment of the taxes and fees.

Registration Of Title Deeds

The sale is now complete, and you will be given a copy (copia simple) of the the deeds to take away after the signing. Each copy costs around 30 Euros so you should decide how many copies you want in advance.

You can use the copia simple to do most things, such as set up utility contracts and pay taxes.

A few days later your lawyer will be able to collect the original deeds signed by the notary (copia autorizada), which are needed to inscribe your title in the property register. In the meantime the notary should have faxed notification of your purchase to the property registry immediately after the sale, thus blocking the register for 10 days and preventing anyone else from inscribing a claim to the same property during this period.

Mortgages

If you raise finances in Spain, there will be a cost of around 2-3% of the purchase price. This cost is made up of the additional notary and land registry fees for registering the mortgage + mortgage arrangement fee.

Try to obtain an a decision in principle before embarking on the buying process, paying deposits etc. If you have prior knowledge of issues, then you are in a better position to solve them

Mortgage lenders will generally obtain a valuation from a trusted independent valuer, or ´Tasador´

When transferring money from abroad, do your research on which company can offer you the best commercial exchange rate - this can make a huge difference to your bottom line.

Legal Fees

There are two types of legal fees – those from your solicitor and those that are external and include the notary fees.

The notary witnesses the signing of some essential documents. He/ she is a professional who legalises agreements and contracts and will witness the signing of the Title Deed. The amount that notaries charge is prescribed by law and starts around €800. The Title Deed is inscribed at the Spanish Land Registry and the fee for this usually starts at around €400.

You will also have your own solicitor to pay. It pays to ask for recommendations, and to do your research, as solicitors fees can vary significantly. A good solicitor helps you avoid pitfalls of buying, and can end up saving you a huge amount of money! So don´t cut corners, or hire a solicitor purely because they are cheap.

Taxes

• 8% IVA/transfer tax on the purchase price for properties up to €400,000.

• 9% IVA/transfer tax on the purchase price for properties from €400,001 to €700,000.

• 10% IVA/transfer tax on the purchase price for properties from €700,001+.

These figures are solely for resale properties - this rate increases to 16% if you are purchasing plots of land, commercial premises, or garage spaces.

Additional Costs

Surveyor Fees - Even if you are not purchasing with mortgage funds you may obtain comfort from obtaining a Surveyor’s Report on your chosen property.

Chartered surveyors are covered by a professional indemnity, so in the case of an error, compensation may be available. On average Surveyor’s fees are between €1,000 and €2,000.

Insurance - It is compulsory to have fire insurance when you have a mortgage, indeed few lenders will release the funds to complete your purchase without evidence that you have an insurance policy in place with their interests noted on it.

Annual fees

• Impuesto Sobre Bienes Inmuebles or “IBI” is a local Town Hall charge and effectively an annual real estate or council tax. IBI’s are similar to “Rates” in the UK. Your lawyer should obtain copies of previous bills from the seller of a resale or second hand property.

• Community charges. These charges will be rendered if you buy a property on an Urbanisation. The “community” will maintain the gardens and swimming pools. The costs of their work and staff will be covered by these charges. In large formal Urbanisations these charges may be quite high but they may also include the provision of water to your property.

• Basura - Rubbish Collection tax. This annual tax is payable by all property owners to the local Town Hall.

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