Buying Property in Spain

Property Purchase - General Notes

We have summarised answers to the most frequently asked questions. Please note that this is just a general guide and clarification of all points should be obtained from either your sales agent or legal representation in the event of property purchase.

It is common practice to allow approximately 8% of property purchase price in order to cover purchase costs such as:

• Notary Fees
• Land Registry
• Legal Fees
• Stamp Duty / Transfer Taxes

On top of this there is a local authority tax for which the demand will be sent up to 12 months after purchase. The value of this is usually in the region of a couple of hundred pounds, but in exceptional circumstances could be higher. One should discuss this possibility with the sales agent.

Properties on some complexes will have an annual community charge to cover costs of general maintenance, pool care, gardens, reception etc. Depending on the size of the development and the services offered, this can vary between £800 and £1200 per annum. Other complexes will not share services and there will be a minimal fee to cover street lighting etc.

Local authority rates are collected each November and will range between £50 and £150 per annum.

Patrimonio & Renta are taxes levied locally and nationally, respectively, as a form of wealth tax. Patrimonio is 0.2% of the property value as stated on the property deeds. Renta is 0.5% of the rateable value as set by the local authority. (NB these values are variable and should be checked at the time of purchase.)

Mortgages are relatively easy to arrange with local banks and work in a very similar way to the UK. The main difference is that for a non-resident, the maximum available is between 60 & 70% of the valuation. The amount of information requested by the banks regarding income and expenses is less detailed, due to the assumption that the mortgage repayment will be met through rental income. The maximum term is usually 15 years and over the past few years, rates have fluctuated between 5 & 6%. UK banks cannot lend against a security held outside the UK, certain offshore banks are able, but request a higher rate accordingly.

Potential rental income can be expected to return a net rate of approximately 8 to 10% per annum, of the property value. Costs to be considered are a management and letting service.

In order to secure an existing property, the standard method is to take a 10% non-returnable deposit from the purchaser. A reservation contract will be signed by both parties and a date for completion of the sale set, usually within the following 3 to 4 months. This contract and the monies are lodged with a lawyer and protect both the purchaser and the vendor. In the event of non-completion by the purchaser, the money will be retained by the seller and similarly, the acceptance of the contract and the money confirms the commitment of the vendor. When purchasing a new property, in addition to the deposit, the vendor will normally require further stage payments as construction progresses.