Buying a New Property in Spain

1. Initial information

If you have decided to buy a property off-plan in Spain at current prices, when the development is completed, the capital appreciation will have made it worth much more.

Upon buying the property off-plan the developer is legally required to provide you with the following information:

  • Inscription details of the Developer at the Spanish Company Registry (Registro Mercantil), its trade name, address and data of the promotional society.
  • Map of the property and general location of the unit.
  • Instructions of the use and maintenance of the installations.
  • Building specifications and description of the electricity, water, gas and heating networks and fire protection measures. Dimensions and specification of the fixture and fittings. This information is contained in the memoria de calidades.
  • Property description and details of the useful surface, common zones and accessory services.
  • Price of the property and accesory services and terms of payment.

Keep in mind that anything the developer publishes must be performed, as the publicity the developer supplies has the power of a legal contract.

2. The deposit and the advanced payments

Normally, you would reserve your apartment while its construction is completed. You would sign a private contract with the seller and put down a non-returnable deposit (about 10% of the property total price).

While the construction is completed, in the meantime, you will be expected to make advanced payments (shared parts of the property total price), which should be protected by an insurance policy, until the construction is completed. Once the property is built, you would sign the purchase deed before a Spanish Notary which will make you become the property owner for all legal purposes.

2.1. Guarantee of advanced payments

The shared parts of the property total price that you will be paying in advance while the construction is complete must be insured by the developer, in order to get the return of all moneys paid in advance plus interests  in the event the developer does not commence the works of the property on the date scheduled, or in case of non-completion of the property.

Upon signing the private sales contract, the developer must provide you with documentation regarding the type of guarantee for the advanced payments and details of the guarantor.

In case the insured events occur, the purchaser may demand the developer for refund of the advanced payments plus interests. If the developer does not answer the demand, the purchaser should contact the guarantor to demand for refund.

Your lawyer should check that your private contract contains reference to this guarantee.

3. The private sales contract between purchaser and developer

Buyer and developer would sign a private sales contract, which serves to settle the conditions for the future purchase, once the construction is completed.

This contract must contain the following details:

  • Seller and buyer identification.
  • Seller and buyer legal capacity to make a contract.
  • Description of the property; details of the useful surface, common zones and accessory services, and its location.
  • The selling price and taxes levied on the property to be paid.
  • That in case of dispute, both parties agree to submit to the exclusive competence of the Spanish courts from the location of the property.
  • Signature of the parties to the purchase contract.
  • Payment terms while the apartment is under construction, up to its completion.
  • Bank account details where advanced payments are to be paid in.
  • Reference to the penalties to be applied either in case the buyer does not accomplish the payment terms agreed, or the seller does not provide the qualities promised.
  • Possession Date: the date when the buyer will take possession of the house. The contract shall also contain the penalty applicable in case the developer does not complete the construction of the property on time.
  • Plan of the property and its description and specifications (memoria de calidades).

Together with the private contract, the developer must provide you the following documentation:

  • Description of the property and the building where it is located, the common areas and accesory services.
  • Plans of the property and its location.
  • Construction details: electric wire, fire protection measures;
  • Reference to the materials used in the construction of the property.
  • Details of registration of the building in the Property Registry (Registro de la Propiedad), or mention to the non registration of it.
  • Copy of the building permit.

Be aware that this is not the final contract that makes you become a legal proprietor in Spain.

4. Signature of the deed. Registration

As soon as the construction is finished you should sign the Purchase deed (Contrato de Compra-Venta) before a Notary, which must contain the mortgage contingency, and the specifics of it: amount, rate and term, where applicable.

The Notary is the public official who makes this contract to be legal. He certifies that the parties sign the contract properly. He keeps the original document in his files in case any problem could arise later. Note that the notary does not certify that all statements are true, only that the parties have sworn to them.

The purchase deed must be registered with the Spanish Property Registry (Registro de la Propiedad). Once it is done, the title deed (Escritura Pública de Compra-Venta) fully assures your title: the registered contract makes you the owner of the property.

The registration of the house is also important for tax purposes, the real estate tax (IBI tax ) shall be paid every year since you could be fined by the Spanish tax authorities.

If you cannot be present to sign the contract, you can make a power of attorney allowing another person to sign it for you, if necessary.

You shall be receiving the keys of your property upon signature of the contract in the presence of a Notary.

5. Taxes to pay

The taxes referred below shall only be paid on purchasing a new property:

  • Value added tax (IVA) 7% of the total price. Iit is necessary to be paid as the sale is a business operation between a developer and a private individual..
  • Stamp duty (Impuesto de Actos Jurí­dicos Documentados) 0.5%: It must be paid upon signature of notarial document.

To pay these taxes, you will be required to obtain the the Spansih tax identification number, say the NIE, if you are non-resident, or the NIF if you are Spanish resident.

6. Fees to pay

When buying a new property, the following fees, subject to VAT, must also be paid:

  • Notary (Notario): You must pay the notary fees when you sign the deed. The amount of such fees is based on official rates depending on the price and size of the property.
  • Property Pegistry (Registro de la Propiedad): You must pay the registration fees for the purchase deed to the Spanish Property Registry so that title on the home is duly transferred to you. Before going to the registry, you should have paid the corresponding taxes, and provide the Registry with the relevant tax receipts; otherwise you will not be allowed to register your property.

Your Spanish Lawyer may inform how much these fees will be.

7. Other points to check when buying a new house

In order to avoid possible problems that could arise later, do not forget to check every point described below. Otherwise you may find that your dream house is illegally built.

You will do well to have a skilled Spanish Lawyer handle with this paperwork, as they know the ins and outs of it.

7.1. The Partial Plan

When you are willing to buy a dwelling zoned within an urbanization in Spain, you should first check the Partial Plan (Plan Parcial). It is the plan of building plots, which must be approved by the urbanism department (town planning department) of the Town hall where the plots are recorded in.

This plan assures that your urbanization is legal and that there are no other developments planned nearby that could affect your new property. An urbanization is a planned community which provides a minimum of services and a minimum of quality control of the constructions, installations, roads;

7.2. Building in conformity with the Coastal Law

If your property is going to be built near the beach, make sure that your property will comply with The Spanish Coastal Law (Ley de Costas) of 1988 or that the builder has an authorization from the Coast department, which provides that the authorities must restrict building within 100 metres of the beach and establishes a zone of influence (zona de influencia) up to one kilometre inland.

7.3. The building licence, the certificate of completion of the building and the
certificate of occupancy

The builder must have obtained the building licence (licencia de obra) issued by the Town Hall, which allows him to build the house.

The certificate of the building completion (certificado de fin de obra) is issued by the architect once the building is complete. The developer needs it in order to get the certificate of occupancy.

The developer must provide you with the certificate of occupancy, which is issued by the Town Hall (Ayuntamiento). This administrative document permits you to inhabit your new dwelling.

Only when the certificates of completion of the building and the certificate of occupancy have been issued, can the purchase deed be duly finalized and notarised. The developer shall obtain and pay them.

It could be difficult to register the sale if the building does not have legal approval. Other problems could arise; demolition of the property could be enforced.

8. Builder’s liability for construction defects

Once you receive your home’s keys, you should check your house in order to detect whether there exist defects or not. Homeowners can, in some cases, force to fix their house after they move in, under some specific conditions.

The term of guarantee for possible construction defects is as follows:

For those houses, which applications for building licences were issued before May of 2000, the guarantee periods are as follows:

  • 6 months, at least, since the deed was signed, for defective construction which have no effect on the building’s final purpose.
  • 10 years, from the date of completion of the works for defective construction of the essential parts of a building.
  • 15 years, for the cases in which the contractor had no complied with the terms of the contract.

For those houses which applications for building licences were issued after the month of May, 2000, the guarantee periods are as follows:

  • 1 year for defective construction which have an adverse effect on the finish of the house (electricity installations, painting;). In this case, the builder is responsible for all property damages.
  • 3 years for defective construction which have an adverse effect on the habitability conditions (humidity;). In this case, the other agents involved in the construction of the building are liable for the property damages..
  • 10 years for defective construction which have an adverse effect on the building structure.

Spanish law provides a time limit of 2 years to claim for construction defects from the date on which the deffect was apparent and known to the proprietor, provided that the defect arose during the guarantee period described above.

The different agents will be personally and individually liable for property damages to the buildings caused by their own acts as well as by the acts of others for whom they are legally responsible.They will be jointly liable when the responsibility for the damages cannot be attributed to any one individual or entity.

9. Getting legal help

Purchase a pre-packaged legal service delivered by of our English-speaking lawyers for a fixed one-off price:

» Home Purchase in Spain (Legal Help), € 920.
» Home Purchase in Spain (Prepare Contract), € 185.
» Home Purchase in Spain (Review Contract), € 90.

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