| About buying a
new property:
This
summary is intended to give a broad outline to the first
time buyer of residential new property, which is being
developed or has just been finished and is ready for
handing over.
Once
you have chosen the property you wish to acquire, the
next step is to enquire on features of the property,
plans, terms of payment and extras if any. At this
stage, a serious real estate agency will aid you and
clarify any points and costs involved. Most developments
require the purchaser to make payments during the
building process making a final payment upon completion
and final handing over of keys and Title to it. These
payments in advance range, depending on the development
you have chosen, from 30% to 50% of the price, payable
during the construction and balance at
completion.
It is
quite common that the amounts to be paid in advanced
(30% to 50% of the total price) be distributed in the
following way:
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A small deposit of Euro 3000 to 4000 as
a reservation of the property, for which a receipt
will be handed stating the exact unit, total
purchase price and payment
terms. |
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A further amount is paid at exchange of
private contracts normally 15-30 days after
reservation. |
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Rest of amount to be paid during
construction is distributed in periodical
installments. |
Finally the balance of the purchase price is
paid at completion.
Before
exchange of private contract, your serious real estate
agency will have completed searches and investigations
on the property being sold and will secure that it is
sold free of charges and encumbrances and up to date in
its tax obligations. The private contract will set out
the legal description of the property, price, terms of
payment and the obligations of both parties.
Specifications and plans of the property will be
attached to this contract as part of it.
Security
of your investment
Under Spanish law the developer is obliged to
provide the purchasing party with an insurance policy or
bank guarantee. This will secure that any amount handed
over by the purchaser (plus legal interest), will be
returned should the property not be completed when
agreed.
From May 2000 a new Building Law establishes that
all developers that applied for licence after that date
will also have to provide the purchaser with a ten-year
guarantee duly bonded against mayor defects of the
construction.
These two elements make the purchase of new
property very safe in Spain.
Final completion and formalisation in public
document
When the building has been finalised and
inspected by the purchaser to his satisfaction, the sale
will be formally completed in a Public Title Deed, which
will be granted by the vendor in favour of the purchaser
before a Public Notary against final payment and handing
over of keys.
The Title Deed is faxed to the Registrar, which
will register the purchase at the Land Registry. Your
agent (or your bank where you got your mortgage) will
also have to pay on your behalf all relevant fees which
are dued for the notary, taxes etc. The agent will also
handle the formalities of registration of your Title
Deed. (All taxes and notary fees have to be paid by
you). Similarly, your agent may contract relevant
supplies of utility services such as water and
electricity and organise their payment through a local
bank by standing orders.
Costs of acquiring new property
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The buyer will have to pay 7% VAT on
the purchase price. Please note that this tax
accrues with each stage payment, so if you make a
payment as above-mentioned a 7% on top of the
amount paid must be
considered. |
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0,5% Stamp Duty on the purchase
price, which is paid in a one off payment at
completion. |
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Plusvalia is a one-off
local tax on the increase in value of the land on
which the property is built, since the last
recorded transfer of ownership. It is based on the
rateable value of the land. The vendor is the
subject of this tax, but it may be stipulated that
the buyer pays it. |
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Legal fees normally charged
at 1% of the purchase price plus
VAT. |
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Notary and Land Registry
fees: These are set by law and
the scale for the notary will range from Euro 450
to 1.550. Land Registry fees are also set by law
and are approximately 50% of those of the
notary. |
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Provision should also be
made for bank charges when transferring monies
abroad. |
So, in summary, the buyer has to allow for an
additional 10% of the purchase price to meet the
transfer costs involved in the transaction.
Financing your purchase
Spanish banks will offer to finance up to 60% to
70% of acquisition price through a mortgage. Your real
estate agent will be able to advise on costs and taxes
regarding these facilities and applications on your
behalf. Some developments already have mortgage
facilities for their products, which are worthwhile
considering as they usually have good market conditions
and are cheaper in cost.
Ongoing expenses
Once the property has been purchased, the owner
will have to pay: community fees, rates, rubbish
collection, Income and Wealth Tax, which as a guideline
will be approximately 1,5% of the purchase price per
year (considering a property with a price of Euro
180.000). Water, electricity and insurance costs should
also be budgeted.
Wills
Those who own property in Spain are strongly
recommended to have a Spanish Will confined to their
assets in Spain, as it will save the heirs having to
translate, notarise and legalise any grant of probate or
letters of administration issued in their own country.
It will also allow them to simultaneously wind up the
Spanish and home estates of the testator.
- By Yogesh Chhabra
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