Buying real estate in Spain

When you decide to buy real estate in Spain, you have to be clear that even though Spain is a member of the EU, there are nevertheless big and important differences between the way you deal with real estate in Denmark and in Spain.

It is therefore a good idea to be careful and use professional advice to avoid boring and unpleasant surprises.

Real estate agent

At first glance, buying real estate in Spain looks easy, as the market for housing, especially vacation rentals, in Spain is huge. But watch out for the following: while in Denmark we have the system that an estate agent has a property in exclusive commission, this is usually not the case in Spain, where the same property can be for sale with different estate agents. The seller can also always sell the property himself, even if one or more brokers have obtained the property on commission.

Therefore, it can happen that while negotiating with one broker, the property is sold to the other side by another broker or by the owner himself.

You cannot prevent this from happening and therefore the best advice is that, as soon as you are sure that you have found the right property, you turn to a lawyer, who can review all documents relating to the property and can give the “green light” ” to sign a private purchase agreement, which is the next step in the purchase process.

Counselors or lawyer

When you buy real estate in Spain, you often meet a group of people who want to assist you with the purchase in exchange for a fee, which can vary from time to time.
These people are often very friendly and eloquent, but beware: These people are neither lawyers nor professionals and often look after the interests of both the buyer and the seller without having taken out any liability insurance, so that you as a client can be held responsible if they make mistakes in their advice.

Therefore, always choose an independent lawyer who only looks after your interests and preferably a lawyer who speaks Danish and who can explain the purchase process in an easily accessible language.

Property review

In Spain, there is no system of a condition report, just as there is no change of ownership insurance.
Therefore, it is recommended to have an architect or construction expert of your choice inspect the property for faults and defects before the purchase agreement is signed.

ATTENTION! In Spain, you buy as-is, and if it turns out after the purchase that the property suffers from defects, the only option is to file a lawsuit against the seller in Spain, which can be both expensive and difficult. Therefore, it is important that you do everything you can to ensure that the condition of the property is in order.

ATTENTION! If you are in doubt about a particular property, it is better not to buy it. There are lots of properties in Spain and it is safer to choose another property than to buy something that you will later regret.

The price

In Spain there are properties in all price ranges. Often you buy a property which is either part of a project or is a terraced house or a typical house. In these cases, it is relatively easy to compare the prices.

If, on the other hand, you buy an old villa or a luxury property, it can be more difficult to know whether the price that the seller is asking is now also reasonable.

In this case, it is a good idea to contact a bank or a credit union to find out how big a loan you can take on the property.

Preparatory work/legal advice

Before signing the purchase agreement, it is recommended to have an independent lawyer go through the land register/property register in order to examine the following:

Ownership of the property

Is the seller registered as the owner of the property? If not, this may be due to the fact that the property has been “inherited” and that the owner, who appears in the land register, is the seller’s father.
In that case, it is not possible to buy, unless the seller makes a transfer, so that the deceased’s heir(s) are registered as owner(s) in the land register.

Correct registration

Is the property registered correctly, i.e. do the house number, property description and the use of the property correspond to what appears in the land register? If not, it is likely that the owner has made illegal additions or conversions, or that a property that was originally used, e.g. as a warehouse, now used as a residence.
If there are irregularities, it is necessary, if possible, to legalize the property before the transaction can take place.

Encumbrances in the property

Are there liens on the property? It is important to investigate whether there is a mortgage, attachment or third-party rights registered on the property. If there is a mortgage or attachment, you must ensure that these liabilities are deleted before the transaction takes place, otherwise the new buyer will take over the liabilities.

Residence permit

Residence permit, i.e. occupancy permit is issued by the municipality and is a condition for the property to be used as a residence. When buying an old house, however, this permission is not necessarily available, even if the house has been inhabited for years.

“NINE”

In Spain, as a foreigner you must have a Spanish ID number. You can apply for this at the police station (Policia Nacional) in the municipality you plan to buy in. Applications are made in person.

The purchase agreement

When all the above investigations have been carried out, and both the construction expert and the lawyer have given the “green light” to the deal, the seller and buyer enter into a purchase agreement.

The purchase agreement is an important document, and the lawyer must review it before the buyer can sign it.

The agreement must contain:

• The parties’ names, address (possibly also c/o address in Spain), place of birth, date of birth and the Spanish NIE number.
• An accurate description of the property. The agreement should preferably be accompanied by a cadastral map of the property, so that the buyer is sure that there is identity between the property he has seen and the one being sold.
• Indication of the purchase price and method of payment. It is practice for the buyer to pay an amount of between 5% and 10% of the purchase price immediately after the purchase agreement is signed. This amount is transferred directly to the seller without any form of security.
  It is therefore advisable to sign the deed before the notary as soon as possible after the purchase agreement is signed and that the amount paid is as little as possible.

Encumbrances: If there are encumbrances, they must be mentioned, and you must state before or during the notary meeting when and how these must be deleted.

Default: The party that withdraws from the agreement without a valid reason loses the amount paid (between 5 and 10%). That is that the buyer loses the amount paid, and the seller must pay double the amount to the buyer.

Non-resident seller: The buyer must withhold 3% of the purchase price if the seller is not resident in Spain.

Refund statement: No refund statement is made, and it is therefore appropriate for the buyer to withhold a reasonable amount of the purchase price as security for payment of electricity, gas, water and property tax.

ATTENTION! When the buyer signs the purchase agreement, financing MUST already be in place!

Notary meeting

In Spain, all rights over real estate, i.e. transfer of property, pledge, establishment of easements, etc., are transferred by notarial act.
Therefore, it is not possible to transfer real estate without the assistance of a notary.

Buyer and seller must appear in person before the Spanish notary and sign the deed.

Since notarial business is conducted exclusively in Spanish, it is necessary to meet with an interpreter if you do not have a high command of the Spanish language.

It is also possible to give power of attorney, e.g. to a Spanish lawyer who can appear at the notary and sign on your behalf. The power of attorney can be signed before a Danish notary, who must, however, confirm one’s signature in Spanish.
If you choose this approach, you save both travel and interpretation costs.

During the meeting, the buyer pays the remaining purchase price (typically with a check) and the seller hands over the keys. From this point on, the property is at the buyer’s expense and risk.

After the notary’s meeting, the notary sends the deed for registration in the Spanish land register.

Trading costs

In Spain, VAT (IVA) is paid at 7% of the purchase price. In addition, you must pay the notary’s fee (which is also calculated as a percentage of the purchase price) as well as any costs for the interpreter or representative.
All in all, as a buyer, you should expect to pay approx. 10-15% above the actual purchase price in trading costs.

Bank account

It is important that you have an account in a Spanish bank, from which all expenses and any Spanish loan repayments can be paid off. Several of the largest banks’ branches in areas with many foreigners have one or more employees who speak English. However, it is a good idea to go to the bank with someone who speaks Spanish.

Annual costs of a property
The costs of owning property in Spain are not great if you compare them to the costs you have to pay when you own real estate in Denmark.

The annual taxes and expenses depend on the value of the property.

There are the following tax charges:

Property tax (Impuesto Sobre Bienes Inmuebles – IBI)

This is a local tax on properties in Spain which must be paid regardless of whether the owner is resident in Spain or not. It is calculated on the basis of the property value, which is determined by the municipality. This is an administratively determined value, which is usually lower than the market value – often even lower.

IBI – in general, this is a tax in the order of 150-400 euros per year.

Personal income tax (Impuesto sobre la Renta de No Residentes – IRNR)

If you, as the owner of real estate, are not resident in Spain and have no income from renting out the home or any other income in Spain, the tax will be calculated on the basis of the property’s value.

If you are a permanent resident in Spain, you must of course pay income tax in Spain.

Insurance

It is not compulsory to take out property insurance in Spain, but it is advisable to take out fire insurance and contents insurance.

The price of the insurance naturally depends on the nature of the property and the value of the contents.