Part 2 – Purchasing a new property off-plan

Purchasing a property off plan in Spain means you pay in advance for a property not yet built. However, you make great savings in the end. This is because the builder gives very favourable terms to the buyer because the buyer is financing the project and the property will have increased in value when it is eventually finished.

The costs associated with purchasing a new property are slightly different to those for a resale. ITP (transfer tax) is no longer applicable since you are purchasing from a developer, and instead you pay 4% of IVA (VAT) and 1.20% of AJD (stamp duty). Both taxes are based on the purchase price.

The “plusvalia”, as previously mentioned, may be payable by the buyer or the vendor, as agreed in the contract. Other costs are the same as the resale property, i.e. the notary and land registry fees.

It is very important to appoint a legal representative when purchasing “off plan” so that this representative can check that all the necessary licences are in place. The good news is that a new Andalusian decree has been introduced to protect the consumer. Since February 2007, all developers are obliged to supply a complete information package to a prospective buyer. The documents include papers identifying the builder, the planner, the project manager and the developer and any other intermediary involved in the sale. It also includes the floor plans, building specifications, dimensions, delivery date, terms and conditions of the sale, property registration details, and information on the building insurance that protects the buyer should the builder not complete the project.

Spanish law requires that the purchase contract must contain the delivery date with a penalty clause, specifying that the property must be handed over within “x” days of the first occupation licence being issued.

The developer must also provide bank guarantees for the payment made when private purchase contracts are signed and any further payments made during the construction period.

Your lawyer or property consultant will request and check the following:

  • The construction specifications
  • The specifications of the materials used
  • Details of the communal areas
  • Bank guarantee details
  • The contract
  • Whether the developer or purchaser will pay the plusvalia tax
  • Whether the developer can offer a mortgage
  • If the 10 year insurance policy covers defects on the property.

The developer is responsible for attending to defects at the moment the property has been handed over:

  • Up to 1 year for any snagging defects
  • Up to 3 years for any minor defects
  • Up to 10 years for any structural defects
Part 3: Selling Your Property – Available Wednesday, March 21st

When you find a buyer for your property, you will first receive a reservation fee, at which time you must take the property off the market. The private purchase contract is then signed within a specified time frame and you will receive a full 10% deposit on signature of the contract. The private purchase contract will stipulate all the terms and conditions of the sale, including the final date by which the balance of the sales price must be paid and title deeds signed before the notary public. Continued tomorrow…

Perez Legal Group

Tel: +34 952 833 169

www.perezlegalgroup.es

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Purchasing a resale property in Spain

As promised here is the first in a series of articles to inform you about the processes and fees involved in buying or selling a property in Spain. Part 2, Purchasing a New property off-plan, will be here tomorrow.

Purchasing Costs

There are various taxes and costs associated with the purchase of property which will add approximately another 10% to the purchase price. The various charges are:

Transfer Tax

The transfer tax, called “Impuesto de Transmisiones Patrimoniales” in Spanish, is levied at 8% of the purchase price. It will be 9% for all purchase prices higher than 400,000 euros up to 700,000 euros. Higher than this figure it will be 10%.

Plusvalia

The other tax to be paid on a property purchase is the “arbitrio sobre el incremento del valor de los terrenos”, which is the municipal tax charged on the increase in the value of the land since its last sale, using the official value of the land as the taxable base which tends to be always lower than the market value. The land is officially revalued periodically for this purpose. This tax may be paid by either the vendor or the buyer, as agreed between the parties.

Warning to buyers

Since January 1, 1999, the “plusvalia” tax can be charged directly against the property itself, meaning that should the vendor be liable, and “forget” to pay it, then liability for payment will pass to the new buyer.

Notary Fees

The notary fees are fixed by an official scale and the fee varies according to the size of the land, the size of the dwelling and its value.

Land Registry Fees

This will be a similar amount to the notary fees, and relates to the entry of the property in the land registry (“Registro de la Propiedad”).

Appointing a Legal Representative

It is highly recommended to appoint a legal representative as early as possible in the purchase process. Your lawyer will explain to you the legalities involved in the purchase and also carry out the due diligences on the property, including advising you of any debts, provide you with an estimate of the annual running costs of the property and prepare all the documentation required to complete the transaction.

Power of Attorney

Should you not be able to be present to sign all the necessary documentation related to the purchase, then you may grant power of attorney to your legal representative or to another third party. The power of attorney would list all the duties that can be carried out by the third party, which may include buying and selling property, opening and administering bank accounts, applying for and accepting a mortgage, representing you with respect to utility companies and the tax authorities etc.

The power of attorney would be signed before a public notary in Spain, and should cost approximately 60 euros.

Should you not be able to visit a notary public in Spain and need to formalise the power of attorney in your home country, the procedure is different. Your lawyer will prepare the document in Spanish and English, and this will need to be signed before a notary in your home country and then provided with the “Hague Apostille” at the Foreign and Commonwealth Office in London. Some notaries will take care of this process too. More information on the procedure can be obtained from their website: www.fcogov.uk

Deciding on a Property

Once you have decided on a property, you will need to pay over an initial deposit/reservation fee to ensure that the property is taken off the market. The fee may be placed with the real estate agency or with your lawyer. A corresponding “offer and reservation document” should be signed on making the payment, indicating the basic terms of the purchase, i.e. the price, details of the vendor and buyer, details of the property, and the date by which the “private purchase contract” should be signed.

The Private Purchase Contract

The private purchase contract will then be signed approximately 20-30 days after payment of the initial deposit/reservation fee, and once due diligences have been carried out on the property. Normally a 10% deposit would be paid; however, this may vary according to the vendor’s wishes. The contract will stipulate all the terms and conditions of the sale, including the final date by which the title deeds must be signed and final payment made, and this will then give the buyer time either to obtain a mortgage or get together the money required to complete the balance. Should the buyer fail to complete the sale by the final date, the buyer would lose the deposit. On the other hand, should the seller decide to pull out of the sale, or should the seller find another buyer who offers to pay more, then the original buyer has the right to claim back twice the amount of the deposit.

Mortgage

It is important to note that should you consider applying for a mortgage in Spain, this will add approximately another 2% to 3% to the purchase costs. For a non-resident buyer, the mortgage is usually limited to around 70% of the valuation of the property. Once the mortgage is approved by the Spanish bank based on your proof of income, the bank will issue a binding offer which can be compared with other bank’s offers.

Due Diligence

Apart from checking the legalities of the property, your lawyer will also check that all running cost and local tax payments are up to date. This will also enable your lawyer to advise you of the approximate annual running cost of the property. These checks will include:

Utility Bills

Utility bills usually refer to electricity, water, gas and telephone. If you as a buyer are faced with unpaid utility bills from the previous owner, you should be aware that these are in fact personal bills issued by private companies. They are not attached to the property so that only the person who signed the contract with the utility company is liable for them. If left unpaid, the company will cut off the services. However, on payment of a reasonable fee, the utility company will conclude a new contract with you for these services. This fee is exactly the same as the charge for changing the electricity contract into your own name, which you would have to do anyway.

Community Fees

These fees are charged by the community of property owners which is the legal body that controls all the elements of the property held in common. This includes the lifts, gardens, swimming pools, roads, etc. Each owner is assigned a quota or percentage of the expenses which must be paid by law.

Your lawyer will request a copy of the rules and regulations of the community, together with a copy of the minutes of the last AGM so that you can ascertain the current situation with respect to any community issues.

Decisions are taken by majority vote of the owners at each year’s AGM and these actions are recorded in an official document that you are entitled to inspect when you become the property owner.

IBI (local rates) and BASURA (refuse collection)

The IBI is the municipal real estate tax and BASURA is the local refuse collection tax. When purchasing the property, your legal representative must check the IBI receipts and BASURA for the last 5 years, since you can be liable for five years of back tax. The IBI tax can be as low as 120 euros or as much as 2,000 euros per annum.

It is recommended to have these local taxes paid automatically from a bank account each year, in order to avoid unnecessary surcharges, and also to benefit from discounts for early payment, which can be as much as 10%.

The Title Deed and Registration

The “Escritura Publica” or “Title Deed” is the final document of the sale and is signed between the buyer and vendor when the final balance due on the property is paid. The signing takes place in the presence of a notary public, which makes the document legally binding. The notary public is an official of the state, and his duty is to certify that the contract has been signed, monies paid over, and that the buyer and vendor have been advised of their tax obligations. The notary public keeps the original of the document and the purchaser is issued with a second authorised copy, which is then entered in the property registry (against the payment of the stamp duty or transfer tax). This means that if the buyer loses the buyer’s copy, then the notary public can always issue another copy.

Property Values

When going through the purchase process, you will come across different values which are attached to the property. It may be helpful to understand these different values:

  • Catastral value
  • Fiscal value
  • Valuation value
  • Market value
  • Declared value/Sales price

Catastral Value

The “catastro” office is the second form of property registration, and deals more with the exact location, physical description and boundaries; unlike the property registry which deals more with ownership and title. The “catastro” office is also the source of the “valor catastral”, which is the assessed value of the property used in calculation of local rates. The figure is normally considerably lower than the real market value. If you are purchasing a new property this will not have been assigned a “valor catastral”, it therefore becomes the buyer’s responsibility to register the property at the “catastro” office for this tax. An existing property should already have its own “valor catastral”. The annual real estate tax IBI, charged by the municipality, will be calculated based on the “valor catastral”.

Fiscal Value

This is the value assessed by the tax authorities, and is the minimum value that should be declared on the title deed when a sale takes place.

Valuation Value

This is the value assessed by a bank for mortgage approval purposes.

Market Value

Depending on the market, a real estate agent or property valuer will give an estimate of a property’s current market value.

Declared Value/Sales Price

The declared value is the sales price of the property. All the costs and taxes are based on the sales price.

Part 2 – Purchasing a property off-plan in Spain – available Tuesday, March 20th.

Purchasing a property off plan in Spain means you pay in advance for a property not yet built. However, you make great savings in the end. This is because the builder gives very favourable terms to the buyer because the buyer is financing the project and the property will have increased in value when it is eventually finished. Continued tomorrow…

Thanks to Perez Legal Group.

Perez Legal Group

Tel: +34 952 833 169

www.perezlegalgroup.es

Taxis to have meters by the end of 2011

The days of taxis operating with no fixed fares in Marbella are numbered – good news for tourists and residents!

The Town Hall passed a new by-law that regulates taxis which was approved earlier this month. The new law obliges taxis to have a meter installed calculating fares according to distance travelled and time taken.

The measure is in line with a new Andalusian regulation and will be applied before the end of the year.

Taxi representatives and the Town Hall are currently working together to fix the fare payable per kilometre. The idea, however is to use the fare table applied in the city of Malaga as a guide. In Malaga the price per kilometre is 0.87€ and the plan  is to use this fare table as a guide for Marbella, although in Marbella the price could be increased slightly to 0.90€.

The modification of the municipal bylaw also brings in the obligation for taxis to accept payment by card from January 1st 2012. Not accepting cards for payment has been a significant problem in a tourist destination as important as Marbella.

I know it’s not really real-estate but important news for anyone who uses taxis in Marbella!