It is many people’s dream to buy a property in Spain, even after Brexit. The quality of life, generally low prices and the sunshine are appealing factors. When buying a property in Spain, it is important to anticipate the general costs and expenses you will incur, as well as possible pitfalls as a result of unexpected expenses.
I will outline this information for a resale property purchase, as the cost of buying a newly built property will differ slightly. They will be considered in a future article or feel free to contact me to discuss.
On occasions, when you are buying a luxury holiday home, you may decide to engage a property agent to find the right property for you. These types of agents do not sell properties and would be acting just for you and look after your own interest. Their fees may vary and, although they are not totally necessary, if you are very specific in the property you would like and without compromising and wasting time, they can be a good investment to find the right property for you and can also negotiate a reduced price.
So unless you are instructing a top agent, normally the estate agencies are instructed and paid by the seller. The seller may request that an additional cheque be paid to the agent on their behalf and deducted from the price upon completion, but apart from your bank commission to issue cheques or otherwise agreed with the sellers, these fees should be borne by them.
Appointing a good lawyer who can advise on the whole process is important. You need an approachable lawyer with whom you can communicate and who can also respond to your queries. Instructing a lawyer who is also familiar with English law can be very beneficial, as they can explain your queries with the jargon you are more used to in English conveyancing.
Legal costs may vary depending on the property you are buying. As a general rule, they may be around 1% plus VAT of the property price, with a minimum price in the case of small value properties.
Your lawyer will ask you to sign a Spanish power of attorney to assist with the whole transaction. This will assist with many steps in the transaction, but also avoid you having to go to Spain for every signature which may be required. A UK based Spanish lawyer will be able to make this process easier, as they can draft the document and organise signature and legalisation for you. This will have additional costs as a UK Notary Public will be required to assist with the signature (fees vary from £70 to over £250 plus VAT) and legalisation of the document (£30 per document plus postage).
There is a tax which you will always need to pay when buying a resale property. This is the transfer tax. This tax varies depending on the region of Spain where you are buying the property and your own circumstances, but generally will be between 7% to 10% over the purchase price.
It is important that your lawyers consider the minimum tax value of the property before completion. This is because if you buy a property at a bargain price, you may be buying it at a price which may be less than the value set up by the Spanish tax authority. If so, they are likely to demand further taxes in the future. Currently, the Spanish tax authority calculates the minimum tax value by applying a tariff to the cadastral value of the property. The tariff depends on the region where the property is located and it may not be very straightforward. The way of calculating this minimum tax value is changing from 1st January 2022, therefore it is very important to consider this point before completion so you know exactly how much tax you need to pay and avoid unpleasant surprises in the future.
The new minimum tax values are likely to be based on average prices in the area, without taking into account the specific condition of a property, whether it is in need of repairs for example. A house that needs a full refurbishment may have, before the Spanish tax authority, the same value as a luxury property situated next to each other. So watch this space!
Spanish Notary & Land Registry’s Fees
Further costs to incur would be fees of the Spanish Notary and the Spanish Land Registry. It is usual practice in Spain that the buyer would pay for these fees. Notary fees are regulated but the level of fees may vary depending on the number of pages attached to the deeds. In a transaction in which many documents are required, the cost is likely to increase. An average cost for a Notary may be around EUR850-1,250 plus Spanish VAT of 21% and the Land Registry fees may be around EUR650-EUR850 plus Spanish VAT. However, these are just estimates and you will need to wait for the invoice to find out the exact amount.
Surprisingly the law indicates that the seller would need to pay the majority of the Notary fees. In some areas of Spain, this is now more common, however, in most areas, it is general practice to agree that the buyer pays the fees.
You may need to obtain a Spanish non-resident number (NIE). You can obtain this in the Spanish Consulate if you are lucky to live close to one and get an appointment without delay. Alternatively and possibly quicker, you can also ask your lawyer to obtain this for you.
You may decide to instruct a surveyor to inspect the property before fully committing to buy it. The cost is likely to be between EUR500-EUR1,000 depending on the property and the content of the report, as well as the language in which it is prepared. This could be either before the exchange of contracts or before completion. Just bear in mind that the Spanish contracts would not generally include a clause indicating that the purchase is subject to survey, so unless you are very specific in the contract, you may lose your deposit if you change your mind after exchanging contracts.
Changes with the utilities
Following completion, you may wish your lawyer to also assist you further with the change of name and setting up direct debits with the utilities. The process can be very burdensome and not as straightforward as it could be in the UK. On occasions, the utility suppliers ask for further documentation or they may ask you to pay a fee if the meter needs to be replaced for example. Your lawyer is likely to charge additional fees to assist in this respect.
If you need to obtain a Spanish mortgage to buy the Spanish property, it is likely that you will need to pay additional fees so it is worth checking with the lender. These expenses are not as significant as they used to be, as they have now been regulated and reduced with new laws in Spain. The sum you are likely to pay now should be limited to the mortgage fee and copies of the deeds and the cost may be around EUR350-EUR450 as an estimate, although mortgage fees have no limits so the lenders may introduce high fees soon.
Each case is a different world, so make sure you have someone looking after your own interests and not those of the seller. It is recommended that you instruct an independent Lawyer to assist you and someone you can trust.
If you would like to discuss your case, or would like assistance with your Spanish purchase of sale, do not hesitate to contact me on 01273 284 120.