Purchasing real estate in Spain

In Costa del Sol you’ll find a long list of good real estate agents – both Danish and foreign. Unlike Denmark, in Spain no formal education is needed to become a realtor. They can register and receive an official license number, but since 2001 this is no longer mandatory.

At the first showing the realtor usually only has sporadic information about the property, and as a Dane this is hard to understand. Properties aren’t sold with single-commission. The realtors work together in networks so they order information if a potential customer expresses a wish to purchase a property after having seen it.

The home condition reports and ownership transfer guarantees, which are used in Denmark, don’t exist in the Spanish market. This is called ”Cuerpo Cierto”.

If you don’t have experience with building evaluations there are building experts that you can ally with in order to assess the state of an interesting property. When it comes to development houses there are special mandatory guarantee insurances according to which you are liable to receive insurance compensation in case of damages due to construction errors.

There are also expenses associated with purchasing real estate, and as a rule of thumb you should expect transaction costs in excess of 11% of the purchase sum. The majority of the costs relate to stamp duty fees on re-sold property or VAT on development houses.

Anyone, who buys real estate in Spain, must have a so-called NIE-number: a kind of social security number. In the past, you needed to personally apply for this either with the Spanish police, at the Spanish embassy in Copenhagen or at the consulate in Aarhus. Today, however, this can be done by signing a power of attorney.

Real estate transactions are different in Spain compared to Britain. There are several pitfalls, and as a foreigner you’re likely to think “British”, which oftentimes results in frustration because all the involved processes are different.

When you have found your dream property, the realtor will ask for a reservation fee or deposit. Typically, this fee is between 3000 and 6000 euro, and we advise you to deposit it with an attorney.

During a period of about a month you are required to sign a purchase agreement and pay the remaining (up to) 10% of the purchase sum. The buyer’s attorney will prepare the contract. The 10% should be deposited with seller’s attorney and shouldn’t be paid directly to the seller – something that is customary in Spain.

The deposit will generally be forfeit if the buyer decides to back out at this point, but you’re guaranteed a full reimbursement in case the seller regrets and pulls out of the deal.

After four to eight weeks you sign the deed at the notary’s office and the remaining fee is paid in full. You’re now the official owner, and you will receive the keys to the property – ready to move in.

Here, there’s a big difference compared to Denmark in that the seller gets the full purchasing sum when you sign the deed with a notary before the deed is registered in the buyer’s name.

The attorney prepares the deed and is responsible for having examined everything and that the deed is registered. In this regard you can give the attorney authority to sign the deed at the notary’s office and authorise all documents and contracts so that you don’t have to travel to Spain, when the deed is to be signed.

You need a land certificate. All properties need to be registered in “Registro de Propiedad” (The property Register), where you can get all relevant information about the ownership, mortgage commitments etc.

It is only the person registered as the owner of the property who is allowed to sell it, and you need to be aware that sometimes the seller’s wife also needs to sign the deed, (no matter if the property is a ‘separate estate’).

We recommend that you get the realtor’s sales agreement with the owner. It might take a few days, but this is quite normal. You need to arm yourself with patience.

If you buy real estate while it is still in its project phase there are certain precautionary rules.

The payment is due in pre-arranged rates during the finalisation of the building project. According to the law, these developer- or promoter rates must be covered by a bank guarantee in case the entrepreneur goes bankrupt. The attorney should always demand copies of these and claim individual bank guarantees for all pre-payments in the name of the buyer.

It isn’t enough that a building permission is in place and that the architect has sent in a notification of completion. You shouldn’t take over a property until the local municipality has approved the project and a ”Primera Ocupación” permission to live on the property has been issued.

Even though many of the problems relating to illegally erected properties has now been weeded out, you still need to be conscious about the problem as it still occurs on occasion.

Finally, you need to make sure that property taxes and fees have been paid, so you don’t suddenly receive government payment demands.

In some cases too little inheritance tax or stamp duty has been paid at the time of the transfer of ownership. In Spain you need to pay a percentage of the inheritance fee and stamp duty according to a value set by the local authorities on the basis of the real estate valuation ”Valor Catastral”, which differs from municipality to municipality.

There might be latent tax demands when buying real estate and the expiration time is five years.