The Spanish legal system guarantees the legal security of property owners. Several actions have to be taken to inscribe the purchase of a property in the Land Registry, thus guaranteeing the right over the property.
The are three phases:
In the case the buyer is a foreigner non resident in Spain, a resident card must be issued, even if their residence is in a European Union (EU) country, and he must be registered in the Spanish Treasury, paying taxes in Spain as a resident. In addition, he must have a passport in force when signing the deeds and the Foreigner Identification Number (NIE), document that has to be applied for at the local Police Station of the area in which the property is situated.
The NIE is an administrative control number issued by the Home Office, essential to pay the taxes inherent to the purchase of the property. The NIE has to be applied for directly by the interested person, or by a representative specially authorized through a power of attorney granted abroad, as the ones granted in Spain are not admitted to apply for the NIE in the name of the interested person. As well as the specific form, the following documents should be presented to apply for the NIE; the original and a copy of the power of attorney if it is applied for through a representative, the original and a copy of the passport (being valid either a consular or a notary copy) and a copy of the document that proofs why the person interested is applying for a NIE, which in this case would be the private purchase contract, however, if the person is from the EU there is no need to provide the copy of the contract.
If the buyer is a foreign company, a CIF (company registration number) should be provided to purchase a property, with no significant differences in respect to a single person buying a property. The most significant one will be the possibility to decide regarding the application of VAT when the company sells the property owned, if both parts agree and it is of interest to both, for which each case should be studied separately.
Before signing any documents that may link us to the property, we have to assure there are no pending charges, for which we should request a certificate from the Land Registry (Nota Simple Informativa) where the property is registered, providing Volume, Book, Sheet and number of the plot. If the property is of new construction and the contract is signed before the individualization of the different apartments, you will only be able to request the information of the plot where the promotion is being built, to know of any existing charges that the apartments or plots could inherit in the future.
It is advisable to check if the property is subjected to the payment of community fees, if there are any due and have been paid (generally this is not the case in properties of new promotion), as well as the corresponding payments to the Town Hall, to assure there are no debts in the Property Tax, Rubbish Collection Rates or any other rate or tax set by the Town Council.
The corresponding procedures should be done to obtain mortgages or other credits, if needed to finance the purchase of a property.
It is necessary to sign, prior to the title deed, a contract of sale and purchase, of call option or of deposit, where the price is established, the property bought is settled and the conditions (deadline for title deeds, distribution of expenses,…), clearly stating if VAT has to be added to the price, as in the case of newly built properties, and the applicable rate according to the type of the property and its characteristics.
This phase consists in signing the title deed before a Notary, allowing us to register the property in our name. The stated document has to include the conditions agreed for the sale and the following documentation must be presented to attach to the title deed:
Proof of the payments made before the signing of the deeds, to certify its real existence, legal obligation set to avoid money laundering. Written proof of the means used for the payments made when the deeds are signed (cheques, bills of exchange, promissory notes, bank transfers, mortgages, …). In the case of being a non-resident foreigner, including an EU citizen, proof of the origin of the total funds used in the purchase should be presented, both in payments prior to the signing and when the deeds are signed. The bank that has received the funds must certify its origin from a non resident account, to whom they have been credited to and the property involved, identifying it (certificate of investment). The vendor must provide the last receipt of the property tax payment (IBI), with an expired paying date, clearly showing the property reference at the Land Registry.
Independently from the fiscal obligations of the vendor, who has to pay the Capital Gains Tax (Plusvalía), it is usually the buyer who runs with the legal expenses involved in the property purchase. However, both parties can previously agree a different distribution of the charges generated till the moment the purchase is registered in the Land Registry.
Nevertheless, the procedures followed after the signing of the title deeds are:
Withdrawal of the title deed from the Notary office. The notary expenses of the purchase procedure usually represent a 0,25 % of the sale price (mortgage aside), however, they can vary depending on the number of pages of the deed, the number of sellers and buyers and on the number of properties involved. Tax settlement is required in a maximum of 30 days from the date of the signing of the title deed, made payable in the Settlement Office (Oficina Liquidadora) of the Local Government (Junta de Andalucía) situated next to the Land Registry Office where the property is located, having to pay: a 1% of the purchase price in properties with added VAT (AJD); a 8% of the price in properties with no added VAT (ITP); Presentation and registration of deeds in the Land Registry Office where the property is located. The registry expenses are approximately a 65 % of the notary expenses.