Elite Properties Spain always recommends that purchasers of property in Spain retain a qualified solicitor to represent them and qualified financial advisors to deal with tax issues.
Purchasing property in Spain is a relatively straightforward procedure. The property registry has the “last word” in property ownership, which is important to ensure that the seller owns the property free of liens and encumbrances. Most frequently, unless an immediate payment of the full purchase price is made, a private contract of purchase is drawn up wherein the details of the purchase are reflected – the legal description of the property, purchase price, form of payment, date of completion, date of possession, etc. Upon signing the private contract, a payment on account of the purchase price is always made, which can vary substantially according to the terms of the sale and the date of completion. A normal deposit for completion within 30 to 60 days would be 10% of the agreed purchase price.
New properties which are unfinished obviously are paid for over the construction period, and all payments on account before finishing must be guaranteed, according to the BUILDING ORDENANCE LAW (LOE) LAW 38/1999, by a bank or insurance company: if the property is not finished by a certain date, the purchaser has the right to reclaim the monies paid, plus legal interests. Additionally, this law obliges the property developer to arrange a TEN YEAR insurance policy with respect to any basic building defects with the purchasers as beneficiaries.
When the entire purchase price is paid for the property, the seller will issue the public deed of conveyance (“escritura”) to the purchaser, free of liens and encumbrances. This deed is issued before a Spanish notary, passed on to the tax office to be assessed for stamp duty if the property is a resale or second hand property, and then presented to the Property Registry for registration. A provisional registration in the registry is made immediately upon issuance of the deeds.
8% TRANSFER TAX (I.T.P.) payable by the buyer for the purchase of any real estate (villas, flats, land, commercial premises, garages), provided the vendor is not a developer or does not normally trade in the business of resale properties.
10% (7% VAT and 1% STAMP DUTY) for any VILLA or APARTMENT, or GARAGE that is annexed to an apartment, where the vendor is a developer, promoter or habitual trader in these generally new properties.
22% (21% VAT and 1% STAMP DUTY) for PARCELS OF LAND, COMMERCIAL PREMISES or COMMERCIAL GARAGE SPACES, where the vendor is a developer, promoter or habitual trader. This covers virtually all NEWLY URBANIZED LAND PARCELS and NEWLY BUILT COMMERCIAL PREMISES. This only covers resale properties when the vendor falls into one of the above categories.
Notary fees can cost up to approximately €1,750, although the cost increases according to the number of pages or complexity of the title deed (e.g. transcription of statutes, payment in stages, property partially finished, etc.). As an example, an apartment costing €300,000 will cost around €546 in notary fees, whilst a property costing €600,000 will cost around €678 in notary fees. Any higher than this amount, the fees go up marginally. The property registration fees also depend on the complexity of the transaction. For example, fees for an apartment costing €600,000 to be registered in the name of one person and purchased without a mortgage loan, will cost around €300. For an apartment with the same sales price to be registered in the name of 2 people and purchased with a mortgage loan, the cost is around €800.
This is an “added value” tax based upon the increase of the Town Hall index value of the land only, from the prior (vendor’s) purchase to the present sale. It is usually not a significant amount with respect to apartments or townhouses – less than €1,000 for the most part for an apartment or townhouse which last changed hands five or six years ago – but can be more in the case of villas with a large tract of land.
This tax corresponds, by its nature, to the vendor who is responsible for its payment, unless otherwise negotiated. As there are several variable factors used in calculating this tax, especially the length of time of ownership of the property, the amount payable can vary substantially and should be verified before proceeding with the purchase.
The total official costs involved in purchasing property should be less than 8% if it is a resale property, or less than 9% if VAT is paid on the purchase price, plus lawyer’s fees.
Local rates are payable annually, and are calculated from the rateable value (“valor cadastral”) of the land assigned by the Spanish Tax Office. The rateable value takes into account the value of the land plus the value of the building, according to type, location, and usage. Upon this value, each municipal Town Hall decides on the percentage to be charged with respect to local rates. In the case of Marbella, the formula applied is 0.9644% (for 2007) of the rateable value of the property, which is almost always far less than its true market value.
Examples: In 2006, a 2 bedroom apartment in the beachside complex of Marina Puente Romano, which is in the heart of the "Golden Mile", paid rates in the range of €800 to €1,000 approximately. A free standing, large beachside villa in the heart of the "Golden Mile" paid annual rates of approximately €2,800.
The rubbish collection rate is applied by the Town Hall according to the property and payable every 6 months. For an apartment in Marbella, rubbish collection is approximately €162 and, for a villa, approximately €242 per year. Water consumption is calculated by the water meter consumption in cubic meters and is payable every 3 months. Payment can be made directly at the Town Hall or by bank with direct debit instructions.
Generally speaking, the Community of Co-Proprietors, or Homeowners’ Association (“comunidad de copropietarios”), is a legal entity comprised exclusively of the owners of the apartments in a building, or villas on an estate. The purpose of the association is to own and maintain the common elements of the building or estate in question, and each homeowner is obliged to participate in the expenses of the upkeep of the community areas and services on a prorated basis with the other owners. Usually, a homeowner’s percentage of the costs is fixed by the size of the apartment, or plot, divided by the total area of all the apartments or plots.
A budget for the annual community expenses is presented at the annual general meeting of the association, and they or their authorized representatives must approve the budget by majority vote of those present at the meeting. Expenses can vary substantially according to the services provided, and normally include salary and social security of the hall porter, common garden maintenance, lift maintenance, repairs to common elements, rubbish collection, water for watering community gardens, electricity for lighting communal areas, insurance, security, and administration fees. The President of the association must, by law, own a property within the complex itself and is chosen by way of vote by the co-owners. The President has no remuneration for this role.
A typical 2 bedroom apartment in a building or area with a hall porter, swimming pool, and a small garden, could cost between €90 to €300 per month in community fees – but could go up to €600 or more per month in a high luxury building with a large community staff and many services.
In the case of an individual villa in an estate of villas, community fees are often less since the private gardens and exteriors of such properties are generally not maintained by the community, and the community fees are limited to road and roadside garden maintenance, basic common service maintenance, and security.
A standard insurance cost for a €300,000 apartment with contents valued at €48,000 would be €395 per year. One should note that in an apartment building, the Homeowners’ Association is required to insure the building for its reproduction cost. Therefore, the individual’s insurance policy for the apartment need not cover the entire value of the apartment, but only damages to the interior of the apartment, its contents, and third party liability. It is also advisable to insure your property yourself, in case the Association´s insurance is not as comprehensive as you would require. For a villa with a reproduction value of €500,000 with contents insured at €180,000, the annual insurance would be in the area of €1,580.
The upkeep of a private garden is essential to the maintenance of your property and its cost will, of course, depend on its size. As a rough guide, the hourly rate is about €16. A full-time gardener on salary would cost in the area of €1,100 per month, whilst a half-time salary would be in the area of €700. Apartments and townhouses have the communal garden areas tended by a contracted gardener and the cost is included in your community fees. A villa on a plot of 2,500m² might require a gardener a few hours a week. A large parcel of a full acre or more may require a half or full-time gardener. Social security is an additional cost to full time wages and runs in the area of 40% of the salary.
Cleaning service is generally available on a full-time salary or hourly basis. Full-time salaries range from €700 to €900 per month, plus approximately €140 per month for social security contributions. Part-time help is usually charged by the hour with rates varying from €9 to €12.
Electricity is billed twice monthly. Minimum rates are applicable whether you are in residence or not, and the minimum varies according to the amount of electricity your house could potentially use with all power and lights turned on. The minimum charge for an apartment might be between €24 and €36 per month. Charges for a villa are from about €60 to €90 per month, depending largely on the extent of the electrical installation. General usage is €0.08 per Kwh, plus tax. All rates are exclusive of taxes.
With all the sunshine in Marbella, you will nevertheless be using less lighting and heating than in a lot of other countries!
The telephone bill is also charged twice monthly. Standard rates vary according to the equipment installed, but can be in the region of €18.50 per month which includes a touch dial telephone. A direct dial 3 minute call during daytime business hours to any European Union country costs about €0.69 (excluding VAT) at the moment. Landline calls to mobile numbers are in the region of €0.16 per minute. There are many local and national telephone companies that offer substantial savings to those who wish to spend some time studying the market. ADSL broadband services are available virtually anywhere and ADSL "packages" cost approximately €39 per month (plus VAT), including all local and national calls to landlines.
Some of the main taxes for non-residents in Spain include the following:
A. Providing that a building plot is situated within a residential development (“urbanización”), or an area zoned within the Municipal Plan for such use, outline planning permission will already have been granted for the construction of a detached home. However, building regulations, which vary considerably, dictate the permissible size of the villa according to the size of the plot. Care should therefore be taken before proceeding with the land purchase that one will be allowed to construct one’s chosen home on it. Elite Properties Spain will be pleased to provide a list of bilingual architects and to arrange viewings of some of their previous work.
A. A building survey, as is common in the U.K. for example, is not necessary in Spain for mortgage purposes. It is nonetheless advisable when purchasing an older property. Common things to check for are the condition of the plumbing and electrical installations, waterproofing, roofing, and so on. These checks, as well as a full structural survey, can be carried out by a Spanish technical architect (“aparejador”) or indeed by a qualified British Chartered Surveyor. Any fees involved will have to be paid by the prospective purchaser.
A: Spanish banks are highly competitive when offering mortgages on both new properties and resale properties. It is now common practice for most Spanish banks to offer mortgages to non-residents, although some banks do offer a wider variety of financing packages than others. Common terms offered are mortgages from 5 to 15 years, often of up to 80% of the purchase price, at around 1 point over current EURIBOR rates. The applicant must of course qualify for the loan, especially from the standpoint of having sufficient income to afford the monthly payments, and the bank must appraise the property value. The appraised value, generally speaking, coincides with the market value of the property.
A: The seller always pays agency fees, unless you specifically settle on a different agreement with your agency. Although the seller pays the agency, the agent has an ethical obligation to see that the purchaser gets fair value for money, and at the end of the day, a good agent’s job is to bring the buyer and seller together in harmony. This highlights the importance of working with an established estate agency with a strong reputation. The agency also has an obligation to see that the title deed to the property is passed on free of all liens and encumbrances. Elite Properties Spain provides an exceptional after-sales “settling-in” service for its clients, totally free of charge, as part of its general company policy.
A: Frequently the administrator for the Homeowners’ Community will settle these bills. If not, it is common practice in Spain to issue standing instructions to your bank to pay them on your behalf.
A: A residential development or “urbanización” is a planned community which has met the standards of the various governmental agencies with respect of the use of the land (residential, commercial, sports area, green zones) and to providing a specific set of services and minimum level of quality in the construction of roads, sidewalks, drainage, sewage systems, electricity and water installations, and so on. Obtaining permission to develop land into a residential development can take a developer up to several years and several million euros of expense. The most obvious advantage to the owner of a property within a residential development is the fact that the land usage is strictly controlled. If one decides to build a house on a plot in a section of a development zoned exclusively for single-family dwellings, you are assured by law that neither an apartment block nor a rabbit farm can be located on the adjacent single-family plot!
There are several zoning classifications for rural land outside of residential developments. Marbella is in the process of updating its master plan, and great care should be exercised in purchasing land outside of a development: under most circumstances, one may not be able to build upon land which is not within recognized residential development.
A: European citizens from the E.U. can stay in Spain indefinitely. Visas are not required for some other countries, such as the United States, but are still required in other cases depending on your country of origin and length of stay. Any non-resident residing in Spain for 183 days or more per calendar year is considered by the Tax Office to be a resident for tax purposes.
A. There are several international schools in the region, including one in the Sotogrande area which provides weekly boarding facilities. Pupils are taught in English, and a choice of curriculum is offered between G.C.S.E.s and A-Levels, and the International Baccalaureate, the latter placing an emphasis on course work above exam results.
For further information, check out the below e-mail addresses:
Spanish state schools are based on the Baccalaureate system. Any pupil whose year’s work is considered to be inadequate is relegated to stay in the same class for a further year and repeat the curriculum. In general, very good results are achieved, with a high percentage of pupils going on to university. However, as all classes are naturally conducted in Spanish, the age at which a child can be expected to cope with a change of language and of curriculum should be taken into account. The younger the child, the easier they will pick up the language. Most under 12s can become fluent in Spanish in 3 or 4 months.
For an in-depth guide to schools in the Costa del Sol region, please consult the website:
A: Marbella has the newest, most modern and well-equipped regional hospital in Spain (“Hospital Costa del Sol”), in addition to a good, well-equipped clinic with a substantial staff of general practitioners and specialists.
Private medical insurance is available through various groups such as SANITAS. This could cost from €30 to €130 per person per month, depending on age and the general state of health. Spain's social security system now allows E.U. residents access to the health network via a special form (E-101). For residents who are self-employed, own a company, or are employees, your social security contributions automatically entitle access to the Spanish health network.
Elite Properties Spain considers the above information to be current and accurate at the time of writing, but it is nevertheless by its very nature abbreviated and intended to serve only as a guide and subject to errors or omissions.
Elite Properties Spain always recommends purchasers or sellers of property to consult qualified lawyers and tax advisors.