A quick guide on buying property in Spain for UK solicitors

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Do you have a client looking to buy property in Spain?

How can you help him/her from the UK?

 It is quite likely that you will have one or two clients looking for a property in Spain. The uncertainty of Brexit and the temporary weakness of the Sterling pound has not stop British buyers from their dream of buying a home in Sunny Spain. It is true that they are not buying as much as they did before the recession but they are still buying second homes and looking for a place to retire or a place to spend family holidays.

Very often, clients will contact their trusted advisors to see if they can give them some guidance or recommend a lawyer able to deal with the purchase of the property in Spain. Obviously, you cannot be expected to be versed on Spanish law and the normal thing is to recommend the client to look for a Spanish lawyer or to recommend one, if you have come across a firm in the past and you were happy with the service provided. Having said that, knowledge is never a burden and therefore see below a few tips on what should and what should not be done when buying property in Spain which will prove of help if you are approached by one of your clients asking for advice:

1) Help your client to make an accurate budget.

Apart from the price of the property your client should consider other costs involved in the transaction:

– Taxes, Notary and Land Registry: Approximately 10%-12%.

– Spanish Lawyer fees*

– Surveyor**

* althoughnot mandatory (because the Spanish Notary usually carries out the main checks on the title and charges), we would always recommend instructing a Spanish lawyer who can collaborate with you when your client is buying in Spain. He will carry on a full due diligence on the property and draft the necessary contract. The Notary Public will not do the above.

** we would recommend to have one when your client is buying a resale property in order to be 100% sure about what yourclient is going to buy.

2) Inform your client that he/she should save a 30%-40% deposit plus 10%-12% for the Notary, taxes and Land Registry fees.

Nowadays, most of Spanish banks are not offering mortgages which exceed 70% of the appraised value of the property. Your client will need to ensure that he/she has enough deposit to complete on the purchase, usually around 30%-40%.

3) Your client should have a clear idea of what he is planning to buy before committing to a purchase

Spain has different regions with big differences between them in terms of weather, lifestyle, tourism, etc and most importantly, in terms of price. We would recommend your clients to visit the place in winter so they can get an idea of the way of life outside the tourist season.

Once they decide where they want to buy, the second step is to consider the different types of properties they can buy, i.e. brand new, old property, off-plan property, urban or rustic land, and obtain legal advice to ensure they are fully advised on all aspects of being the ownerof a property in Spain.

4) Encourage your client to check different options of mortgages.

Make sure your client fully understands the conditions of the mortgage offer. We would recommend to have the draft mortgage deed reviewed by a Spanish lawyer in order to ensure that it does not contain abusive clauses. In our recent article about Spanish mortgages we talked about some abusive clauses that some Spanish lenders have been including in their mortgages in recent years and that should be avoided when getting a Spanish mortgage.

Look for the mortgage which is most appropriate for your client´s income and financials. There is a range of mortgages on offer and yourclient should pay special attention to the interest rate, repayment period, fees for setting up the mortgage as well as early repayment and cancellation fees.

 5) Advise your client to reserve the property and sign a purchase agreement or “contrato de arras”.

If yourclient finally finds “the” property, he/she will have to reserve it while you and your Spanish lawyer will be collaborating and dealing with all the checks that the transaction requires to ensure that they are buying safely. Your client will need to pay a reservation fee of around 3000 Euro which will take the property out of the market. Then, once all the checks have been done, and the documentation has been reviewed, he/she will be asked to pay a deposit of around 10% with the signing of the purchase agreement (contrato de arras) and the rest will be due on completion.

Signing an “arras” contract means that both parties have the right to withdraw:

If your client decides not to proceed with the transaction he/she will lose the deposit, but if it is the seller who withdraws, or if the property has been misrepresented, yourclient will be entitled to claim double of the deposit: his 10% plus another 10% compensation.

6) Consider engaging a surveyor.

Your client may consider that the property needs to be surveyed by a professional with appropriate experience and qualifications. That is very sensible thing to do, but your client will find that some Spanish estate agents will discourage this. If that is the case, the client needs to follow his/her own instincts and still instruct his/her own surveyor.

7) Check the annual expenses of owning a property in Spain.

Be certain of the likely annual expenses your client will incur, including service charges, property tax (IBI), non-residents income tax, wealth tax if applicable, electricity, water, gas, etc.

8) Instruct an independent Spanish lawyer to collaborate with you.

All of the above-mentioned advice can became a terrible bureaucratic fight if yourclient does not engage the expertise and help of an independent Spanish lawyer.

A Spanish lawyer will guide you or your client through the entire process, avoiding extra costs and, what is more important, ensuring that the property your client is going to buy has all it needs to be transferred into his/her name: no charges, no development plans affecting it, etc.

You can instruct a Spanish Lawyer based in Spain or in the UK. Please note that there are several UK law firms with an in house Spanish lawyer able to provide legal advice without your client having to go to Spain.

 9) Warn your client not to declare a lower value than the actual purchase price.

In the past it was quite common to declare a low value for the property in order to minimize the transfer tax payable by the buyer and the CGT payable by the seller. Nowadays, the Spanish treasury will prosecute anyone who declares a price lower than the one effectively paid. The wrongdoer will be fined and additional interest will be applied. On the other hand, when your client decides to sell the property, he/she will be liable to pay Spanish capital gains tax on any profit made and he/she will be liable for CGT on a much larger (but not real) profit.

 10) Recommend your client to make a Spanish Will.

We would recommend your clients to sign a Spanish Will when acquiring a property in Spain. This in order to avoid potential problems in the future for their relatives and beneficiaries. It is not compulsory but in our own experience, really advisable.

Claudia Font & Antonio Guillen

Spanish Desk

Gunnercooke LLP

www.gunnercooke.com

 

London   Manchester

First use license and habitation certificate. Tomatoe, tomato. Are they the same thing?

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There are two documents which are essential before moving into a house in Spain. They are called first use license (“licencia de primera ocupación”) and habitation certificate (“cédula de habitabilidad”). These two documents sometimes have their own validity and in other occasions complement each other. It is difficult to summarize the requirements for these two documents because each region has its own legislation and also because they are very similar.

The First use license aims to check whether a property has been built according to the technical design and to the building permit. Once granted, it confirms that the construction has been built in accordance to the licence granted and the designs submitted at the Town Hall planning office. This licence is therefore vital for new properties or for properties that have been totally converted or with relevant major works. The person obliged to request this document is the holder of the planning and construction permit, generally the owner or the property developer.   It is an essential document required to apply for the provision of utility services, such as electricity and water and some regions in Spain demand this document prior to selling or letting a property.

In the most extreme cases, the absence of the said license could even imply a cause for the termination of a rental contract.  The lack of a first use licence can also prove a problem for an Estate Agent as he could be held liable for not checking this point and he could lose the right to receive his commission.

On the other hand, the Habitation Certificate is a document that certifies the minimum safety, health and occupation levels in a property in order to be dwelled. Furthermore it controls the minimum living surface and equipment in the property.

In certain areas like Cataluña, this document is compulsory and a property cannot be sold or let without it. In other areas, the first occupation licence covers the functions of the habitation certificate and therefore there is no need to obtain both. Depending on the kind of property and the place it is located, the expiration time will be different and will range from 6 months to 15 years. These are the reasons why it is advisable to verify this point before signing any contract or committing to the purchase of a specific property.

Obtaining this document is not complicated. If the seller does not have the document you must ask the seller to supply it before completion. If this is not possible and you are prepared to take the risk of completing without the habitation certificate in place, you must sort it after completion. The best way to do it is by contacting an Architect and requesting him or her for a certificate which will have to be endorsed by the Professional College of Architects. The Architect will inspect the property and verify that the property meets the regulations. It may be the case that someone appointed by the Town Hall also inspects the property prior to issuing the certificate of habitation, although this is not necessarily the case.  Once you have the Architect’s certificate, you have to present it before the corresponding public administration, together with the documentation required. Then, eventually, a certificate of habitation will be issued.

As indicated, these are vital documents that need to be requested prior to buying a property in Spain. Each region has its own intricacies but in general terms most of the regions in Spain request the existence of a document certifying the habitability of a property. These could mean both the First use licence and the habitation certificate or just one of them. When in doubt, the best thing is to seek independent legal advice as the lack of such a document could imply that the property is illegal and non-habitable.

Can I buy my Spanish property in sterling?

 

 

 

 

 

This week a client who lives in the UK asked me if he can pay in sterling the purchase price of a house he is buying in Spain. The truth is that this is not an impediment. On the day of the signature of the purchase deed, the Notary will request evidence that the payment has been made i.e. a copy of the cheque. The purchase deed will also reflect the fact that the price has been paid in sterling and will show its equivalent amount in euros, which at the end of the day will be the one used for tax purposes and for the calculation of the transfer tax.

This is a scenario that is more and more often these days. Many Brits have bought properties in Spain and they are now willing to sell them. At the same time, other Brits who are currently cash privileged are still interested in buying in Spain and very often the transaction involves UK nationals on both sides. In this type of transactions, the parties might be interested in securing the deal in sterling in order to avoid currency fluctuations so this is something that I am seeing with enough frequency.

Food for thought if you are planning to buy in Spain and do not need a mortgage.

 

Photograph by Yusputra/dreamstime.com