Topical Content Articles - buying overseas property Return to Main Planning Guide I topical content
Estate Agents - Another source of advice is the estate agents. Use established companies and beware of anyone who gives you the hard sell. Make sure you have a good lawyer with an excellent command of English and the native tongue to deal with the endless stream of rules and regulations. For instance did you know that if you're buying in Spain you'll need to make out a will in Spanish before buying, or that you can inherit debts from a previous vendor?
Finances - Start a direct debit from a native bank account to pay for those bills. Be careful not to miss payments and read those red letters. Foreign banks are not lenient with those who don't pay up in time. If you're considering renting out the property when it's empty, bear in mind that advertising here for what is abroad, could result in tax demands from both the English and foreign authorities.
And remember - Choose your location carefully - try a holiday first before committing. Get a good lawyer - fluent in English and the native tongue. Don't act on a whim - do plenty of homework Speak to those who've been there and done it. Be well prepared with your finances. Taxes are high when buying. Make the usual enquiries to financial advisors, banks and building societies.
Introduction - Buying property in Spain is now more popular than ever, with increasing numbers of people following their dream in purchasing a holiday home, buying property to rent out or moving lock, stock to the sun. The British love the pleasant, healthy climate and in recent years the Spanish local authorities have made great efforts to increase the number of foreign tourists and residents. Now is a good time to buy property in Spain as European interest rates are low and there is a wide selection of property options available, from developed plots, farmhouses and village locations, through to villas, townhouses and new apartment developments. Buying a property abroad is an exciting experience. However, you must go looking for your home with an open mind. You'll soon realise that it is virtually impossible to find exactly what you want, so you may need to compromise on some issues. Using qualified professionals will protect your interests, making the purchase of your home in Spain a risk free and stress free experience.
Buying Checklist -
1. Settle on a region - Spain is a big place. Consider the location first and foremost. Decide on a particular town, village, development or hillside where you'll want to spend a lot of your time, or even live permanently. This involves a whole series of individual choices. Research the area to find out what it is like in different seasons, what facilitates are available and the travel times to different places. And ask yourself, would you be happy living there? Look at estate agents in the region and find out the prices that you would expect to pay.
2. Think about the kind of property you are looking for - The area, size, number of rooms. But keep an open mind. It could be worth looking at different types of properties in different residential areas. By looking at a variety of homes you'll build up your knowledge of the present market values in the area you are looking.
3. Speak to estate agents - Only negotiate with those that are officially registered and hold a licence. Make sure you feel comfortable with the agent and start looking at as many properties as you can. What you'll need the house for will change your considerations. If you're moving to Spain you may want somewhere quieter, but if you plan to rent out the house you may want somewhere more commercial etc. A good agent will help you through the whole purchasing procedure. Remember, if you feel the agent isn't right, look for an alternative who will give you the service you expect.
4. Research all legal issues and costs involved. Find a Solicitor (abogado) to advise and assist you - Before you have decided on a property in Spain it is important to be fully aware of the legal process and costs involved in your property purchase. Obtain professional. advice and check your finances take account of these additional costs . Whatever housing option you choose, your experienced solicitor should anticipate all contingencies.
5. Organise your administration - There are administrational factors that need to be considered prior to your house purchase.
6. Making an offer - Make your offer in writing if possible (of course, subject to contract), and include not only the price, but also the amount of deposit, when you are prepared to pay it, when you are prepared to complete, what you consider to be included in the price (for example furniture and fittings if applicable) and, an often neglected point, that all machinery equipment and installations should be in normal working order.
7. When an offer is accepted - The solicitor takes the legal responsibility for checking the land registry and if all is well will then prepare a private contract which will bind both parties to the deal (you may be asked to lodge a deposit on the property, to take the property off the market). The solicitor will next prepare the public deeds (Escritura de Compraventa) for signature in front of a Spanish Notary. When the balance of the purchase price is paid and vacant possession of the unencumbered property is granted, the sale is completed.
8. Immediately after completion - The notary will fax details of the title deed to the local land register to inform them of the identity of the new owner. This will prevent the property from being sold twice. The notary and the land register act together to protect and guarantee your interests. Your solicitor can also arrange for the transfer to your name of utilities and services such as water and electricity and organise their payment through a local bank.
Housing Options - Buying off-plan/new build - These properties have yet to be built. Buyers purchase on the basis of only seeing a show home or development plan. Advantages - you can choose the perfect location and pick from a number of styles and designs (both exterior and interior) to construct the villa/house that you would like to live in. It's a more affordable option as payments for new builds are made in installments, with final payment after the finished building is delivered. Disadvantages - because payments are in installments a substantial initial deposit is required. This option can also take some time as you wait for the house to be completed. Check future plans for the area. Remember, further builds may ruin the views you have purchased.
Resale Properties - These are older houses that are up for sale. Advantages - you actually see the finished product. The moving in process could be as easy as buying furniture and arriving with your luggage. A significant number of resale properties are sold with their furniture so it could be even easier. Disadvantages - you may have to compromise in other areas. If the property requires a lot of work consider the maintenance or replacement costs. Call local handymen, local English papers in the Spanish region should have adverts. Plan realistically the cost of 'doing up' a whole property.
Urbanizaciones - Simply means housing estates. Beach-frontage for urbanizaciones is now at a premium. If you decide to forgo a beach frontage, you should expect a lot more inside and outside space for the same money. Advantages - convenience, both in the process of house purchasing and responsibilities of property maintenance. Facilities, ready-made social contacts, greater security, lower taxes and the possibility of owning a home in a location where fully detached properties are hugely expensive. Disadvantages - high community charges, inflexible and restrictive community rules, difficult neighbours, lack of space and privacy and lack of control over the future of the development.
Villas - Detached, purpose-built holiday villas usually found on the Costas. You'll pay more for a detached villa than for a house of equivalent size and comfort on an urbanizacion.
Apartments - Usually built as holiday homes on the Costas. Advantages - these are usually the cheapest places to buy on the coast. Disadvantages - offer limited comfort plus the flats are often so reasonably priced because they're in the middle of resort towns where noise could be a problem.
Town and village houses - Small inland towns and villages have a lot of properties but limited outside space as groups of properties tend to be clustered together. Advantages - the size of these properties can be quite deceptive and tend to follow the traditional Spanish decoration. Disadvantages - older houses may require checking and new work with regard to wiring and plumbing.
Fincas - A plot of land or an estate outside of or in-between towns and villages. Properties advertised as fincas can run from tumbledown farmhouses to lavish modern villas. Advantages - They are often on their own land in the countryside. Fincas generally come with a substantial amount of land, which may include olive groves and fruit orchards. Disadvantages - you won't be on the coast front, and to find cheap land or run down properties you'll probably have to look further inland.
Legal Issues - The solicitor will take care and assist you in all the different steps involved in the transaction. There are many excellent English-speaking solicitors in Spain. Choosing the right solicitor is your guarantee that Spanish legal requirements are met, the property is registered in the vendor's name and that it is free of any mortgages, charges, encumbrances, debts or other liabilities. Clear everything with your solicitor. Do not sign any contract or agreements with an agent, get them sent to your solicitor. They will negotiate and discuss the purchase terms with the seller's solicitor. The terms should not be limited solely to price but should cover in detail all your requirements like the completion date, the form of payment, etc.
Additional Fees - Typically around 10% EITHER - I.V.A. (VAT) on new construction - 7% of the contract price (16% on land) OR - Transfer Tax (Stamp Duty) on resales - 7% of the declared value PLUS - Legal Fees - 1% approximately, Notary and Land Registry Fees - 1% approximately, Title Deed Tax - 0.5% of the declared value, Plus Valia tax on any increase in land value - Varies, and may not even apply.
Location Checklist - Do you prefer the town or country? Do you want to be inland or on the coast? Do you want to be isolated or in the thick of it? (Most people prefer to be within about an hour's travel time of a town) How much outside space do you want? Private house or urbanisation? How close do you want to be to your neighbours? How close do you want to be to shops, bars and restaurants? Where's the nearest public transport, how often does it run, what time does it end? How far is the beach? How far is it to sports facilities, golf, tennis, swimming etc? How good are the local health & social services? Arts and entertainment, what's available in the area? Neighbours, what are they like and how much do you want to see them?
The Estate Agent - Once you have chosen the right estate agent with the necessary experience and knowledge of the property market, they will help you find a suitable property. The agent will advise as to the best areas to invest in, comparing prices and qualities. You should ask for details of the out-goings payable every year to maintain the property: Annual Real Estate Tax (1131), Community fees, Charges for rubbish collection, Water rates, Electricity charges, Property Income and Wealth Tax.
Making an Offer - Consult your solicitor, if they are happy, get your agents help and you can make an offer, confirm the details in writing, covering all the following points: The price, Declared price on the escritura (title deeds), Payment method and currency , Fixtures and fittings, Furniture (with inventory), Who pays which taxes, This way you only have to negotiate once and there should be no hold ups. The skill of the agent comes into play carefully bringing the vendor and buyer into an agreement. Having funds available at this time will convince the vendor you are serious and not just fishing.
Administration before buying - Before you step onto the property ladder in Spain you'll need to arrange the following:
NIE number (Numero de Identificacion de Extranjeros) - This is the fiscal identity number and is essential to have for any financial dealings you may have in Spain. This can take a few weeks to obtain, so plan ahead. It involves filling in a form with your solicitor and you also need to supply a colour 'passport' photo, a photocopy of your passport and your passport. The solicitor will then obtain your NIE number from the local police station.
Banks - You need to set up a bank account if you want your home running costs dealt with through direct debit. Choose your Spanish bank carefully as running costs vary considerably between banks. A name you recognise from your high street will probably have no relationship with a bank with the same name in the UK. Find out from the UK bank if they have a relationship with any Spanish banks.
Becoming a Resident - If you wish to spend more than six months in Spain you need to apply for a Residencia - to become a Resident. Being a resident does not restrict movements in any way and it has many advantages i.e. lower taxes. If you don't become a Resident, you must appoint a fiscal representative.
A Spanish Will - Property in Spain is subject to Spanish laws, so it is strongly advised that you make a Spanish will, which costs approximately 200 euro. Your solicitor should be able to advice you on this point.
Finance - You can choose to apply for a mortgage in Spain or from the UK. Mortgage rates in Spain tend to be lower than those in the UK. You know the price of the property in Euros but you will not know the actual cost until you buy all of the currency to pay for it. This means that the property could either cost you more than you had planned (if the Euro strengthens) or the property could become cheaper (if Sterling strengthens). There are generally two levels of mortgage offered, one for residents and one for non-residents. For non-residents the mortgage offered is generally around 60% of the declared value, for residents it is usually around 80% of the declared value of the property. Applying for a mortgage in Spain is a straightforward process, as in the UK. You will need to prove that you have an income or sufficient funds to pay the mortgage. The level of mortgage offered is directly dependent on your financial status and also the declared value of the property you wish to purchase. A number of documents must be furnished to the Spanish bank in order to accommodate a smooth transaction. Please note that originals of everything will need to be shown and copies will be taken at the bank.
Passports, driving licenses
If employed: last three months payslips, latest P60's.
If self employed: last three years audited accounts, tax returns and accountants reference.
Fiscal Representative - It is highly advisable for any person who has a property in Spain but does not live there all the time to nominate a "fiscal representative". This is a person to whom the tax authorities can send all correspondence relating to your affairs in Spain, secure in the knowledge that it will arrive. The fiscal representative must be resident in Spain, but it is for you to choose whom to appoint. It can either be a friend, a neighbour, a lawyer, or your tax adviser.
Gestor - For facility management you can appoint a local 'Gestor'. This person is like the official form filler who does the work for quite reasonable charges. If you decide to live or work in Spain your legal representative or Gestor can assist you with "residencias", work permits, licences and permits in connection with the opening of new businesses. They will also advise on importing cars, furniture and electrical goods, and pets into Spain, obtaining payment of your pension in Spain, national insurance and other related matters.
Living Costs - When living in Spain, you'll need to take the following expenses into consideration:-
Urbanizacion and Community Fees: Controlled by the committee of owners and covering the running and maintenance costs of shared facilities which can include private roads, drains, lighting, private water supplies, gardens, swimming pools etc. These costs vary considerably.
Local Rates - Patrimonia: All non-residents have to pay wealth tax, 'Patrimonia', based on the amount on the Escritura Publica or the Valor Catastral, which ever is the highest value. Vary. 0.2% is typical.
Property Tax - The local town hall charge IBI on owned Property (tax Impuesto sobre Bienes Inmuebles), which is an annual real estate tax. This local tax varies and is based on the Catastral value of the property.
Insurances - Fire insurance is compulsory by law when taking out a mortgage. Comprehensive household insurance is available to protect your home and contents. Life insurance can be taken out to guarantee payment of the loan in the case of death. 0.5% to 1% of value.
Water and Electricity - Utilities have a standing charge and the charges for consumption are in addition to this. The costs are similar to the UK and Ireland.
Telephone - The standard charge for a telephone line installation from Telephonica is around 180 Euros. The line rental and call charges are then payable every two months.
Tax on Rental Income - Britain and Ireland have a double taxation treaty with Spain. Tax is paid on the declared income from the property and your rental income must also be declared to the inspector of taxes in Britain or Ireland.
Fiscal Representative - (Gestor) to manage tax returns etc as a non-resident in Spain (approx. 60 Euro)
Basura - In some areas you will have to pay the Basura (for rubbish disposal) separately, in other areas it is included in the IBI.
Children's Education - If you plan to move the whole family abroad, your children's education is highest priority. There are a variety of options to consider, as outlined below.
International Schools - All of these establishments offer tuition in English. They tend to be the most popular option, but all vary so it is best to research the different possibilities. IGCSEs can be undertaken at most of the schools, while the Spanish LOGSE system is also a popular choice. International schools offer your child the opportunity for a wider education in the company of pupils from varied backgrounds and cultures. Most international schools also pride themselves on maintaining small classes, which allow for a greater degree of personalised tuition.
State Schools - More and more ex-pats are deciding to integrate their children into the state schools. To do this, it is necessary to possess the relevant documentation for enrolment. Ideally this process should be undertaken before moving to Spain, because until it is completed no school will accept your child. This documentation process can be costly and can take time. As in British state schools, the catchment area is all-important, so having decided on your chosen school it is essential to ensure that your house (whether purchased or rented) is located in the correct area.
Private Schools - Spanish private schools are becoming increasingly popular. The private sector offers Spanish education in an environment with a lower student/teacher ratio than provided by a state school.
Enrolment - Most schools prefer to interview prospective pupils, with exams being set in some cases to ascertain the level of Spanish attained. The official enrolment procedure requires that parents provide their local Town Hall with the following documentation: The child's birth certificate or passport with an official Spanish translation. Proof of immunisation. Proof of residence in the shape of an electricity or phone bill or a lease agreement or proof of ownership. Proof of convalidation. State education is free of charge, but parents are expected to purchase books.
Qualifications - The Spanish system of education is divided into three stages: ESO (Compulsory Secondary Education), BUP (the equivalent of British GCSEs) and COU (the Spanish version of the A level course). In addition, university applicants are expected to complete the Selectividad, an entrance exam. English parents can access work/books via the internet to supplement their child's education.
Useful Contacts - Listings of schools in different areas - www.nabss.org Spanish Education - Tel 0207 727 2462
Pets Abroad - Pets can travel with you to Spain under the new Pet Travel Scheme. A number of countries in Europe have the same guidelines for cats and dogs. Since the start of the scheme, over 17,000 cats and dogs travelled to and from Britain. Spain does not have a quarantine requirement when you import your pet. However, make sure you check with the authorities that you have the proper papers for the other countries that you pass through on your journey to Spain. If your present country has a quarantine requirement, you should be aware that when you leave Spain, even for a couple of hours, your home country will put your pet in quarantine on return. As there are many diseases common to Spanish pets that can pose a risk to your pet, you may want to consult a vet in Spain to see if additional inoculations are required. Your pet will have no natural immunity from diseases not found in Britain. The vet will also be able to advise about other precautions. Pet passports are required for Spain, France and Portugal.
Before travelling to Spain, pets have to be: Identifiable - All dogs need to be registered and either tattooed in the ear or have a chip inserted under the skin. This is for identification and makes it much easier for your dog to be returned to you if it is lost. There is a fine if you fail to register your dog. Vaccinated against rabies. Pets need to have a rabies shot before entering Spain, unless your country is exempt, such as Britain. The shot should be given no less than one month and no longer than one year before arrival in Spain. Given a blood test to make sure the vaccine has provided a sufficient level of protection against rabies. Issued with a PETS official Export Health Certificate from a government authorised vet to show the pet has been treated against ticks and tapeworm (this needs to be done 24-48 hours beforehand). Without one, the pet will be refused access to Spain. If you are returning back to Britain with your pet you'll need to take them to a local vet be checked over to ensure they are free of tapeworms, fleas and ticks. Some countries (not including Spain) also require a Private Vet Certificate that notes the pet's name, sex, age, breeding and markings. This also states that the animal showed no clinical signs of infectious or contagious disease and is fit to travel.
Properties: some developments near golf courses, even freehold properties, have restrictions on keeping pets (golfers sometimes complain that barking dogs put them off their strokes). Remember that there are different rules for each breed of dog and country, so always check first.
Useful Contacts: Pets Helpline: Tel 0870 241 1710
Spanish Embassy: Tel 0207 235 5005 for a list of approved local vets
Spanish Glossary - If you're thinking of buying a property in Spain it's worthwhile familiarising yourself with the most commonly used words.
Abagado - Legally qualified person i.e. a solicitor, who acts on behalf of the purchaser in the purchase of a property. The standard solicitor's fee for the purchase of a property is between 1% and 1.5% of the purchase price plus IVA.
Capital Gains Tax - A tax paid on the gain made on the property when it is sold.
Copia Simple - A copy of the title deeds (see Escritura).
Deposit - Usually approx £2,000 and your official confirmation that you intend to proceed with the purchase of that property.
Escritura - The title deeds.
Fees - Apart from the actual cost of a property, you will need to allow approximately 10% of the purchase price to cover the various fees and costs of acquiring a property. The 10% will cover Abagado [Solicitor's] fees, Translation fees, Land Registry costs, Notary fees, Stamp Duty and IVA [VAT].
Gestor - A licensed conveyancer.
Hacienda - The Spanish tax authorities and equivalent to our Inland Revenue.
IVA - The Spanish equivalent to VAT (Value Added Tax).
Land Registry - The place where all Escrituras (Title Deeds) are registered and where title and any charges against a property are checked. Registration fees to inscribe the new deed into your name should not exceed 1% of the registered value.
Main Contract - A contract with conditions (such as the payment structure at each stage of construction, see stage payments) attached to the sale of a property.
Notary (Notaria) - Public official appointed by the Spanish government to witness the signing of all legal public documents. They put on the public record the fact that the title deed recording the sale/purchase has been signed in their presence and understood by the parties concerned. When the Escritura is signed in front of the notary either the purchase price is handed over to the person selling the house or the seller confirms that the money has already been handed over. The original signed document is retained by the notary who will apply for a formal change in the land registry.
Numero de Identificacion Fiscal (NIE) - Foreigner's Identification Number. All non-residents require a NIE and the solicitor acting on your behalf will obtain one for you.
Option or Reservation Contract - A document reserving a property and acting as a signed receipt for any monies paid (see Deposit) with respect to that contract. Normally valid for 30 days to give lawyers time to carry out the necessary searches
Plus Valia - A local tax, usually paid by the vendor, calculated as a percentage of the difference in the increased (rateable) value of a property since it was last sold.
Purchase Currency - Due to fluctuating currency rates the purchasing currency is almost always Euro's. Whilst UK banks will assist you in buying Euros and arranging the transfer of funds to a Spanish Bank, a number of specialist Foreign Exchange companies offer better exchange rates. With no fees or commission to pay, plus limited free transfer of funds, your property purchase can become less expensive.
Stamp Duty - The current rate is 1% (December 2002)
Transfer Tax - (Impuesto de Transmisiones Patrimoniales). A 7% tax payable on resale properties.
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