The basics about buying in Spain

The purchase process

Reservation:  Once you have chosen a property and negotiated a price, it is wise to get the property off the market by signing a short reservation agreement, normally drawn up by your real estate agent.  You will also normally pay a small initial holding deposit (known as a “señal”).  This is normally around 3000 to 5000 Euros and is usually paid into your lawyer’s holding account, or the client account of the real estate agency.

Usually, the initial reservation agreement will have a validity period of between 2 and 4 weeks, after which you will sign a more formal Private Contract with the vendor.

The purpose of the reservation agreement is to give you time to appoint a lawyer, (not obligatory but often wise), to check out the property paperwork and ask any other questions (such as access rights over someone else’s land, building or renovation estimates, planning issues, etc), and to prepare the money.

Open a Spanish bank account – this is vital, as you will need that account to prove that the funds have come from your country into a Spanish account for the purpose of purchasing a property.

Get an NIE number – this is your official ID number in Spain.  You can get this at the local police station, but seek advice and assistance from your estate agent or lawyer, or a friend who has already done it, as otherwise what is a very simple task can become quite a nightmare.  You need this number for the purchase itself, when you sign at the notary, but not necessarily for the initial reservation.

Private Contract
The Private Contract is normally signed before the end of the validity of the initial reservation agreement.  When you sign the Private Contract, it should stipulate the total sales price agreed, all costs paid and to be paid, and by whom, the deadline for the purchase to take place (Completion), and any clauses that are deemed appropriate.  At the point of signing the Private Contract, it is normal to pay the vendors 10% of the total agreed price for the property directly into their account.  So the reservation fee can be forwarded to the vendors, and you make up the different with an additional transfer.

It is normally the case that the Private Contract is relatively binding for both parties by including a clause that stipulates that if the vendor pulls out, he or she pays back any monies paid to date, plus the same amount again, and if the purchaser pulls out, he or she loses the monies paid to the vendor to date.  This is known as “Arras” in Spanish.

Please note that all contracts in Spain should be in Spanish.  They can be in several languages, but need to also be in Spanish!

Completion
Completion takes place on the day both parties meet at a suitable Notary office to sign the new title deeds (Escritura).  At this point the balance of the money is paid over, usually in the form of a bankers draft drawn from the purchaser’s Spanish bank account and handed to the vendor in front of the Notary.  The deeds, prepared on the day by the administrative staff at the notary known as “oficiales”, will be translated verbally to you on the day, usually by your lawyer or estate agent, so you need a Spanish speaker if you don’t speak Spanish, who also has to sign the deeds as your official translator.  Once you have signed and handed over the bankers’ draft, then the property is yours!  Don’t forget to pick up the keys!

Please note that if you are based in Spain already and find your ideal property, and wish to go straight to completion, there is no obligation to sign a private contract.  As long as the paperwork has been checked and everything is clear and you are happy with everything, you can go from Reservation straight to Completion at the Notary office.  The notary are always happy to help check and explain the paperwork to you.

What is the Notary Office exactly?

The Notary is a lawyer with special qualifications able to legally witness an agreement or contract between two or more parties. It is typically the purchase/sale of a property, but can also be the signing of a mortgage with the bank, a will and testament, declarations of inheritance, updates of details on current deeds, or any type of contract, power of attorney, or other legally binding agreement.  It can be a statement that you wish to be legally recorded, for example, and so on.  There are usually one or more Notary offices in each town and they work for a fee charged on the day of signing.  The fee is based on a number of factors and includes the number of official pages your deeds takes up!  All advice and preparation work is normally included in that final fee, so you can always take paperwork on a property of interest to you directly to a notary office and ask what is missing, or required in addition, in order to be able to complete the purchase/sale.  The Notary is the one who decides ultimately what is required!  So they are a great service to use and can often save you extra legal expenses.  You can use any notary office you wish, they are not bound by geographical boundaries, within Andalusia.

Do I need to use a lawyer?

You are not legally required to use a lawyer, but you can employ the services of a local lawyer if you personally feel safer and happier using one.  Most local lawyers are  experienced and trustworthy, and they may speak your language.  We don’t recommend that you use a lawyer from outside the area.  If a case is a little more complicated than usual, a good lawyer can sort these matters out for you in advance.  If the case is straight-forward, you may prefer to go straight to the notary for advice, along with your agent, who can also help with after sales administration, and that way you save the lawyer’s fee.  It is up to you!  The after sales admin is the real work behind a sale!  A lawyer’s services will include getting you registered with the Spanish tax authorities, paying the 7% sales tax for you, paying off any withheld expenses from the vendors, getting the property registered in your name at the Property Registry, and changing any utility bills into your name.  Once again, a good agent should be able to do this for you if you should decide not to use a lawyer, but the notary offices also offer this service, normally via third party administration offices (‘gestorías’) for a small fee.

Do the estate agencies charge us a fee to show us around?
No, the agencies make their money by way of being paid a commission from the vendors when a property sells.  Purchasers do not normally have to pay anything to an agent, unless an agreement is made for the agent to help you with extra administration work.  If they take you around the area covering great distances in their car, a contribution towards petrol is always welcome!

Purchase Costs
Allow around 10% of the total agreed sales price, on top, to cover these costs.  These normally consist of:

7% purchase tax (percentage of the amount declared on the deeds on the day of completion)

Notary office fee (varies depending on each individual case, but normally, allow up to 900 Euros)

Registration fee (again, varies hugely depending on the work involved and property purchased – again, on average, allow 500 Euros)

Lawyer’s fee (often 1% or 1.5% of the total purchase price agreed) if you choose to use a lawyer

What is a Nota Simple?
If the property you are buying is registered on the Property Registry (Registro de la Propiedad), you can go to the local registry office and request a Nota Simple for that property.  You will need to know the Finca number (estate number) which is written on any older Nota Simple, or mentioned in the deeds, if the property is registered.  It may take 24 hours+,  so you may have to go back the next day and it usually costs a few Euros to order one.  You can also order one online.

The Nota Simple is a short document that will summarise the present status of the property on the Registry: who owns it, who are the immediate neighbours, the size of the property and what it consists of, and if there are any mortgages or loans taken out against it – basically, whatever information was on the last set of deeds that was passed through to the Registry, plus any debts, fines, etc..  Note any loan or mortgage against a property MUST be registered, so these debts will always show up on the Nota Simple.  It will also tell you how long the property has been registered, and this is important if you are looking to take out a mortgage against it.  A property needs to be registered for a minimum of 2 years before most Spanish banks will lend you money against it.

Please note that it is not obligatory for a property to be regsitered on the Property Registry.

What if a property doesn’t have any deeds?

Lots of older Spanish properties don’t have deeds, as in the past, few folk bothered to create them (it costs money, you see!)  This is not necessarily an end-of-the-line situation.  If the property has been around for a long time (currently the law states a minimum of 6 years) and this can be proved, (for example through aerial photograph records, also through regular payment of the council tax or IBI, or via the Castastro Registry which is the council tax registry)  you can get new deeds created.

What if a property isn’t on the Property Registry?

The same applies if the property is not on the Property Registry – it doesn’t mean it can’t be added on!  It is usually a simple process to register a property for the first time, but make sure your notary has checked out the documentation first, to ensure it is a trouble-free process.  However, if a property is not registered, or was registered under two years ago, you will not be able to take out a mortgage against it with a Spanish bank, so this is very important to know if you need bank funding to buy your property.  This is because they need to be sure that the initial two year period has gone by since registering for the first time, during which time, if there are any previously unknown “owners” of the property, they are still able to come forward to dispute their right of ownership or part ownership (only if they can 100% prove their rights as owners, of course).

Can I get a mortgage on my future Spanish property?

If the property you are considering has been registered on the Property Registry (ie, it has a Nota Simple showing it registered) for more than two years, in theory you can borrow money against it.  However, for most properties in the countryside, on ‘rustic’ land, what the bank lends you may be limited.  The banks will typically not lend much more than 60% of the value given by an indepedent Valuation firm that the bank will commission (and charge you for) to carry out the valuation.  The valuations are coming in often WELL below the actual market value, at the moment, so generally speaking, you would probably not be offered much more than one third of the sales price in terms of a bank mortgage.  So work out what you can realistically afford first, and whether you can borrow money on a property in your own country, as a viable alternative option.

This does not apply to properties on ‘urban’ land, such as in towns and villages or on housing developments registered as urban (residential), where usually the percentage of the valuation amount offered is higher.

What is a DAFO or AFO?

The DAFO is a new certificate that for most country houses can be obtained by the town hall to ‘regularise’ country houses that don’t have all the correct paperwork. It is not obligatory, only if the town hall requests you to obtain it.  However it can also be very useful if the property to be regularised has an issue which can be SOLVED by having a DAFO, such as if the property is not connected to the electricity or mains water at present, or it is an old house which needs to be segregated from another property on the same land, or if the current categorisation of your property is not Residential.

It was introduced by the Andalusian Government with the objective of offering owners the chance to obtain a certificate of acceptance of their property.  A fully legal property must have three documents:

1. Full planning permission, from the town hall
2. End of works certificate from the architect to show the house has been completed and is exactly what is on the planning permission
3. Licence of First Occupation, (LFO) issued by the town hall, after seeing 1. and 2. above.

Many country houses (in fact, the vast majority) don’t have some or all of this paperwork, due to the fact that those documents didn’t exist at the time they were built, and so in an attempt to offer an ‘equivalent’, and ‘regularise’ those houses, the DAFO was introduced.  If a country house has been in existence for 6 years or longer the owners can OPT to request a DAFO certificate which is the nearest equivalent of the LFO.  Houses built before 1975 and not altered or added to since then, do not need a DAFO unless it is for a very specific reason, such as obtaining town hall water or an electrics metre.

Bear in mind that the vast majority of houses in the countryside here do not yet have this certificate because it is not always simple (or economical) to obtain it. If it were, everyone would have one!  It is NOT required to purchase a house or register it on the Property Registry and it should ONLY be requested if every piece of construction on site (including walls and patios) are over 6 years old or have a full building licence. If that is not the case, then don’t request it until those parts of the building are 6 years old, or unless you are willing to remove them.

In protected areas, and within certain municipalities, it is often not possible to obtain.

Should I only be looking for properties with a DAFO or AFO?

Not in our opinion, otherwise at this moment in time you are limiting your search hugely! But for each case, seek sensible advice.  It is arguable that in the future, all country houses in this situation will have one, so you might wish to get it done now, or negotiate with the vendors on this point.  But in practice we don’t know what the future situation might bring, and the fact remains that the costs of obtaining this certificate are often prohibitive to the vendors.

Some lawyers insist on obtaining the DAFO in advance, but this is not always possible, as town halls can take months and even years in some cases to issue it.  It might be adviseable, instead, to negotiate to withhold some or all of the funds required to obtain the DAFO from the vendors, or negotiate the costs within the price and request it when the time is right, be it immediately or in the future. A simple telephone call to the town hall often clarifies whether a property should request the DAFO or not.

DAFO = Declaración de Asimilado Fuera de Ordenación (Declaration of Acceptance of a property that does not match the current planning laws/ programme).

If you have any general questions about buying a property in Spain, please email us.  However, we are not legal advisors:  FOR ALL LEGAL ADVICE, OR IF YOU ARE IN DOUBT, ALWAYS SEEK THAT OF A LOCAL LAWYER OR THE LOCAL NOTARY OFFICE WILL HELP YOU.

How do I choose a lawyer?

Our advice is to choose a good local lawyer, with a good reputation, who speaks your language or has access to someone who speaks it.  A local lawyer knows the right people in the local town halls, the local registry offices, local architects and topographers, etc.  They also know local planning requirements and restrictions for the local areas.  A GOOD LAWYER SHOULD BE ABLE TO IDENTIFY PROBLEMS AND OFFER SOLUTIONS, rather than identifying a problem and advising you not to buy without investigating further.  Most situations (not all!) are solvable!