By Laura Kemp • Updated: 22 Nov 2022 • 13:01
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Particularly since lockdown confined people to their homes, many people have had the same idea, wanting to live somewhere they love if it’s where they’re going to spend most of their time. Combine this with rising inflation rates, and Spain’s real estate market is only set to become even more expensive, making now the best time to buy a property there before they supersede your housing budget!
From dealing with legal issues to ensuring there’s no miscommunication with translating, making sure that you find the right property for you from reputable sellers, and buying in your desired timeframe, an experienced independent lawyer and international mortgage broker who specialises in Spanish land law (urbanismo) is the best way to ensure you end up with the perfect property in Spain.
An independent lawyer will work on your behalf only, rather than considering the interests of the agent or developer as well. As the Spanish property conveyancing system is different to the UK system, it’s important to ensure that your chosen lawyer is also qualified and has experience in Spain.
The UK Government advise employing caution if an estate agent, promoter or lawyer suggests that you cut corners to save money or time in the buying process.
As the property buyer, the notary you use is down to your discretion, but you will need a Spanish notary public to prepare the contract of sale and issue the public deeds.
The role of the notary is a public servant whose duty is to provide you with free and impartial legal advice on all aspects of the contract prior to signing the contract’s dotted line. Seeking advice from a notary early on in the process is advisable. Once a date has been set for signing the contract, you will have 3 days beforehand in which you can visit the notary to ask any questions you may have about any aspects of the contract.
If you choose to work with a British estate agent, promoter or lawyer, make sure that they have experience operating in Spain and that they are qualified and reliable. They must also be registered with the Law Society in the UK and specialise in international transactions and it is helpful if they specialise in international transactions.
If you choose to work with a lawyer based in Spain, request their registration number and check that they are registered and practicing with the local bar association (Colegio de Abogados).
Your lawyer also needs to have professional indemnity insurance, this is a protection policy which will cover any potential defects in the property you are about to buy. Do not sign any documents or make any payments until you have received independent legal advice.
Click here to see the British Embassy’s list of local English-speaking lawyers if you’re unsure where to look.
Many British citizens in Spain use a ‘gestor’ to carry out bureaucracy on their behalf. A Gestor Administrativo must have the GA kite mark to prove that they are professionally qualified and certified to process paperwork directly with the Spanish administration. Click here
Click here to see the FCDO’s list of registered gestors in Spain.
If at any point during the buying process, you find yourself embroiled in a property dispute, and do not have enough money the pay the costs of a court case, you can apply for legal aid (“asistencia juridica gratuita”) to meet the costs and fees of legal proceedings and court litigation. If you are a resident in Spain, you can apply to your local bar association for a legal aid solicitor.
Legal aid may cover things like pre-trial legal advice, lawyer and procurador fees, court fees, the costs of publishing announcements in official journals, experts’ fees, affidavits, deposits required for lodging certain appeals, an 80% reduction in the fees for notarial deeds and certificates from the land registry, and translation and interpretation services.
You may need to find a new lawyer with specific expertise, for example, specialist civil lawyers for compensation claims against private parties such as agents, developers or banks, and specialist public body litigants (contencioso administrativo) for claims against local, regional or state authorities.
Click here to see the FCDO’s information on legal aid in Spain.
If your Spanish is not fluent, especially when it comes to legal rhetoric, make sure that you get all contracts and documents translated by an independent translator.
Click here to see the Spanish Ministry for Foreign Affairs list of accredited translators and interpreters in Spain.
The eligibility criteria for Spanish mortgages are fairly similar to those required by many UK lenders and the standard length for a mortgage is usually between 25-30 years. When buying your property in Spain, you should make sure that your lender is authorised to operate in Spain by checking with the Bank of Spain.
To be considered for a mortgage, you will need to ensure that you have a good credit score. Request a copy of your credit form and correct any errors, don’t assume that it’s all already correct.
As for any mortgage application, the biggest factor for most lenders is affordability. Lenders will look at things like your income, employment type, age, any bad credit or debt you have, and the type of property you’re buying, in order to establish whether or not you can afford a Spanish mortgage. For things like age, generally, the limit for applying for a mortgage is set at around 75 years old, because as your age increases, as does the risk of non-payment. Logically, the shorter the allowed repayment term, the higher the monthly instalments would be.
Generally, banks in Spain will request proof of life insurance from an older applicant. It is also possible to minimise the risk of non-payment by endorsing a younger person who accredits a certain level of income. On the other hand, older people often have a fixed-rate pension, meaning that banks can be more certain that they will be able to keep up with monthly mortgage payments.
People often make the mistake – especially when buying a property in Spain for the first time, that the deposit, which is usually around 20 per cent of the price of the property, is all of the additional costs. However, when it comes to purchasing your new property, it’s important to remember the associated costs that will accrue, such as the cost of closing, which is usually between 2-5 per cent of the property’s price and should be paid with the deposit.
The amount you will be able to borrow for a property in Spain will vary depending on your circumstances as well as your choice of lender. The average lender loan-to-value (LTV) ratio tends to be around 60-70%, but if you live, work and pay taxes in Spain this could possibly be higher.
Luckily for you if you’re a young person looking to enter the housing market, the Spanish government and local banks have recently launched programs to make it easier for young people to enter the housing market. In 2021, Santander bank began offering some mortgages at 95 per cent of the LTV ratio for property buyers 35 years and under. If you are a first-time or low-income property buyer, it is well worth inquiring with Spanish lenders to see if there is a mortgage program that applies to your personal circumstances.
In 2019, Spain brought in a law that would make Spanish mortgages more aligned with other EU countries. This means that now, banks have to pay the costs linked to the signing of the mortgage loan, such as agency fees, notary fees, registration fees, and the Impuesto Sobre Actos Juridicos Documentados (AJD), the court document tax also known as “stamp duty”.
As for the property tax rates (Impuesto Sobre Bienes Immuebles – IBI) in Spain, these are set by the local tax authorities. These can range in price from about 0.405 per cent and 1.166 per cent of the property value, according to land registry records, and can vary depending on the location of your property. This Spanish tax will be payable on the first of January of any given year that you own the property, whether you are a resident of Spain or not, however generally it is payable in instalments.
There are a range of mortgages on offer when it comes to buying a property in Spain. Important things to consider are things like the interest rate and repayment period, fees for setting up the mortgage as well as early repayment and cancellation fees.
One of the main decisions to make is whether you want to invest in a fixed-interest rate or variable mortgage. Generally, a variable rate mortgage is the most popular of the two because, although the interest rate changes over time, it’s cheaper at the beginning and therefore more accessible for most people. You can also extend the number of years you have to pay this type of mortgage of.
By contrast, a fixed-rate mortgage remains the same throughout the repayment period, which makes it a more stable option. Long term, this type of mortgage also tends to be less expensive because they’re not subject to surprise interest rate increases, although the first initial payment may be more expensive.
If you are unable to keep up with the mortgage payments on your property, the Spanish bank could repossess it.
If the value of the property is less than the total debt outstanding (you are in negative equity), the bank may pursue your UK assets to recover the mortgage shortfall using a European Enforcement Order.
Make sure you fully understand the mortgage agreement you sign. If you have any doubts check with the branch during the 10 working-day period after the binding offer has been provided.
If for any reason you cannot keep up the mortgage repayments, you should speak to your bank immediately (before defaulting on repayments) to discuss the options available.
Click here for the Spanish Mortgage Association’s information on mortgages in Spain.
An NIE (Numero de Identidad de Extranjero) is a personal identification you will need in Spain in order to carry out any fiscal transactions such as opening a bank account or buying property.
Foreign nationals are assigned an NIE number when they register as a resident in Spain at the Oficina de Extranjeros (immigration office) or designated police station. However, property buyers from outside Spain can apply for an NIE at the Spanish embassy or consulate in the UK or through a representative.
It’s important that you also familiarise yourself with which taxes are associated with buying a property in Spain before beginning the purchase proceedings. Taxes can vary from one region to the next, so the best way to do this is to seek the advice of an accountant or professional tax advisor.
You can find out how much purchase tax will be due by checking the cadastral value (the administrative value that the cadastre gives to your property) of the property you wish to purchase. at the regional government’s online tax agency site using the cadastral reference number. Tax is charged on the Spanish council’s valuation of the property as opposed to the amount of the sale.
Click here to see the Spanish tax authority’s (Agencia Tributaria) advice and information on property and tax in Spain.
Further brief information on taxation can also be found in the UK Government’s Living in Spain guide.
Before signing on the dotted line, dotting all the Is and crossing all the Ts and accepting the keys to your new property in Spain, you should make sure that you have seen the land registry extract (nota simple), available here from the Colegio de Registradores. Translations into English can also be sought at an additional fee.
On the land registry extract, you should check that:
It’s also important that you check that planning permissions are in order and that the property is a legal build. This is especially important if you’re buying off-plan or direct from the property developer. The town hall can tell you whether the building has all of the necessary licenses and permissions as well as what type of land it is built on.
If the property is built on rural land or land that is not classified for construction, you will need to ask the regional government to confirm whether or not construction is authorised.
Off-plan properties need to be certified as finished by a registered architect and registered as a new build in the property register. Details of the developer’s insurance against structural and other defects in the construction should also be provided in the property’s registration. If the property was a private build (which means the previous owner built their own house and decided to sell it before 10 years had lapsed), a request for these details will need to be put through separately.
If the property you wish to buy has any building restrictions, is in a green zone, or includes a public pathway or similar, these details can usually be checked at the town planning (urbanismo) department of the local town hall. Although not obligatory, it’s also worth getting a chartered surveyor to check the property.
You should also make sure that you have seen the following documents before closing the deal on your new property:
Upon completion, the public deed should contain an accurate description of the property and you should register the property in your name with the Land Registry as soon as possible. This will allow you to ensure full protection of your rights. The notary can even send advance notification to the Land Registry electronically once the public deed is signed.
As planning and building rules differ from region to region, you should ensure that you have thoroughly researched the rules relating to the property’s location prior to purchase.
If, as many property buyers attracted by the sea views and beach promenades have done increasingly since lockdown, you are considering purchasing a coastal property, you should contact your regional Coastal Demarcation office. They will be able to provide you with a certificate to prove that the property is unaffected by the 1988 Coastal Law. Whilst the coastal boundaries of public maritime areas can be viewed online at the Environment Ministry’s website, this may not provide sufficiently accurate information on which to base a property purchase.
Property built on property land can often involve the most restrictions of all property types in Spain, so be extremely careful if this is the case for your property. This will be indicated in the Land Registry. Under normal circumstances the government reserves this type of land for agricultural use, so you would need to check with the municipal and regional authorities to ensure that full planning permission had been obtained for residential use.
In certain parts of Spain, the peripheral land surrounding a military or naval base is considered ‘restricted’ under Spanish law. This means that specific rules may apply when buying, selling or carrying out construction work on properties located in these areas.
As of January 2021, UK nationals wishing to buy property in these areas, even those who fall within the scope of the withdrawal agreement (Brexit), must meet third-country national (i.e non-EU national) requirements. This involved obtaining a military permit from the Spanish Ministry of Defence prior to purchase. Only new property purchases or construction works from January 2021 in the following areas require this permit:
Off-plan property constitutes a property that hasn’t been built yet or is still under construction, such as in new housing development plans. As the real estate market rapidly increases, buying off plan enables buyers and investors to buy a property at a lower price, rather than wait for the construction of their chosen property down to exact specifications.
Whilst this can be a cheaper option, buying off-plan inevitably involves higher risks than re-sale property such as the developer going bust or the property plans being subject to change. Before going ahead and purchasing an off-plan property in Spain, there are a few things to consider.
The first thing before putting down any payment is to ensure that you have a bank guarantee (aval bancario) to cover any stage payments/payment instalments. Whilst developers of off-plan properties are legally obliged to secure all deposits with a bank guarantee, this obligation only comes into force on the developer has obtained planning permission. For a secure purchase, request to see this planning permission prior to making any payments.
Off-plan property developments can also be checked at the Land Registry. If the description of the future building is registered, the registrar should have seen evidence that the licence exists and work has begun following the approved design.
Thank you for taking the time to read this article about how to buy a property in Span. Do remember to come back and check The Euro Weekly News website for all your up-to-date local and international news stories. Remember, you can also follow us on Facebook and Instagram.
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Originally from UK, Laura is based in Axarquia and is a writer for the Euro Weekly News covering news and features. Got a news story you want to share? Then get in touch at editorial@euroweeklynews.com.
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