As European Union members, the British have the same right to buy in Spain as the Spanish do, although with a few restrictions. However, there are significant legal differences in the sales processes between countries, such as property law, urban planning and coastal law, building regulation, tax law, money laundering regulations, mortgage regulations and consumer rights. What follows therefore, is just a general overview.
Like Frank and Diane, you should always get independent legal advice before attempting to buy property in Spain.
Frank and Diane have found the property they like. Their agent now takes them to a local bar to celebrate and explains what will happen next.
Firstly they are given a document to sign and asked to pay €5,000 as deposit, because the agents says there are other people looking at the house. Indeed, it could well be being marketed by other agents too, who must be informed that the owner has agreed and stopped all viewings.
Most legal documents will be in Spanish – that being the legal language of the country – so a translation must be given and both signed by the owner and the buyer or their representatives.
There are many ways of buying property in Spain. The type of contract will depend on the type of property, whether new build or resale, the nationality of the buyer (understandably, sellers are more keen to get a binding deposit from an overseas buyer), the speed with which the buyers want matters concluded, and how much they trust the seller. If all the due diligence can be completed quickly it is possible to buy a property in Spain in a day or two, but never attempt to buy quickly if it means skimping on your legal protection.
In this guide we describe the usual processes for a foreign (UK) couple buying a resale property.
Frank feels uncomfortable signing this contract, and insists that they will consult their lawyer first. He doesn’t want to be committing to buy the property before any legal checks have been completed. It makes for a slightly awkward celebration but, as Frank says to Diane while the agent isn’t listening – better that than spending years regretting it. As soon as they get back to their hotel, Frank sends a copy of the agreement to their independent lawyer.
Frank’s lawyer calls him back and explains that after reading it through, he can confirm that this is simply a “reservation agreement” to take the specified property off the market for, usually, 15-30 days, at the stated price.
It is quite normal to pay a deposit of between €3,000 and €10,000, which will be taken off the final purchase price. By Frank and Diane making the agreement subject to preliminary legal checks, mortgage loan availability on the property and a building survey, the deposit should be returned if there are problems. Estate agents are understandably keen to get overseas buyers – who are prone to getting cold feet when they return home – to sign and pay up while there. And it does secure the property for the couple. However, if they didn’t believe anybody else was imminently trying to buy it, and were not entirely 100% sure themselves, what would be the advantage in paying up? It is a significant amount of money to lose if they later pull out.
However, Frank and Diane decide that they will “lock in” their decision so they sign the agreement and pay the €5,000. Now they are finally ready to celebrate!
The next day, with their lawyer or estate agent they go to the immigration office to start the process of obtaining their NIE number (see box, below).
They have also given a down-payment to their lawyer, who starts the search process to ensure that the property is legally the seller’s to sell (and if it is jointly owned, get confirmation that all the owners have agreed to sell), has no debts or sale restrictions on it and has planning permission. At this stage, if there are legal problems not mentioned in the sale particulars they will be entitled to back out and get their deposit repaid. This would not have been possible had they, as some agents will attempt to get buyers to, signed a preliminary sales contract instead of a reservation agreement.
Obtaining your NIE
Expatriates living in Spain will usually already have an NIE, as you need one for many transactions; certainly anything that involves paying tax. Property buyers arriving from outside Spain, however, will need to get one. NIE stands for número de identificación de extranjero and is essential for buying property, obtaining mortgages and getting utilities connected. Since Frank and Diane are buying the property jointly they each need an NIE.
It is not complicated to get, but it can take from one day to six weeks. Since you need it to sign the escritura, you will need to apply at an early stage in the buying process. It is often the first thing you do after agreeing on a property, and often the estate agent will help, taking you down to the immigration or tax office and ensuring you have all the correct documentation.
Most people apply in person but you can also apply via a Spanish embassy or consulate. You can apply through a representative, or by post.
How you may apply can vary between regions.
To apply in person you go to an immigration office (oficina de extranjeros) within a specially designated police station.
You must take the following documents:
• Original and one copy of your current passport. If you provide only one copy, it should be notarised
• Official form (EX-15) filled out.
When you have paid the small fee you will be given a date to come back and collect it (or there is a process for a representative to collect it for you).
You will also need the NIE to open a bank account. Money laundering regulations limit how much you can pay in cash and set out the choice of payment methods as part of the sale agreement. Payment will normally be by bank transfer or bank cheque, so it is sensible to open a Spanish bank account and transfer funds from the UK.
Eight things your lawyer will be checking
- Who owns the property, and therefore who has the right to sell it.
- If there are debts against it. For example, a mortgage or court judgement.
- If there are sitting tenants in the property.
- If it is subject to any special rules such as subsidised housing.
- In case of an urbanisation, whether the seller is up-to-date with the community fees.
- If the annual real estate tax (the former “contribución urbana”) has been paid. If it has not been paid within the last ve years, the new owner will be responsible for payment.
- For new or off-plan homes, if insurance is in place to cover any damage that may result from structural defects of the building.
- For Subsidised Housing (VPO), or Appraised Price Housing (VPT), if there is any prohibition against selling it or any rights of rst refusal from the authorities.
Your lawyer will get all this information from the Land Registry. A buyer could also get the information herself, or the seller, estate agent or administrative manager could do it for you. Either way, do not hand over any money other than a reservation deposit or sign any contract other than a reservation agreement until you have checked this information.
Disclaimer: This guide was brought to you by AIPP / RICS / RDE