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Property Services Spain
BUYING
Purchasers of property in Spain should retain a qualified solicitor to represent them and qualified financial advisors to deal with tax issues.
Purchasing property in Spain is a relatively straightforward procedure. The "last word" in property ownership is the property registry, which will show immediately if the seller owns the property free of liens and encumbrances. Most frequently, unless an immediate cash payment of the full purchase price is made, a private contract of purchase is drawn wherein the details of the purchase are reflected - the legal description of the property, purchase price, form of payment, date of completion, date of possession, etc. Upon signing the private contract, a payment on account of the purchase price is always made which can vary substantially according to the terms of the sale and the date of completion. A quite normal deposit for completion within 30 to 60 days would be 10% of the agreed purchase price.
New properties which are unfinished obviously are paid for over the construction period, and all payments on account before finishing must be guaranteed by a bank or insurance company: if the property is not finished by a certain date, a purchaser has the right to reclaim the monies paid, plus legal interests. Additionally, a recently enacted law obliges the property developer to arrange an insurance policy with the purchasers as beneficiaries, with respect to any basic building defects.
When the entire purchase price is paid for the property, the seller will issue the public deed of conveyance (escritura) to the purchaser, free of liens and encumbrances. This deed is issued before a Spanish Notary, is passed from the notary to the tax office to be assessed for stamp duty if the property is a resale or second hand property, and then presented to the Property Registry for inscription. A provisional inscription in the registry is made immediately upon taking title.
Property Purchase Costs
7% TRANSFER TAX (I.T.P.) payable by the buyer for the purchase of any Real Estate (villas, flats, land, commercial premises, garages), provided the vendor is not a developer or normally trading in the business of resale properties.
8% (7% VAT and 1% STAMP DUTY) for any VILLA or APARTMENT, or GARAGE that is annexed to an apartment, where the vendor is a developer, promoter or habitual trader in these generally new properties.
Notary Fees & Property Registry Inscription Fees
Notary fees should amount to no more than 1000/£715, although the cost increases according to the number of pages or complexity of the title deed (e.g. transcription of statutes, payment in stages, property partially finished, etc.). As an example, an apartment costing 300,000/£215,000 will cost around 650/£464 in notary fees, whilst a property costing 600,000/£429,000 will cost around 800/£571in notary fees. Any higher than this amount, the fees go up marginally. The property registry inscription fees, providing the purchase is straightforward, run at around 65% of the notary fees.
Plus Valνa
This is an "added value" tax based upon the increase of the Town Hall index value of the land only, from the prior (vendor's) purchase to the present sale.
This tax corresponds in principle to the seller, but, in common practice, is often paid by the purchaser, especially with respect to apartments or townhouses. As there are several variable factors used in calculating this tax, especially the length of time of ownership of the property, the amount payable can vary substantially and should be verified before proceeding with the purchase.
Summary
The total official costs involved in purchasing property should be less than 8% if it is a resale property, or less than 9% if VAT is paid on the purchase price, plus the PLUS VALIA, if applicable.
Other costs involved in owning Spanish property
Local rates
Local rates are payable annually, and are calculated from the catastral or rateable value of the land assigned by the Spanish Tax Office. The catastral value takes into account the value of the land plus the value of the building, according to type, location, and usage. Upon this value, each municipal Town Hall decides on the percentage to be charged in respect of local rates. In the case of Marbella, the formula applied is 0.85% of the rateable value of the property, which is almost always far less than its true market value.
Examples: A 2 bedroom apartment in the beachside complex of Marina Puente Romano which is in the heart of the "Golden Mile" paid rates of 1.219/ £870 in 2003. A free standing, large beachside villa in the heart of the "Golden Mile" paid annual rates of 2,500/£1,785 in 2003.
Rubbish Collection & Water Rates
The rubbish collection rate is applied by the Town Hall according to the property and payable every 6 months, at a maximum rate of 258/£184 per year. Water consumption is calculated by the water meter consumption in cubic meters and is payable every 3 months. Payment can be made directly at the Town Hall or by bank with direct debit instructions.
Community Fees
Generally speaking, the Community of Co-Proprietors or Homeowners' Association is a legal entity comprised exclusively of the owners of the apartments in a building, or villas on an estate. The purpose of the Community is to own and maintain the common elements of the building or estate in question, and each homeowner is obliged to participate in the expenses of the upkeep of the community areas and services on a prorated basis with the other owners. Usually, a homeowner's percentage of the costs is fixed by the size of the apartment, or plot, divided by the total area of all the apartments or plots.
A budget for the annual community expenses is presented at the annual general meeting of the homeowners, and they or their authorized representatives must approve the budget by majority vote of those present at the meeting. Expenses can vary substantially according to the services provided, and normally include salary and social security of the hall porter, common garden maintenance, lift maintenance, repairs to common elements, rubbish collection, water for watering community gardens, electricity for lighting communal areas, insurance, security, and administration fees. The President of the community must, by law, own a property within the complex itself and is chosen by way of vote by the co-owners. The President has no remuneration for this role.
A typical 2 bedroom apartment in a building or area with a hall porter, swimming pool, and a small garden, could cost between 120/£85 to 300/£215 per month in community fees - but could go up to 600/£428 or more per month in a high luxury building with a large community staff and many services.
In the case of an individual villa in an estate of villas, community fees are often less since the private gardens and exteriors of such properties are generally not maintained by the community, and the community fees are limited to road and roadside garden maintenance, basic common service maintenance, and security.
Insurance
A standard insurance cost for a 300,000/£215,000 apartment with contents valued at 48,000/34,300 would be 280/£199 per year. One should note that in an apartment building, the Homeowners' Association is required to insure the building for its reproduction cost. Therefore, the individual's insurance policy for the apartment need not cover the entire value of the apartment, but only damages to the interior of the apartment, its contents, and third party liability. It is also advisable to insure the building at first risk in case the Community insurance is not comprehensive. For a villa with a reproduction value of 500,000/£357,000 with contents insured at 180,000/£128,600 the annual insurance would be in the area of 1,550/£1107.
Gardeners
The upkeep of a private garden is essential to the maintenance of your property and its cost will, of course, depend on its size. As a rough guide, the hourly rate is about 14/£10. A full-time gardener on salary would cost in the area of 1000/£715 per month, whilst a half-time salary would be in the area of 600/£430. Apartments and townhouses have the communal garden areas tended by a contracted gardener and the cost is included in your community fees. A villa on a plot 2,500m2 might require a gardener a few hours a week. A large parcel of a full acre or more may require a half or full-time gardener. Social security is an additional cost to full time wages and runs in the area of 40% of the salary.
Cleaning Service
Cleaning service is generally available on a full-time salary or hourly basis. Full-time salaries range from 600/£428 to 800/£571 per month plus approximately 120/£85 per month social security contributions. Part time help is usually charged by the hour with rates varying from 8 to 10 / £5.7 to £7.15.
Electricity
Electricity is billed bimonthly. Minimum rates are applicable whether you are in residence or not, and the minimum varies according to the amount of electricity your house could potentially use with all power and lights turned on. The minimum charge for an apartment might be between 24 and 36 / £17 and £26 per month. Charges for a villa are from about 60 to 90 /£43 to £64 per month, depending largely on the extent of the electrical installation. Usage is 0.08 /5.7pence per Kwh plus tax. With all the sunshine in Marbella, you will nevertheless be using less lighting and heating than in a lot of other countries!
Fixed-line telephone
The telephone bill is also charged bimonthly. Standard rates vary according to the equipment installed, but can be in the region of 18.50 / £13.21 per month including a touch dial telephone. A 3 minute call (daytime business hours) to any European Community country, direct dial, presently costs about 0.41 /30 pence (including VAT). There are many local and national telephone companies that can offer substantial savings to those who wish to spend some time studying the market., and ADSL broadband services are available virtually anywhere.
Miscellaneous questions & answers
Q: What if I want to buy a plot and build my own home?
A. Providing that a building plot is situated within an urbanization, or an area zoned within the Municipal Plan for such use, outline planning permission will already have been granted for the construction of a detached home. However, building regulations, which vary considerably, dictate the permissible size of the villa according to the size of the plot. Care should therefore be taken before proceeding with the land purchase that one will be allowed to construct one's chosen home on it.
Q: Are technical surveys available?
A. A building survey, as it is understood in the U.K., is not necessary in Spain for mortgage purposes. It is nonetheless advisable when purchasing an older property. Common things to check for are the condition of the plumbing and electrical installations, waterproofing, roofing, and so on. These checks, as well as a full structural survey, can be carried out by a Spanish technical architect (aparejador) or indeed by a qualified British Chartered Surveyor. Any fees involved would be to the account of the prospective purchaser.
Q: Is financing available?
A: Spanish banks are highly competitive when offering mortgages on both new properties and resale properties. It is now common practice for most Spanish banks to offer mortgages to non-residents, although some banks do offer a wider variety of financing packages than others.
Q: When I sell my property, may I remit the proceeds of sale back to my own country?
A: A foreigner who is a non-resident of Spain has the right to sell his property to another non-resident foreigner entirely in foreign currency, with payment made outside of Spain. It should be noted that, since 1997, a 5% tax retention is effected by the tax authorities upon the sale of any property owned by a non-resident vendor, which is applied towards the capital gains tax (currently 35%). The profit on the sale is reduced by a small percentage for each year of ownership in compensation for inflation. If the amount withheld is greater than the tax due, it can be reclaimed in part from the tax office. Those sellers today who have owned their property prior to 1986 currently pay no capital gains tax on a sale.
Q: Who pays estate agency fees in the sale of a property?
A: The seller always pays agency fees, unless you come up with a different agreement with your agency. Although the seller remunerates his agency, the agent has an ethical obligation to see that the purchaser gets fair value for money, and at the end of the day, a good agent's job is to bring the buyer and seller together in harmony.
Useful Contacts
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Copyright © 2006 Steve Prendergast. All Rights Reserved