The private purchase contract


Purchasing a resale property in Spain     There are various taxes and costs associated with the purchase of property which will add approximately another 10% to the purchase price.   Costs of purchasing.  
Transfer Tax
 
The transfer tax, is levied at 8% of the purchase price when it is lower than 400,000 euros, 9% when the purchase price is from 400,000 euros to 700,000 euros and 10% from 700,000 euros upwards.
 
Plusvalia
 
There is another tax to be paid on a property purchase is the “arbitriosobre el incremento del valor de losterrenos”, this is the municipal tax charged on the increase in the value of the land since its last sale, using the value of the land as the taxable base which tends to be always lower than the market value. The land is officially revalued periodically for this purpose.This tax may be paid by either the vendor or the buyer, as agreed between the parties.
 
Warning to buyers
 
Since1999, the “plusvalia” tax can be charged directly against the property itself, meaning that should the vendor be liable, and “forget” to pay it, then liability for payment will pass to the new buyer.
 
Notary fees
 
The notary fees are fixed by an official scale and the fee varies according to the size of the land, the size of the dwelling and its value. Land registry fees this will be a similar amount to the notary fees, and relates to the entry of the property in the land registry.
 
Land registry fees
 
This will be a similar amount to the notary fees, and relates to the entry of the property in
the land registry (“Registro de la Propiedad”).
 
Appointing alegal representative  
It is highly recommended to appoint a legal representative as early as possible in the purchase process. Your lawyer will explain to you the legalities involved in the purchase and also carry out the due diligences on the property, including advising you of any debts, provide you with an estimate of the annual running costs of the property and prepare all the documentation required to complete the transaction.
 
Power of attorney  
Upon signing necessary documentation related to the purchase if you are unable to attend, then you may grant power of attorney to your legal representative or to another third party. The power of attorney would list all the duties that can be carried out by the third party, which may include buying and selling property, opening and administering bank accounts, applying for and accepting a mortgage, representing you with respect to utility companies and the tax authorities etc. The power of attorney would be signed before a notary public in Spain, and should cost approximately 60 euros. Should you not be able to visit a notary public in Spain and need to formalise the power of attorney in your home country, the procedure is different. Your lawyer will prepare the document in Spanish and English, and this will need to be signed before a notary public in your home country and then provided with the “Hague Apostille” at the Foreign and Commonwealth Office in London. Some notaries will take care of this process too. More information on the procedure can be obtained from their website: www.fcogov.uk.
 
Deciding on aproperty  
Once you have decided on a property you wish to purchase, you will need to pay over an initial deposit/reservation fee to ensure that the property is taken off the market. The fee may be placed with the real estate agency or with your lawyer. A corresponding “offer and reservation document” should be signed upon making the payment, indicating the basic terms of the purchase, i.e. the price, details of the vendor and buyer, details of the property, and the date by which the “private purchase contract” should be signed.
 
The private purchase contract  
The private purchase contract (PPC) will then be signed approximately 7-10 days after payment of the initial deposit/reservation fee, and once due diligences have been carried out on the property. Normally a 10% deposit would be paid; however, this may vary according to the vendor’s wishes. The contract will stipulate all the terms and conditions of the sale, including the final date by which the title deeds must be signed and final payment made, and this will then give the buyer time either to obtain a mortgage or get together the money required to complete the balance. Should the buyer fail to complete the sale by the final date, the buyer would lose the deposit. On the other hand, should the seller decide to pull out of the sale, or should the seller find another buyer who offers to pay more, then the original buyer has the right to claim back twice the amount of the deposit.
 
Mortgage  
It is important to note that should you require a mortgage in Spain, this will add approximately another 2% to 3% to the purchase costs. For a non-resident buyer, the mortgage is usually limited to around 70% to 75% of the valuation of the property. Once the mortgage is approved by the Spanish bank, the bank will issue a binding offer which can be compared with other bank’s offers.
 
Due diligence  
Apart from checking the legalities of the property, your lawyer will also check that all running cost and local tax payments are up to date. This will also enable your lawyer to advise you of the approximate annual running cost of the property.
 
The title deed and registration  
The “EscrituraPublica” or Title Deed” is the final document of the sale process and is signed between the buyer and vendor when the final balance due on the property is collected. The signing takes place in the presence of a notary public, which makes the document legally binding. The notary public is an official of the state, and his duty is to certify that the contract has been signed, monies paid over, and that the buyer and vendor have been advised of their tax obligations. The notary public keeps the original of the document and the purchaser is issued with a second authorised copy, which is then entered in the property registry (against the payment of the stamp duty or transfer tax). This means that if the buyer loses the buyer’s copy, then the notary public can always issue another copy.
 
Property values  
When going through the purchase process, you will come across different values which are attached to the property. It may be helpful to understand these different values!
 
·         Catastral value ·         Fiscal value ·         Valuation value ·         Market value ·         Declared value/Sales price  
Catastral Value
 
The “catastro” office is the second form of property registration, and deals more with the exact location, physical description and boundaries. The “catastro” office is also the source of the “valor catastral”, which is the assessed value of the property used in calculation of local rates. If you are purchasing a new property this will not have been assigned a “valor catastral”, it therefore becomes the buyer’s responsibility to register the property at the “catastro” office for this tax. An existing property should already have its own “valor catastral”. The annual real estate tax IBI, charged by the municipality, will be calculated based on the “valor catastral”.
 
Fiscal value
 
This is the value assessed by the tax authorities, and is the minimum value that should be declared on the title deed when a sale takes place.
 
Valuation
 
This is the value assessed by a bank for mortgage approval purposes.
 
Market value
 
Depending on the market, a real estate agent or property valuer will give an estimate of a property’s current market value.

 
Declared value/sales price
 
The declared value is the sales price of the property. All the costs and taxes are based on