Diary of our house - Here we tell you about how we bought and renovated a place in Spain. 

Buying in Spain
article from the Evening Standard

Estate agent fees and any capital gains tax due on the sale of the property to you is usually paid by the vendor.  As in the rest of Europe, you would be wise to use a local lawyer to act for you.  His fees are likely to be about one per cent of the declared value of the property.

Once you have agreed a price you will be asked to sign an option contract or Compra Venta, which contains all relevant details or special conditions as well as the price and the date of completion.  It is not common practice in Spain to have a structural survey but you may need a valuation if you are raising a mortgage.

At this point you will be asked to pay a deposit of at least 10 per cent of the agreed price and you are committed to purchase the property while the vendor is committed to selling.  If you pull out you will lose your deposit but if the vendor pulls out he will have to pay you twice the deposit.

Your lawyer will carry out the searches and it is important that the land and property have been registered.  In the past it has been common for private sales not to be registered to avoid taxes but this is unwise.  As in some other areas of the EU, debts go with the property so make sure you know what is owing and that any mortgage on the property will be repaid on completion. 

On completion you will have to pay the registration fee which is based on the registered value of the property and is normally around 250€ (£160).  You will also pay transfer tax of six per cent of the value of the property or seven per cent VAT if it is a new building.  The property is transferred by a notary and his fees will depend on the length of the title deed but should not exceeed one per cent of the property's value.

Capital gains tax for non-residents is 35 per cent of the gain.  When you sell, if you have held the property for less than 10 years, you must deposit an advance payment of CGT of five per cent of the selling price.  You will also be liable to plus valia tax, which differs from area to area, which is calculated by the local authority and is based on the increased value of the land on which the property stands.  The formula is complicated and depends on the length of time you have owned the property.

You will also have to pay wealth tax (patrimonio), which is calculated on the registered value of the property and is levied annually at 0.2 per cent.

You will be liable to Spanish income tax at 25 per cent of the gross rental income.  If you claim not to rent your property you will pay tax on notional rental income at the rate of 25 per cent on a figure of two per cent of the rateable value.  If you own the property through an offshore company they you pay three per cent of the rateable value (valor catastral) annually.

If you have bought on a development there may also be local community service charges.  These will vary but should be set out in the sale documents.

Deciding Location
Don't rush into this: decide if you are looking for a holiday home or somewhere to eventually live.  The most important thing you should be doing is learning Spanish - despite what anyone may tell you to the contrary.  Even if you want to only mix with UK ex-pats and want an apartment on a holiday urbanisation, organising services and paying bills will be difficult; emergencies (repairs to house OR health) will be almost impossible!  The nearer to the costas you buy, the less Spanish you can get away with; inland the prices may be cheaper, but the further you go (and the cheaper you go) the more ESSENTIAL it is to have a good working knowledge of the language.  I am amazed at how many enquiries I get from people who have only been to Spain once, can't speak the language, but are ready to up sticks and live there!  Also don't be fooled into thinking you'll easily pick up work there - if you don't speak the language you don't have much chance!  

Opening a Bank Account in Spain

You need your passport and a small cash deposit.  It takes about half an hour.  Ask them to post your cheque book (talonario) to you in the UK. You can pay-in Sterling cheques when you're over there.  Until the Euro is both here and there, transferring cash from the UK to Spain money will cost you.  The cheapest way is a non urgent Relay which costs around £8 for up to £2000, and £14 for more than that.  It's most efficient to transfer regular sums into a UK account and then transfer to Spain in £2000 lumps.

Note that many Spanish banks charge you for just about everything - taking money out, putting money in, having it there, etc.!  It's worth asking around for one that is free.

Finding a Property

Search the web with keywords such as finca spain, cortijo, house for sale spain, etc, to find online agents (a few are listed below).  You might also look in Loot - some areas of rural Spain still use radio telephones which are not really suitable for Internet use.  Most of these agents will require you to make an appointment in advance for viewing.  Be prepared for viewing to be a long process - you need the best part of a day with one agent.  If you're looking for a resale property there could be a fair amount of travelling in between each you want to see.  Depending on when you go, the day can be very short:  most agents start at 10.00, with lunch 2 - 4.00 pm.  If it's getting dark at 6.00 pm, you won't have much time!  No matter how many descriptions of interesting places you read, the only real way know is to go see.   This will frequently mean bumpy 20 minute trips in 4-wheel drives to somewhere you immediately know is not for you.  Do bear in mind that some of the properties look very dilapidated ... go for location every time - building costs in Spain are much cheaper than here.  If it's got a great view, never mind the rubble - however see 'Building' below.

Making the Offer

Having looked, try to find a 1st, 2nd and 3rd choice.  Before you make any offers, try to establish whether the owners are English or Spanish.  The Spanish won't take much in the way of offers.  Once you've had your offer accepted, you'll need to go to the agent's office to pay a deposit (usually 10%).  You can use one of your cheques for deposit - be aware that the agent may want it made out to cash (El portador) to avoid bank charges.   Now is a good time to ask if they use a solicitor for the transaction as it's not strictly necessary because a Notario (public official) will make checks on the registration of the property and the completion of the transaction needs to be carried out in front of him.  However it's in your best interest to rope a solicitor into the deal even though it will cost you double the fees.  You need an initial contract between you and the seller stating the deposit paid, the purchase price agreed, how long to completion (usually 90 days) and what happens if either side pulls out.  Note that it is Spanish law that if the seller pulls out, he should return double your deposit.  Don't sign anything that doesn't say this. 

Solicitors in Albox: 
Miguel Rodriguez - c/Santo Domingo, 6 (tel/fax 0034 950 120 790 / email miguelmarcelinos@eresmas.com)
Maria Mercedes Flores - c/Duque de Ahumada, 33

Changing the electricity account:
Sevillana is the electricity company in Andalucia.  To change the account, you need the old contract from the previous owner or an old bill, plus your bank details.  The offices are generally open 8.30 to 1.30 pm.  If you can't get hold of any old paperwork, take your Compra-Venta document and a meter reading.

Undervaluing:
The practice of undervaluing property goes on big time in Spain to avoid paying the equivalent of Capital Gains Tax.  The solicitor may well suggest that the property is valued at much less than you are paying!  You have to be aware that if you go ahead and agree to this, should you come to sell you will be liable for lots of tax on the profit you have made (unless you under-value then too).  Be aware that, as in the UK, this is not strictly legal!

Escritura:
If you buy an old property, it may be that it has never been registered at the 'town hall'.  Even so you will probably find that the previous owners have been paying their rates - it doesn't seem to matter to officialdom that the house isn't registered by who pays the rates, just so long as someone does!  Your solicitor should apply for the Escritura either before or after the sale.  It needn't hold up the sale which can go ahead under private contract which should state that the previous owners agree to appear before the Notary as and when the Escritura is ready.

Costs of Buying:
(All are approximate)

Solicitor:   500€
Notary:     250€
Transfer tax:     7% of declared value.  (Payable 1 month after escritura if property is unregistered)
Registration of property:   150€

There are all sorts of  'normas' that need to be observed when having building work done.

1.  You may not build  anything within 18 metres of the edge of a road.

2.  You may erect a fence (not wall) 6 metres from the edge of a road.

3.  In rural areas there is currently a ruling that says there must be a distance of 60 metres between any new building and existing neighbouring properties.  This is being hotly disputed by locals; it comes from the Diputacion and has been brought in to curb over development on the Costa del Sol.

For any building works you need a permiso from the Ayuntamiento (town hall).  To obtain one you need to take your builder's estimate to the Ayuntamiento and pay 3% of it.  If your building works are extensive, ie remodelling of the roof, creating extra space, this is deemed a proyecto and you need to present architect's drawings to the town hall to obtain permission (and then pay your 3%).  The architect will be able to advise you on the 60 m rule, ie as to whether your house would be considered rural, semi-rural or urban.