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Frequently asked questions on Buying Property in Spain

 

Is it safe to buy a property in Spain?

Spain is as safe as any country in the EU to buy a property as a second home, investment or for retirement. This is so only as long as you take the sensible precautions you would when you buy in your own country. Additionally, in Andalucia you are protected by Decree 218, which gives you legal protection against illegal builds and misrepresentation. Just follow some very simple rules:

• Only agree to a contract when you understand all its clauses. If it is in Spanish, then ask your lawyer to explain each clause to you clearly.
• Only sign a contract that your lawyer has seen and is happy with.
• There is no such thing as Verbal Contract under the Spanish Law. If it is not written down, then it does not count.
• Do your homework. Get to know the area, the potential, the pros and the cons. Don’t just buy the first thing you see without having looked around the location. If you are moving to Spain to start a new life or retiring here then stay in the area for a while.

 

What is Andalucia Decree 218?

A decree in Spain is the local or federal law that has been passed by the Federal or the Regional government into law. This means you are protected or have to abide by the conditions of the Decree as it has been passed into law. Decree 218 requires the vendor to disclose all material facts about the property he is selling including its legal status, local taxation, disputes, or any outstanding charges.  Failure to comply could results in the buyer being able to sue for compensation equal to the value of the property.

This means you must be shown (and have a right to demand) a copy of:

• The Deeds or ‘Escopia Simple’ which is a legal and official summary of the deeds stating the owners, land borders, size of the plot, your neighbours, previous owners, and any building that is legally on the land. If the building is not included in the Deeds, then they ar eillegal builds.

• IBI – This is local taxation payable to the town hall equivalent to the old Rates System in the UK, which is based on the rateable value (Valor Catastral). This is the official first valuation of the property (some could be over a hundred years old), and your local taxation is based on this, and so is the inheritance tax! IBI should show the total size of the plot, the fenced part of the plot, and the legal building size. If there are any discrepancies between this and the vendor’s claims, walk away. You cannot claim under Decree 218 if you knowingly bought something that is different to the IBI.

• Receipt for IBI – This is to prove that there are no outstanding taxes on the property. Remember if there are, once you are the owner you are responsible for any outstanding IBI as well as the associated fines!

• First Occupation Licence – This is issued by the Town Hall architect after the construction of a building is complete. This proves the work was carried out according to the planning permission and is fully legal. You must have this in order to obtain Utilities such as Water or Electricity for your property. Remember if there is no Water or Electricity, there is high chance that there is no First Occupancy Licence, which means the building could well be illegal.

• Opening Licence – If you are buying any business such as hotel, bar, restaurant or any other business, then the vendor must have an ‘Opening Licence’. You are not allowed to operate any business without this licence. This licence is transferable from person to person but not from location to location. Remember if you do not have this and operate a business the consequences can be crippling. Your public liability insurance is invalid if you do not have a licence. Also the cost of obtaining licences can run into tens of thousands of Euros, and the fines can cripple you before you get a chance to obtain it. Depending on your Town Hall it can take 3 years to obtain a licence.

• Utility Bills – You must see a copy of the latest utility bill. If this is not in the name of the vendor, then you should dig deeper. There are a lot of properties that are illegal and cannot legally obtain water or electricity, so they tap into their neighbours supply (with the neighbours agreement of course) and they share the bill. If this is the case, we suggest you walk away.

What is the process for buying property in Spain?

After you have found your ideal property and have done the due diligence including checking the documentation covered in Decree 218, you can make an offer.

• Offer – You make your offer to the Estate Agent acting on behalf of the vendor and the estate agent will try to negotiate a price. Remember, an estate agent might be acting on the vendor behalf but they wants to make a sale as there are no fees earned until the house is sold. Therefore estate agents will do their hardest to get a compromise price that suits both the buyer and the vendor.

• Private Contract - Unlike the UK and in line with most European countries, once your offer is accepted you will enter into a legally binding Private Contract. Private Contract requires the buyer to pay a deposit (consideration) without which the contract will not be binding. Within the contract you can estipulate any conditions such as subject to survey, subject to mortgage, completion date, etc. There are no restrictions or limitation on the conditions that can be stipulated in the Private Contract. Remember, Private Contracts are binding and their conditions survives the execution of the contract, which means it does not expire when you complete and both vendors and buyers are obliged to continue with any commitments that go beyond completion.

• Completion – This is when you become the legal owner (and responsible) for the property. This is done at the Notary, who will check the Deeds for accuracy, explains terms and conditions of your mortgage including any penalties, etc., and any conditions that exists or has been entered on the Deeds such as right of way, etc.

 

What happens if I pull out of the purchase process?

Nothing until you sign a Private Contract. If you pull out once you have signed a Private Contract you will lose your deposit. The only time you can pull out of the purchase without losing your deposit is if there is breach of contract by the vendor, namely if he does not meet the conditions of the contract including any agreed or stipulated dates.

 

What happens if the Vendor pulls out of the sale?

Nothing until you both sign a Private Contract. If he pulls out of the contract and assuming you have met your commitments, then he has to return your deposit plus an equal sum as compensation. This means if you have paid €20,000 as the consideration for the contract (Deposit), the vendor has to return €40,000 to you which include your deposit and compensation.

 

What guarantees do I get with a property?

When you buy a new property the builder is obliged to give you a transferable 10 year guarantee for the property. This is very similar to the NHBC in the UK. Additionally if the builder is offering additional guarantees, make sure it is entered in the Private Contract.

 

How do I let my property?

We recommend you use a reputable Agency, which will look after the contract, day-to-day issues arising from having tenants and looks for new tenants when the contract is up for renewal. We operate a rental agency and will be delighted to list your property with us.