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DUE DILIGENCE

Once the deposit has been paid, your lawyer request the real estate agency to provide us with the contact details of the vendors lawyer to notify them and to request from them the necessary documentation in order to carry out the appropriate due diligence in which we will verify all relevant aspects related to the property, such as:

PURCHASE FROM A DEVELOPER (OFF PLAN OR NEW PROPERTIES)

1. The legal identity of the owner/the seller of the immovable property you intend to buy.
2. That the property under construction is legally registered in the corresponding Land Registry.
3. That the property is free from charges (mortgages, liens, encumbrances, etc.) It is customary for the developer to have finance to build which may take the shape of a mortgage. Should the buyer not be interested in taking over the proportional part of said finance in the way of a mortgage on the property, then it will need to be cancelled prior to completion, with all the cancellation costs paid by the developer.
4. That the property has been granted the corresponding municipal building permit and habitation licence (where applicable) by the Town Hall in question, and respects local urban planning rules.
5. That the construction specification or quality specifications are made available to the buyer and included in annex to the purchase agreement.
6. That there is a Bank Guarantee or Insurance Policy in place in order to provide guarantee for all monies paid to the developer during the construction process.
7. Confirm and check the content of the mandatory 10-year insurance guarantee (Seguro Decenal) that will provide coverage for any structural defects on the property.
8. Revision of the purchase contract drafted by the developer in order to assure that its content respects the buyer’s rights and that it is fully understood by the buyer and to ensure that this document respects the buyer’s rights.

PURCHASE FROM AN INDIVIDUAL (RESALE OR SECOND TRANSFER)

1. The legal identity of the owner/the seller of the immovable property you intend to buy;
2. That the property is legally registered in the corresponding Land Registry;
3. That the property is free from charges (mortgages, liens and encumbrances, etc.)
4. That the property has been granted the corresponding municipal building permit and habitation licence by the Town Hall in question, and respects local urban planning rules.
5. The study, preparation and signing of whatever private contracts (reservation agreement, option contract, sale contract) or public, notarial, documents (purchase/sale deed) which are deemed necessary to execute the purchase operation. The standard procedure is to first sign a private contract normally with the payment of 10% of the purchase price, and after a reasonable lapse of time, to sign the public deed of sale/purchase.

TAX AND EXPENSES

The expenses and taxes arising from the execution before a Notary Public of the corresponding deed of purchase are as following:

IN THE CASE OF FIRST TRANSMISSION:

• VAT 10% for residential properties.
• VAT 21% on plots, garages and storage rooms.
• Stamp Duty (for Andalucia) 1.5%
• Notary fee: notary fees are calculated according to a scale agreed by the authorities and is dependent on the nature of the purchase and the number of sheets contained in the deed of sale/purchase. Therefore, all notaries charge the same fee for the same concept. The notary fee for the purchase of a typical residential property would vary between 500-1,800 Euros
• Land Registry fee: land registry fees are calculated according to a scale agreed by the authorities. Normally, the land registry fee amounts to 50-70% of the notary fee.
• Legal fees 1% of the property purchase price plus 21% VAT

IN THE CASE OF A SECOND TRANSMISSION/RESALE

• Transfer tax:
  • on amounts up to 400.000 Euros tax is levied at 8%;
  • on amounts from 400,000 Euros up to 700,000 Euros tax is levied at 9%;
  • and on amounts over 700,000 Euros tax is levied at 10%.
  • As a clarifying note, for a property with a purchase price of 1 million Euros, the first 400,000 Euro is taxed at 8%, the amount from 400,000 up to 700,000 is taxed at 9% and the amount over 700,000 Euro is taxed at 10%, therefore the total amount due would be 32,000 + 27,000 + 30,000 = 89,000 Euro
• Notary fee: notary fees are calculated according to a scale agreed by the authorities. Therefore, all notaries charge the same fee for the same concept. The notary fee for the purchase of a typical residential property would vary between 500- 1,800 Euros
• Land Registry fee: land registry fees are calculated according to a scale agreed by the authorities. Normally, the land registry fee amounts to 50-70% of the notary fee.
• Legal fees 1% of the property purchase price plus 21% VAT

PRIVATE CONTRACTS

Once we complete our due diligence, and providing that everything is in order, in a period of 2-3 weeks from the signing of the reservation deposit, your lawyer will proceed with the preparation and subsequent signing of the private purchase contract with the payment of the amount previously agreed with the vendors. Upon the signing of the private purchase agreement it is customary for the buyer to pay to the owner an amount equivalent to 10% of the purchase price in the case of resale property and an amount equal to 30% of the purchase price in the case of off plan properties. The private contract is a very important step, as herein we will set out the terms and conditions of the purchase;

• therefore, we will carry out all the necessary negotiations with the vendor’s legal representatives in order to defend the client’s best interests. Power of attorney. Many of our clients choose to grant power of attorney to their lawyer in order to act on their behalf in Spain during the buying process.
• This will enable the lawyer to sign the relevant paperwork related to the purchase and the mortgage, if necessary.
• The power of attorney can be granted in Spain by a public notary, which is the easiest way, with an estimated cost of 70 Euros, or at the Spanish Consulate in your country of residence.
• Furthermore, it can also be granted in your country of residence before a public notary, but in this case, it should then be legalized with the Apostille of The Hague Convention or through Consular legalization for it to have legal value in Spain. In any event, your lawyer will also assist you during this process should you choose to grant power of attorney, here in Spain or abroad.