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Spanish Algarve Buying Process

Buying Property In Costa de la Luz

Spain is a modern European country with an established property market and strict rules and procedures for buying and selling property.

In principle, the rules and procedures are not too dissimilar to those in the UK, and like the UK, professional advice should be sought from the outset of any potential purchase.

Spanish Algarve Properties Ltd has several independent English-speaking Spanish lawyers that we can recommend to help you through the process.

Tenure

In Spain, land, houses, villas and apartments are all acquired freehold. In Spanish it is called Propiedad en Pleno Dominio (ownership in full right). Leaseholds are not used for residential property.

Land Registry

Nearly all land in Spain is registered in a Land Registry. This shows who owns the land and whether there are any encumbrances on the title such as mortgages, rights of way, etc.

First Steps

When you have identified a property that you wish to purchase, the first step will be to place a small deposit.

This will take the property off the market until the Private Contract is signed. This deposit may or may not be refundable.

Private Contract

The Private Contract of purchase and sale is usually prepared and signed within four weeks of placing the deposit.

This contract is called the Contrato Privado de Compraventa, and sets out the terms and conditions of purchase. It binds you to the purchase. If you cannot be in Spain to sign this document you can give your lawyer Power of Attorney to sign on your behalf.

Escitura de Compraventa

Upon completion of the property and issue of all licences, the Sale and Conveyance Deed, the Escritura de Compraventa, is signed by both parties, in the presence of a Notary, and payment made of all outstanding monies. As with the Private Contract you can give your lawyer Power of Attorney to sign on your behalf.

Licences

For tax purposes the Spanish Authorities require non-residents to obtain a NIE Certificate (Foreign Identification Number) from a police station. Spanish Algarve Properties Ltd can assist in obtaining this certificate.

It is essential that the builder developer have a Building Certificate for any new property especially one being built off plan.

For new build properties, prior to releasing the final monies and signing the Escritura de Compraventa, a Licence of Habitation must be issued by the Local Authority. This certificate must also be issued before the electricity, gas and water can be connected. Spanish Algarve Properties Ltd can help with this.

Expenses

Fees during the buying process include the following:

Buy Spanish Algarve Property
  • In Spain VAT (IVA) is charged on all new build properties at a rate of 8% and on land and building plots the rate is 18%
  • For resale properties VAT is not applied but there is a Property Transfer Tax of 8%. Stamp duty AJD is 1%
  • Notary fees are variable on a sliding scale between €60 on house value of €150,000 and €150 on a house valued at €600,000.
  • The Land Registration Fee is variable and similar to notary costs.
  • Spanish Lawyer fees are normally 1%

The total costs of purchasing a property are consequently approximately 10%

Spanish Bank Account

It is a requirement to open a Spanish Bank Account. Spanish Algarve Properties Ltd can arrange this for you.

Buying Off Plan

Many British buyers have recognised the significant investment potential of buying off plan from reputable Spanish developers.

The procedure for buying off plan is normally as follows:

  • A small deposit secures the property.
  • 10-20% of the value is paid within four weeks and the Private Contract exchanged.
  • 15-30% is paid during the construction period by monthly or quarterly instalments.
  • The balance is paid at completion and signing of the Escitura de Compraventa. A mortgage arranged by the developer is usually in place to cover this final payment if required.
  • Spanish Algarve Properties Ltd ensures that all payments made are secured by bank guarantees.
  • The advantage of buying off plan is that for an outlay of between 25% and 50% of the value of the property the purchaser secures the full value of the property at the time of completion.

Mortgages & Funding

Spanish Algarve Properties Ltd through associate companies are able to offer a comprehensive mortgage service to help you finance your property in Spain.

For new build homes most Spanish developers will arrange for mortgages on the properties of up to 70%. These mortgages do not have the same criteria and constraints as those in the UK. However they may not be appropriate for purchasers requiring more than 70% of the value of the property or those over the age of 65.

Buying Property In Spanish Algarve

Alternatively we are able to arrange independent Spanish mortgages and are able to provide re-mortgages on your UK property to finance the stage payments of new developments and part or all of the value of your Spanish home.

Depending upon an individual's circumstances, we can arrange:

  • 100% mortgages
  • Mortgages for self-employed
  • Mortgages for individuals up to 75 years of age
  • Buy-to-let mortgages

Some UK Banks and Building Societies are also prepared to provide mortgages for properties in Spain and, depending on your individual requirements, consideration should be given to this approach.

Funding

When you buy a property in Spain, you will know the price of the property in Euros but you will not know the actual cost in Sterling until you buy all of the currency to pay for it. This means that the property could either cost you more than you had planned (if the Euro strengthens) or the property could become cheaper (if Sterling strengthens). On the basis that you are buying a property and not speculating on the currency markets, it is worth fixing the exchange rate for all of your future stage payments to the agent/developer.

Foreign Exchange Service

In association with TTT Moneycorp Ltd, Spanish Algarve Properties Ltd are able to provide a comprehensive Foreign Exchange service that includes:

  • Achieving a better exchange rate than you would receive at a high street bank - it is not uncommon to see savings of up to 4 cents or approximately £4,300 on a £150,000 property.
  • Reduced or zero Spanish banking charges when clients transfer their money to Spain.
  • Provide clients with a faster and seamless transfer of funds to Spain than is available from banks. Funds are usually transferred within the same day.
  • The ability to fix exchange rates for future payment and delivery. For example, if the client approves the exchange rate quoted, then they can fix the rate on day 1 for payment and delivery up to 2 years in the future. This is very popular with clients intending to buy lengthy new build properties.
  • The allocation of a personal dealer to every client, enabling him or her to build rapport and trust which only the consistency of one point of call brings.
  • Access to experienced foreign exchange professionals.
  • Facility to buy or sell currency over the telephone on a 24 hour, 7 day a week basis rather than being limited to trading between UK bank's opening hours of 9am - 4.30pm, Mon - Fri.