Ready to jump into the Spanish property market? Here are details of the legal process.

Documentation
Taxes
Fees
Sales contract

Documentation

Once you have decided which property best suits you, it is very important to check the following documentation before you sign the contract or make a deposit to reserve the property:

• Ask for a simple note at the Property Registry, in order to obtain the full details of the owner and the exact size of the property. You can check whether the property is free of charges or is otherwise subject to mortgages, restrictions on use, court orders for seizure, etc. If a mortgage exists on the property, make sure that the seller can prove that the payments are up to date, otherwise the bank could seize the property.
• Check if the house is rented out as Spanish rental law protects tenants. For that purpose, make sure that the purchasing contract states that the house is not rented out.
• It advisable to ask the President or Administrator of the community of property owners whether the monthly community fees are paid or not, since the buyer should pay any pending fees. Notwithstanding, the seller must provide you with a certificate that states that the fees are paid up to date.
• Check on the paid-up municipal real estate tax (IBI- Impuesto sobre Bienes Inmuebles) to make sure that its payment is up to date, otherwise the buyer must pay the back tax and penalties.
• It is necessary to request the Tax identification code (CIF- Código de Identificación Fiscal) and the Spanish Company Register, in case the seller is a private developer. If the seller is an estate agent, he must provide you with the number of estate agent's professional association.

Taxes

You must pay the following taxes:

• Transfer tax (Impuesto de Transmisiones Patrimoniales - ITP) The purchaser must pay this upon signature of the sales contract. Its value is 6 percent of the purchase price, as indicated in the sales contract. If the purchase price declared is much lower than the approximate market value the tax inspectors could feel that the purchasing price is too low and you may be applied heavy penalties. Your lawyer can help you in this matter by asking the tax office what is the market value of the property that you are willing to buy.
• Capital Gains tax on land (Plusvalía): This is the tax on the increase in the value of the property since the last sale. Although it must be paid by the seller, usually both parties agree that the buyer pays it.

If you are willing to buy a property in Spain you should first get a tax registration number — the NIE if you are non-resident or the NIF if you are Spanish resident. This number allows you to pay the corresponding taxes in Spain.

Fees

Apart from the corresponding taxes, you must pay the following fees:

• Notary: You must pay the notary fees when you sign the deed. These are fixed on an official scale and will vary depending on the size of the property.
• Property Registry: You must pay the registration of the deed at the property registry in order the property of the house can be transferred to you. Before going to the registry, you should have paid the corresponding taxes. Its receipts must be given to the Register, otherwise you will not be allowed to make the property registration.

Sales contract

You should sign a purchase contract (Contrato de Compra-Venta) before a notary. The contract will contain the mortgage contingency, and the specifics of it: amount, rate and term, where applicable.

The contract must accurately describe the property you are buying, fully identify the seller and buyer, and state that the property is free of charges.

The notary is the public official who makes this contract legal. He certifies that the parties sign the contract properly. He keeps the original document in his files in case any problem should arise later. Note that the notary does not certify that all statements are true, only that the parties have sworn to them.

The purchase deed must be registered with the Spanish Property Registry (Registro de la Propiedad). Once it is done, the title deed (Escritura Pública de Compra-Venta) fully assures your title: the registered contract makes you the owner of the property.

The registration of the house is also important for tax purposes, the real estate tax (IBI tax) must be paid every year since you could be fined by the tax authorities.

If you cannot be present to sign the contract, you can make a power of attorney allowing another person to sign it for you, if necessary.

You will receive the keys of your property upon signature of the contract in the presence of a notary.

These are only general guidelines and not definitive statements of the law. All questions about the law's applications to individual cases shall be directed to a Spanish lawyer.

Article by iAbogado Servicios Jurídicos SL (Madrid, Spain). Visit www.SpainLawyer.com for more original content like this.