Have you always dreamed of a house purchase in Spain? Your own cozy townhouse in a typical Spanish village? A romantic ´finca´ in the countryside or a luxury apartment on the coast for your own holiday and rental? If you have serious plans to turn this dream into reality, remember that the Spanish buying process looks quite different than in Northern Europe. And also you have to deal with a different language, laws and customs .
Since this financial investment is likely to be one of the biggest in your life, you would do well to read this page with 10 legal tips for a problem-free, stress-free and above all safe purchase. After all, these of course have quite a different perspective than the sales information of the broker.
Legal assistant at Spanish law firm
My name is Ariane van Wijk and in 2006 I immigrated to sunny Andalusia. Since 2013, I enjoy working at a Spanish law firm specialized in real estate and inheritance law. In this job I assist mainly foreign clients. Also I have bought a house myself twice, so I speak from both professional and personal experience and therefore know exactly which problems and cultural differences foreign buyers encounter.
Necessity for a legal investigation by the lawyer in Spain
On this web page, I give general information. Every Spanish purchase however always requires an individual legal assessment based on the documentation and current registrations. This in additional information from external parties such as government agencies, the Town Hall and often an architect. As well as the individual circumstances and wishes of the buyer and seller. It is good to know the most important points in which the Spanish process. They are probably different from what you are used to:
Differences in the buying process in Spain
- NOTARY, AGENT AND LAWYER: The Spanish notary and real estate agent have a more limited role in the process. He is not concerned with the legality of the house, any debts or the various payments. That is why it is common to hire a lawyer who conducts a legal investigation. Also he represents you legally from the reservation to the closing balance meeting.
- LAND REGISTRY VS. CADASTRE: In Spain you have to deal with 2 separate authorities for registering real estate, the Land Registry and Cadastre. These have different functions and often their data does not match, especially in rural areas. Your lawyer should assess whether any changes are necessary before, during or after the purchase.
- AUTONOMOUS STATES: The 17 autonomous states within Spain each have their own laws, taxes and institutions. Therefore, several concepts in this video relate specifically to Andalusia. Such as the DAFO certificate, RTA rental license or the ITP transfer tax.
Legal value of the reservation and the private purchase contract
Many potential clients contact our law firm with happy news. “They have bought a house” and now need a lawyer when they only mean that they have a verbal price agreement. However, the house is not yours until you or your lawyer sign the purchase deed. Neither the reservation contract nor the private purchase contract can oblige anyone to buy or sell a house. Nevertheless, you can lose the amounts paid up to that point. Also you can miss out on your dream home. Or end up buying a house with legal problems or debts.
House purchase in Spain? Do it safely!
There are buyers who just sign ány contract or even title deeds of sale. This, without a doubt, is obviously not wise. On the other hand, there are also people who are too scared by wild cowboy stories on the internet. And that is not necessary either. Surely, you can really safely buy a house in Spain, provided you know what you are doing. So, just take some time to watch this important video to the end to be aware of the important aspects in the buying process .
10 Legal tips for a house purchase in Spain
Tip 1. Hire a specialized and independent lawyer
The only professional who can correctly interpret the information and documentation of a real estate is a lawyer with experience in property or real estate law. Not a real estate agent nor a ´gestor´. So please do not try to save on these attorney fees. If things are really wrong with your purchase, then your financial loss will be way worse. Incidentally, this does not only apply to rural areas, as people sometimes think. Certainly also to houses within urban areas.
Legal protection by lawyer when buying a new home
Unlike real estate, the legal profession is a protected profession. The lawyer must have his license and mandatory liability insurance. He, therefore, has a professional responsibility. Despite that, I would always recommend that you find an independent lawyer for conveyancing in Spain yourself. So, especially not the real estate agent’s standard lawyer.
Responsibilities Spanish lawyer during the purchase process
In addition to being safe, hiring a lawyer is also very practical. This because if you issue a power of attorney, you do not have to be present in Spain during the process.
- COSTS CALCULATION: Your lawyer calculates all Costs and Taxes and gives you tax advice. This way you can determine your buying budget.
- RESERVATION CONTRACT: He checks the agent´s reservation contract if desired and handles all payments during the process.
- EXTRA SERVICES: Also he provides all kinds of extra services with third parties on behalf of his client. Such as applying for a NIE tax number, bank account, mortgage, valuation, structural survey, topographical report, rental license, etc.
- LEGAL INVESTIGATION: However, the most crucial task of the lawyer is to carry out the legal investigation into legality and debts. For this, he assesses all documents and he contacts with the relevant authorities. For example the Land Registry, Cadastre, Town Hall, Tax Authorities, etc. Also he assesses whether additional deeds need to be signed.
- NEGOTIATIONS: He negotiates secondary purchase conditions with the seller. In this he often has added value due to his experience and knowledge.
- PRIVATE PURCHASE CONTRACT: If there is the green light after his investigation, he will draw up an extended private purchase contract to guarantee your 10% down payment until the purchase at the notary.
- SIGNING OF DEEDS: During completion, your lawyer ensures the correct signing of all deeds and if they are according to the previous agreements. Such as deed of sale and any mortgage deed, new construction declarations, country border corrections, etc.
- AFTER-SALES: After the purchase, he finally takes care of the tax payments, conversion of registrations, service contracts and collections, settlement of retention and gives personal advice on wills and inheritance law.
Costs for the lawyer and the legal investigation
The attorney’s fees for the legal investigation are usually 1% + VAT. Would like to receive an example offer for the total buyer costs of a purchase within Andalusia – these are approximately 12%? Please just send me an email with your budget.
Tip 2. Find your own real estate agent
In the province of Malaga with its Costa del Sol, the buyer usually pays no agent´s commission. The seller, on the other hand, will pay 5% plus VAT. If there are 2 different brokers involved, they share the commission. It is therefore wise to find a good purchase agent who represents your own interests. An experienced real estate agent knows the local market. He knows prices and has already seen many houses inside, which saves you a lot of time.
Keep in mind that he will initially try to sell you houses from his own portfolio – of course, because of the double commission. But besides this, he can show you any house that is on the market. It is important that you do not contact a sales broker yourself, because then they immediately registere you as a client. And you put your own broker aside in terms of commission…
The reservation contract of the real estate agent
Once you find your dream home and agree on a verbal price, you should sing a reservation contract as soon as possible. This to take the house off the market for a few weeks during the first part of the legal investigation.
It is wise to have the contract checked or corrected by your lawyer. For example that the house needs to be fully registered, debt-free and without tenants or occupants. And of course, preferably only pay the reservation fee of 3 to 6 thousand Euros after you and the vendor sign. The reservation contract is a short contract of usually 1.5 pages with at least:
- the details of both parties
- the property (Land Registry and Cadaster number, address)
- the price
- the reservation sum
- at least 1 deadline for the private purchase contract and/or completion of the sale
If necessary, short clauses could be included. For example: ‘price including furniture, subject to mortgage or including DAFO-costs in the countryside’.
Difference between ´Contrato de Arras´ and reservation contract
A reservation in which the seller takes on the same financial risk as the buyer we call a ´Contrato de Arras´. However, from a legal point of view this is actually a kind of short private purchase contract with the 10% down payment.
If the seller has his own lawyer, the real estate agent -from the moment of signing- only has to take care of the furniture list and the final inspection of the house.
Reference for a good real estate agent in the Malaga province (Costa del Sol)
Through the opinions of our clients I know that there are very professional agents with a lot of added value, but unfortunately also downright bad ones. So always check whether you find enough positive, external references, see whether the geographical work area matches and if the contact is pleasant. There are also agents with a professional license, but this plays a lesser role in Spain. If you would like a reference for a good real estate agent in the province of Malaga based on area, language or specialty, please just send me an email.
Tip 3. Negotiate the DAFO-costs for rural properties
Are you planning to buy a country house, cortijo or finca in the countryside of Andalusia? Then take into account a different legal status of these houses, because in principle the Junta de Andalucia doesn´t allow building, reforming or renovating ‘rustico’. So: do no digging a swimming pool, expanding a garage, constructing terraces, brick outdoor kitchens, etc. You will not receive a permit for this and aerial photos easily demonstrate changes. Illegal indoor renovations are more difficult to prove, but if you get the police on the doorstep because your neighbour complains about the noise, you really do get a legal case against you.
N.B. By the end of 2023 a new urban law is expected to enter in force. This law will make it possible to get a building license in the countryside but only under very limited conditions. To start, it will only be for house on plots of 2,5 hectare (25.000 m2) and there are more limitations.Ask your lawyer for more information.
Normal countryside? Tolerance illegal constructions after 6 years.
However, because in recent decades a lot was built in the countryside and the Town Hall often had a role in this. Therefore the Junta drew a line under this practice. Buildings of 6 years and older are now officially tolerated when it comes to normal countryside.
It is therefore no longer possible to have legal proceedings involving mandatory demolition and a fine of 70% of the new construction value. If you buy in a protected nature area, the calculations are usually made back from the protection date. And new illegal buildings never expire.
Value and costs of the DAFO-certificate
For a few years now, it has been possible to get the current legal status of the Town Hall on paper through the DAFO-certificate . It is not mandatory to buy or sell with a DAFO, but sooner or later you will have to face these costs and they easily are between € 6.000 – € 12 .000. The advice is therefore to negotiate that the seller pays this and agree on a price including DAFO costs.
Because the DAFO procedure takes longer than the purchase, the lawyer checks any risks, deducts the estimated costs from the sale price and settles with the seller later.
Builing, reconstructing or rennovating in the rural countryside
So, the DAFO certificate from the Municipality states in black and white that all buildings are old enough, but also that there are no legal proceedings and the service facilities (electricity, water – which is often an issue – and septic tank) meet the legal standards. In addition, with a DAFO you can apply for small building licenses in the context of hygiene, safety and quality of life.
The exact interpretation of this depends on and the Municipal Architect. For your information: even if your house already has a DAFO, the lawyer has to check everything again. In addition, the certificate is also no guarantee that the registrations in the Land Registry and Cadastre of the house and the land are correct. A thorough legal investigation will therefore always be necessary.
N.B. By the end of 2023 a new, more flexible law is expected to enter in force. This law will make it easier to get a renovation building license in the countryside when you have a DAFO-certificate.Ask your lawyer for more information.
Tip 4. Check your First Occupation License for RTA rental
Do you want to rent out your new house in Andalusia to tourists, start a B&B or just rent out a few rooms? Then you need an RTA-rental license from the Registro de Turismo de Andalusia. With the corresponding RTA-number you can register on the well-known rental sites. There is a list of practical conditions that you must meet, such as having a fire extinguisher, first aid kit and complaint forms.
IRNR income tax for non-fiscal residents over rental profit
The registry holds announced checks and you must declare the profit via the IRNR income tax for non-tax residents (this is about 19%) or the normal IRPF. You must also register guests via a police platform within 24 hours of arrival, just like with hotels.
Licence of First Occupation (LPO) for your house purchase in Spain
Do you want to rent out an urban home to tourists (this means less than 2 months)? Then you need to have a First Occupation License (Licencia de Primera Ocupacion). For older homes, the BUYER often still has to apply for this. This is because the LPO only became mandatory in the 80s and 90s and this LPO license is not a legal requirement when selling. In total, a new LPO costs between 1500 and 2000 Euros.
However, if the house does not meet current technical requirements, for example if there is no individual water contract, you may not apply for an LPO and therefore can´t rent out to tourists. So, if rental is crucial for your purchase and you buy an older urban house or apartment, you can possibly hire an architect to check this theme with the Town Hall.
Opening license for a business (licencia de apertura)
There are over 20 different RTA licenses. There are specific rules in the countryside that you need to know if you want to start a B&B with breakfast or Casa Rural. I recommend that you check with your lawyer. In addition, it is important to know that applying for an opening license for a company is a long, expensive procedure. Of its future admittion you can’t get any guarantees before your purchase. Also there are (smaller) town halls that don´t have enough capacity for the application of this license.
These are the limits of number of beds:
- Rustic B&B: 20 beds
- Urban B&B: 6 beds
- Urban total rental: 15 beds
Be aware of insurance and Community of Owners
Check whether you should expend your liability insurance needs for commercial rental. Imagine someone slipping next to your pool….
Have your lawyer check with the Community (Comunidad) whether there are any restrictions on tourist rental. Officially, the community needs to register this limitation in the Nota Simple with date before the RTA License. However, this is under discussion at the moment at the higher court.
Owners with an RTA license may also have to pay extra. These kinds of decisions require a 67% majority in the Community vote.
Tip 5. Count with 6 to 8 weeks for the binding mortgage offer
Since a law change in 2019, the Spanish mortgage process takes significantly longer. This causes problems with the parallel purchase process. Many sellers are willing to sign a reservation contract subject to a Spanish mortgage, but not the private purchase contract. However, the reservation usually only is valid for 2 to 4 weeks. However, the binding mortgage offer, the FEIN-offer, quickly takes 6 to 8 weeks to be issued by the bank.
So, that is a risk if your bank manager promises you certain conditions but the risk department after all rejects your application. My advice is therefore to try to negotiate a reservation contract subject to mortgage for 6 to 8 weeks.
Early NIE-number application for a house purchase in Spain with mortgage
In addition, make sure that you request your tax NIE-number as early as possible in the process. This because this involves long waiting times at the Police and the risk department of the bank does not start the assessment without this number. The FEIN offer remains valid for 3 months and a valuation for 6 months.
Requirements Spanish mortgage
Your lawyer can take care of the entire mortgage application for you up to the signing of the mortgage deed. He will also inform you about all conditions such as interest rate, term, discount points for secondary products such as insurance, commissions for opening or early cancellation, etc. How much mortgage capital you can get depends on 5 factors:
- NET ANNUAL INCOLME: You can spend approximately 30% of your last net annual income on housing costs and debts in Spain and your own country.
- VALUATION: The valuation (taxation) can only be done by an official appraiser. Keep in mind that these are usually lower than market value, especially in rural areas. Sometimes they may also include additional legal requirements.
- RESIDENCY: With residency in Spain you can usually get up to 80% financing of the appraisal values and otherwise up to 70%
- TYPE OF HOUSE: Spanish banks also look at the type of house. And not all banks give mortgages in rural a reas. If they do, the percentage is often at least 10% lower.
- INTERNAL TARGETS: The risk department does not only look at the situation of the house or person. It also looks after its own internal targets.
Tip 6. Check financial, legal and practical differences in new build purchase
Most agents correctly tell you that you pay VAT on a new build purchase from a developer instead of the cheaper transfer tax. What they often don’t tell you, however, is that in addition to VAT, you also pay AJD-tax on the registered value. The total buyer costs are therefore quite a bit higher than for existing buildings.
Bank guarantee (aval) and insurance for new build
Also know that the developer is obliged to secure your paid amounts at the bank. So, he has to finance the project itself with mortgages. This is to prevent the buyer from losing his money if the company were to go bankrupt.
Your lawyer will check this bank guarantee, or ´aval´, for you and also the official penalty provisions in the private purchase contract in the event of delays. This of course is also an important point of interest .
Buying from a real estate developer
Due to the high demand for new build contractions, developers are often much more dominant than normal sellers. For example, they work with their own inflexible contracts as standard. Also they put a lot of pressure on the buyers at the end of construction for a quick completion. This is despite the fact that the legal documentation is often not yet in order. So, all the risks then are transferred on to the buyer.
Your lawyer therefore always first requires the End of Construction certificate, the License of First Occupation and the Boletin certificates for water and electricity. Only after this he will sign the purchase deed.
New service contracts, IBI property tax and Community of Owners
Another tip for new construction. Keep in mind that setting up new service contracts can sometimes take up to 8 weeks after completion. You therefore cannot rely on well-intentioned promises from the developer that you can use construction electricity or water. So don’t plan your long-desired vacation shortly after the transfer.
Furthermore, costs such as the IBI tax and especially the ´Comunidad´ (Community of Owners) you can´t predict in advance. This simple because they are not yet determined.
Tip 7. Be critical of black money deals or furniture tricks
Unfortunately, it is still a problem for some home buyers that they are put under pressure by the seller with black money deals. This in order to save his Capital Gain Tax . Despite the fact that this saves you ITP transfer tax at the moment, there are still a number of important disadvantages.
Besides being immoral and illegal, it is also quite impractical and unprofitable in the long run. You are of course not allowed to large amounts of cash by airplane. Also, someone could rob you and you need to be present in person at completion at the notary. This because your lawyer can´t facilitate illegal practices.
In addition, these practices are fortunately becoming less common. And if you ever sell with a profit again, you still have to pay the profit tax on the amount yourself and this is currently 19% for non-residents. Remember that you can always say ‘no’ to the deal or, if necessary, compensate the financial difference for the seller.
Value of the furniture in the deed of a house purchase in Spain
To avoid profit tax, some sellers sometimes propose an extremely high value for the furniture as well. This value is included in the purchase deed, but does not count for the profit tax. Only half of the ITP transfer tax is charged on the declared furniture price of a house purchase in Spain.
Nevertheless, the same disadvantage applies to this that you may have to pay the profit tax yourself in the future. For this you can receive an after-assessment from the tax office . You however cannot refuse a separate amount for the furniture completely. The reason for is because then the seller can take everything including the kitchen and boiler. But keep the amount reasonable, for example a up to 10% of the purchase price.
Tip 8. Ask for your lawyer about the Community of Owners and urbanization
Spanish lawyers normally request a certificate from the Association/Community of Owners to guarantee that the seller has no outstanding debts. But often they do not conduct further research into this Comunidad itself. This is quite a complicated and substantive theme. Especially if there are debts or additional future expenses have already been approved in the annual meeting. The content then ought to be looked at and in some cases the lawyer can negotiate that the seller pays for these costs.
Therefore, ask your lawyer for the minutes of the annual meeting. And also whether he can look at whether there are any specifics that you need to know before the house purchase in Spain. It is also useful to receive the general regulations. For example with the opening times of the swimming pool or any rental restrictions.
Development costs of the Town Hall for the urbanization
The comunidad and urbanizacion are 2 terms that are sometimes mixed up. However, an urbanization is a neighbourhood at the municipal level. In new developed areas it is customary for residents to jointly contribute to the development costs in the future, as a result of which the district has not yet been administratively completed. This can be, for example, for paving, street lighting and green zones.
Sometimes, however, this also still applies to older neighbourhoods and you can therefore still be faced with unpleasant financial surprises. This is one of the reasons why it is also wise to hire an experienced lawyer for urban homes. He checks these matters through the zoning plan of the Town Hall.
Tip 9. Think about technical risks (structural survey, hidden defects and insurance)
It is always possible to hire an architect for a structural survey of your new house. For an amount of 500 to 600 Euros this certainly can’t hurt. You can also ask him specific questions such as ‘What could be the cause of these damp spots, or do cracks in the wall indicate architectural problems’.
Keep in mind, however, that an architect cannot see into the walls, nor under the ground, or into the future. It is therefore not an insurance policy. If something turns out to be wrong afterward, this does not mean that the architect is responsible for these costs.
Rights of the buyer for hidden defects after a house purchase in Spain
In Spain you can claim hidden defects up to 6 months after a new house purchase in Spain. But it is not easy for several reasons. In any case, remember that any lawsuits in Spain are always very expensive and time-consuming. So, always make sure that a thorough final check is done on the house on the day before the house purchase.
If you are not in Spain yourself, you can instruct your real estate agent to do this for you. Sometimes even through a video meeting. Has the furniture been left according to the furniture list? Is the house clean and tidy? Are there no leaks? Is the pool pump working? Is the water and electricity still active? If something would not be right, your lawyer can always withhold money from the sale price during the transfer as compensation.
Don´t forget your home insurance, especially in the countryside!
It is also always important to request a quote for good home insurance before the signing at the notary. This you can activate as soon as the signatures are placed. This is especially important in rural areas. If your house burns down, you will not get a permit for rebuilding. That is why you should always have well-covering insurance.
In addition, it is of course always wise to check your new home for fire and burglary safety.
Tip 10. Finally home owner and partners or resident? Then you need a will.
After the transfer at the notary, your lawyer takes care of the correct registrations, tax payments, the transfer of the service contracts and setting up direct debits. You will receive all original documentation and invoices in the final balance meeting a few months after completion.
Keep these well together with bank statements and official invoices for any value-increasing renovations. These are deductible from any future Capital Gain Tax. Did you buy with a Spanish mortgage? Then ask for the final balance at the bank.
And then in terms of inheritance law: Are you a non-married couple or do you want to become a resident in Spain? Do you in addition, like most foreign buyers, also want the surviving spouse to inherit the house? Then you need a Spanish will that designates this desired heir and your national inheritance law.
High inheritance tax for non-married partners
Your lawyer provides tailor-made advice on Spanish inheritance law and inheritance tax . In Andalusia, for example, there is no inheritance tax between spouses and first-degree relatives such as children. However, if you are not married and you want to avoid high inheritance tax for the survivor, then you must also register your official partnership in Andalusia through the Registro de Pareja de Hecho, in addition to your will.
The other option is to get married, which also immediately gives a tax advantage in your own country if you have joint assets there and don´t have your partnership registered yet.
Personal tips for you house purchase in Spain
These were my legal tips for a safe property purchase in Spain according to current standards and laws. I also have a few short personal recommendations for new homeowners in Spain: immediately think about environmental and especially water-saving investments, especially if you have a garden or swimming pool.
In addition, your time in Spain will be so much more fun if you learn the language and this is much appreciated by the Spaniards. In addition, stay positive, even if you occasionally encounter cultural differences or Spanish bureaucracy.
Example offer purchase costs or referral for real estate agent
As I said, you can always request a sample quote for all costs and taxes a purchase in Andalusia, a reference for a real estate agent in this area. Good luck in finding your dream home!