With regard to property sales, LUXURY VILLA SALES (LVS) always recommends choosing a qualified lawyer to represent your interests on the Costa del Sol. Once you have decided you are going to buy a property here, it is advisable and very useful to arrange to meet with a lawyer while you are here on the Costa del Sol, even if you have not yet chosen a particular property, because once you are back in your home country it will be more difficult for you to choose a lawyer long-distance.
Current Legislation requires an individual to appear before a Notary to sign a public deed when buying or selling a property, and to have a Foreigners Identity Number (N.I.E.). Your lawyer can help you not only with handling this but also in orientating you in other necessary aspects of the transaction (opening a bank account, home insurance, placing standing orders for paying bills, communicating with the cadastre office to inform on the change of ownership of the property.
Your lawyer will also perform due diligence on the property chosen in order to ascertain whether it is free from charges in the Land Registry, whether there are any planning charges, if it is up-to-date with the payment of taxes, community service charges and any other expenses. Normally, and if the sales price is not paid in full at the beginning, a private sales contract is drawn up reflecting all the terms and conditions of the transaction - the registration details of the property, sales price, form of payment, deadline for exchanging deeds, delivery date, etc. Upon signing this private contract a down-payment is made on account of the price, which varies considerably depending on the sales conditions and the deadline for signing the deed. Generally speaking, if the transaction is to be concluded within 30 to 60 days, the amount would be 10% of the total agreed price.
In the case of new-builds, payments logically have to be made during the construction period and, according to the Building Regulations Act 38/1999 (LOE), all payments made on account before the conclusion of the building work must be guaranteed by a bank or an insurance company; if the property is not finished on the date stipulated, the buyer is entitled to have the amounts paid on account reimbursed to him plus any applicable interest at the legal rate. This law also requires the developer to take out TEN-YEAR INSURANCE to cover any structural defects there might be in the construction.
When the sales price is paid in full the seller will convey the property to the buyer, free from liens and encumbrances. The sales deed will be signed in the presence of a notary, and then sent to the Tax Authorities for payment of the taxes corresponding to the operation and other expenses which we list below:
PROPERTY TRANSFER TAX (I.T.P.) : This tax, which is generally payable by the buyer, is charged on the purchase of any property, providing that the seller is not the developer or his regular business is not property development or real estate.
If the minimum tax value of the property as set by the Regional Government is higher than the price, that minimum tax value is applied: 8% is applied to the first tranche up to 400,000€; 9% is applied to the tranche between 400,000€ and 700,000€; 10% is applied to the tranche in excess of 700,000€
Generally speaking, this is charged on any property sale when the seller is the developer or regularly sells new properties (first transfer of ownership). The normal rate is 10% for VAT and 1.5% for Stamp Duty.
In some cases the VAT rate can be 21% and Stamp Duty can be 2%. Your lawyer will advise you on which tax is applicable to your sales transaction and at which rate.
Once the pertinent taxes have been paid, the deed will be presented at the Land Registry for registration. The Registry fees vary depending on the amount involved and the length of the deed.
Lawyer’s fees for buying a property are usually 1% of the sales price, plus VAT in force at any given time. However, in transactions higher than a certain figure, the fees are usually reduced at the discretion of each lawyer and depending on the complexity of the matter.
The lawyer will also handle the minor expenses of the transaction such as administrative expenses and those for collecting, processing and presenting documents. These do not normally amount to more than 1,000€.