So, you've found the perfect property in Spain and now want to invest? Unsure of your next steps? The following process outlines the general buying process for your Spanish property. You must:
- sign an initial contract called the 'opcion de compra'
- arrange the mortgage & pay the deposit for the property
- instruct the notary
Opcion de Compra
Once you have had an offer accepted on a property, a legal document known as the ‘opcion de compra’ will be drawn up and a deposit of around 5-10% becomes due. It is normal to give your deposit to the agent or your lawyer who will hold it safely until the purchase is completed. The ‘opcion de compra’ is a legally binding contract and is written in Spanish although you can ask for a translation too. The contract contains the details of the vendor, purchaser & the agent, the purchase price, a full description of the property, including floor space measurements, any fixtures or fittings that are included in the price, who is responsible for what fees, the mortgage arrangements, and any get out clauses that have been agreed & corresponding penalties should the buyer or vendor withdraw from the sale. The get out clauses are important if you are unsure about the success of your mortgage application, or if the vendor has agreed to certain repairs in the property.
For new build properties, there will be specific payment plans that you will need to agree with the agent or the developer.
You may also want to sign an agreement which protects against gazumping, or from the seller withdrawing - the 'clause crio'. This security deposit will be lost if you decide not to proceed, but the seller will have to pay you twice that sum if they decide to withdraw. The security deposit (along with your initial deposit) is subtracted from the purchase price when completion day arrives.
If you are thinking of arranging a Spanish mortgage, you can expect to get 60-70% of the purchase price if you are non-resident. In a similar fashion to those in the UK, the mortgage company will send a valuer to the property to ensure that the loan is proportionate. Associated fees and charges can be negotiable. Life assurance is required to take out the mortgage. If your Spanish is a little rusty, you can employ a mortgage broker to liaise between yourself and the bank. The bank will also need proof of income (pay slips or accounts if self-employed) and copies of your tax return. Of course, a Spanish bank account will also have to be opened.
As you near the completion date, you will need to instruct a Notary. The Notary is a public official who oversees all property transactions in the country. It is a legal requirement to use a Notary – the notary is the only person who can transfer your name on to the title deeds which confirms you are the legal owner. The Notary is responsible for ensuring all the documentation used in property transfers is true and legal – confirming the vendor’s title deed, checking for any outstanding mortgages on the property, transferring the deeds etc. The Notary fee is controlled by the state.
Once finance is in place, you need to instruct the notary to request the funds in time for the completion date. Make sure you have buildings insurance in place for this date. On the date of completion, an Escritura (final deed of sale) will be signed by the buyer, the vendor & the notary. If you cannot be present for this signing, you can give power of attorney to someone to sign on your behalf. The remainder of the purchase price must be paid at this time and the associated taxes should be paid within 30 days. Your title deeds will be sent to you a couple of months later, and the original will be returned to the notary for safe-keeping. Copies are available on request.