Spain has become a popular destination for foreigners looking to buy a second home, for holidays, retirement or investment. Demand for housing remains high in 2024, including in Spain, especially in urban and coastal areas. Real estate prices rose by an average of 4.5% compared to the previous year, with the Illes Balears region showing the highest real estate prices (€4,587 per square metre). However, buying a home in Spain involves several legal and financial steps that differ from other European countries. Spanish lawyer Anna María Atanasova provides a clear overview of what you need to know.
Step 1: Obtain NIE-number
The NIE number (“Número de Identificación de Extranjeros”) is mandatory for any financial transaction in Spain, including buying a property. This identification number can be obtained at a Spanish police station, through a Spanish consulate in your home country or with the assistance of a legal advisor.
While not mandatory, having a Spanish bank account can facilitate the process, especially for paying related costs and fees.
Step 2: Finding and reserving the property
Once you find a property, paying a reservation fee (around 1% of the purchase price) takes it off the market, securing it. Regularly, this reservation fee is returned in case the property is not finally acquired.
Step 3: Legal checks and Due Dilligence
Prior to signing any contracts, it is crucial to conduct due diligence, which involves verifying the property’s ownership, checking for any outstanding debts or encumbrances and ensuring that the property is legally compliant and properly registered.
Due diligence is a critical step to ensure that the property is free from any legal issues that could affect the ownership rights.
The most important steps are the following:
1. Verifying the Ownership:
Confirm that the seller has the legal right to sell the property. This prevents future disputes over ownership.
2. Checking for Debts and Encumbrances:
Identify any existing mortgages, liens, or other debts tied to the property. Buying a property with outstanding debts can make you liable for them.
3. Legal Compliance:
Ensure the property complies with local destination plans and building regulations. This includes checking for any illegal or non-registered constructions or pending fines.
4. Reviewing Property Boundaries:
Validate the property boundaries to ensure there are no encroachments or disputes with neighboring properties.
5. Environmental Assessments:
Evaluate if there are any environmental risks associated with the property, such as being in a flood-prone area.
6. Utility Verification:
Confirm that all utility connections (water, electricity, gas) are legally installed and fully functional.
Step 4: Signing the preliminary contract
The preliminary contract, known as “Contrato de Arras“, generally entails paying a deposit amount ranging between 5% and 10%. If either party withdraws, financial penalties may apply. There are three main types of “Arras Contract”:
Arras Confirmatorias
These deposits confirm the commitment to the transaction. If breached, the contract can be enforced or damages can be claimed. It’s a way to show serious intent to follow through with the transaction.
Arras Penitenciales
Also known as “penalty deposits”. These allow either party to withdraw from the contract with a penalty. If the buyer withdraws, they lose the deposit. If the seller withdraws, they must return the deposit to the buyer, usually doubled. This type provides a clear financial consequence for backing out of the agreement.
Arras Penales
These punitive deposits enforce the contract and include additional penalties for breach. Beyond just the return or forfeiture of the deposit, they might include further financial penalties stipulated in the contract.
Step 5: financing the purchase
Non-residents can obtain mortgages from Spanish banks. Typically, a foreign buyer needs to provide a 30% deposit, as mortgages usually cover up to 70% of the property’s sale price. This deposit, commonly referred to as the mortgage entry, is essential but not sufficient on its own. Additionally, it’s also necessary to ensure you have enough funds to cover additional costs and taxes associated with the purchase.
Step 6: Understand Spanishs taxes and additional costs
Purchasing a property in Spain involves various fees, that normally include:
- Notary fees Typically, 0.1 – 0.4% of the property price;
- Land Registry fees Around 0.4-1% of the property price;
- Transfer Tax (ITP) 6-10% of the property price, depending on the region;
- VAT (for new properties)
10%. If VAT is applied, ITP hasn´t to be paid; - AJD (for new properties)
A documentation tax around 0.5 – 1.5%; - Legal fees
Usually 1% of the property price.
Step 7: Finalizing the purchase
The final step is signing the public deed (Escritura Pública) in front of a Spanish Notary. The Notary verifies all identities, ensures all documents are correct and records the transaction. After signing, the property must be registered in the Land
Registry.
Comparisons with other European countries
Compared to Germany and the Netherlands, Spain offers a more straightforward process for foreign buyers, with fewer bureaucratic hurdles and competitive property prices. The roles of Notaries and Real Estate Lawyers are crucial in simplifying the transaction.
Conclusion
Buying a second home in Spain as a foreigner involves several steps, from obtaining an NIE-number to finalizing the purchase with a Notary. With the right guidance and professional assistance, the process can be smooth and rewarding.
LexQuire provides comprehensive legal support for foreigners buying a property in Spain. Our Spanish law firm offers personalized advice, assists with negotiations and handles all necessary paperwork to ensure a smooth transaction.
