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The Process of Buying a Property in Spain

Similar to other countries, prices are negotiable; the asking price serves as a guide, not a fixed demand. Unless the price is exceptionally appealing or you face competing buyers, initiating negotiations below the asking price is logical, though avoid offensively low offers.

A good starting point for negotiations could be making an offer approximately 5% lower than the initial asking price, and continue from there. However, it all depends on market values and other factors, so make sure you compare different prices for similar properties in the same area.

Price negotiations are often verbal, but they can also be done via email or through the real estate agent that manages the property. Once an agreement is reached, a written contract is drafted, usually a reservation contract where the buyer pays the seller a certain amount as deposit (contrato de arras) to ensure they have the exclusive right to purchase the property.

Reservation contract and deposit

Usually, a deposit is paid as part of the sales price and is treated as “arras penitenciales”, which, for purchase contracts, is regulated by the Spanish Civil Code in article 1454. The amount for this deposit payment is usually around 10% of the sale price, but it can be freely agreed upon by both parties.

The key features regarding this contract and the deposit are:

• The deposit is paid by the buyer to the seller as part of the purchase price.
• A maximum date must be set before which the sale must be completed.
• If the sale is not completed due to the buyer's fault, the seller may keep the amount paid as a deposit and cancel the contract.
• If the sale is not completed due to the seller's fault, the buyer will receive from the seller twice the amount paid as a deposit.

There are also other ways to treat the deposit with their own particular set of quirks (arras confirmatorias / arras penales). I highly recommend having your Spanish solicitor of choice review the reservation contract and clarify any doubts you may have before signing, since it is a binding contract with legal and financial implications.

All terms, conditions and agreements in all contracts cannot be contrary to law. The reservation contract is legally binding for both parties and should contain the following minimum terms and conditions:

• Detailed property description: property description with square meters, location, cadastre reference, occupant situation and any other relevant information.
• Price: amount, payment method, installments and/or any other agreements.
• Rental status: whether the property is rented or not as well as if it is free of legal or illegal occupants.
• Charges and encumbrances: detailed description of any charges or encumbrances on the property if any, and the obligation of the seller to free the property from such charges before the property sale takes place.

Upon review and acceptance, both parties sign the contract and the buyer pays the agreed deposit, usually between 5% to 10% of the purchase price. The reservation contract (contrato de arras) comes into effect only after the deposit payment is made.

Lawyer, Notary Public and Land Registry

Employing a lawyer for due diligence is highly recommended as there are many legal documents to review and ensure the property is free of charges, encumbrances, disciplinary procedures and any other requirements that may not be fully met and must be completed before signing the title deeds.

If the proper due diligence is not completed before signing the deeds, the buyer will most likely have to bear the consequences which may lead to unexpected legal issues or economic losses.

On or before the agreed date in the reservation contract, the title deeds must be signed before a notary public in Spain. This means that the buyer must have paid or pay on that day the total amount to the seller and the seller must hand over the keys of the property to the buyer (unless specifically agreed to otherwise).

From the moment both parties sign the deeds, the seller is no longer the legal owner of the property, therefore, it is highly recommended that the buyer ensures the property from the day the deeds are signed and handles all necessary preparations beforehand.

Notary fees

By law, if no agreement is reached between the parties, the buyer must pay the first copy of the deeds and each party pays their own copies should they request them.

However, in practice, usually the buyer pays for the notary fees for the title deeds of the escritura de compraventa and the seller pays for all costs prior to the signing of the sales deeds.

It is important to know that, if any other title deeds need to be signed before the property is sold (for example, a mortgage cancellation, an inheritance, property extension, etc…) there is a title deed that needs to be signed for said mortgage cancellation to be officially recorded that will later need to be registered. The costs associated with any title deeds that need to be signed before the sale transaction are to be paid by the seller (unless agreed otherwise by both parties).

In summary, notary fees when purchasing a property can vary based on the length of the document itself and other variables that will affect the price, but generally it will be between 0.5% and 0.8% of the property value.

The notary fees are calculated based on many parameters such as the number of pages on the original deeds, the number of authorised copies (copia autorizada), the number of simple copies (copia simple), and others stipulated in Real Decreto 1426/1989, de 17 de noviembre.

Land Registry

The buyer is responsible for registering the purchase deeds after being signed before the notary public. Your lawyer as well as the notary public might offer this service for a fee. Bearing in mind that there are tax forms to fill in that vary by region in Spain, I advise you to take on the services of a professional to complete the registration procedure.

The Land Registry is a public institution that contains all information relating to a property and its legal ownership. Any change in the ownership of the property is recorded there, as well as its legal status, such as mortgages, seizures, transfers, inheritance, etc…

Registration fees are part of the acquisition costs that the buyer must take into account. Payment is made to the registrar responsible for putting the new property in your name and registering it in the Land Registry.

The price of these fees is usually based on the value of the property. The Land Registry fees are stipulated in the Real Decreto 1426/1989, de 17 de noviembre and are applied progressively. They may vary slightly depending on the autonomous community. There are limits to the total amount for the Land Registry fees, which will never be less than 24,04€ or more than 2.181,67€.

For example, if you purchase a property for the price of 100,000€, considering the fees mentioned above, the total fees can be calculated as follows:

24,04€ + 1,75€ x 24 + 1,25€ x 30 + 0,75€ x 40 = 133,54€ (approx)

The first 24.04€ would refer to the first 6,010.12€, and the following three values would correspond to the following price scales described in the above table, up to 100,000€.

The documentation required to register the title deeds in the Land Registry office  (Registro de la Propiedad) after the sale has been completed is the following:

• A notarised copy of the title deeds (copia autorizada de la escritura).
• The tax form (modelo 600) for the ITP.
• Proof of payment of the municipal capital gains tax (plusvalía municipal).

This documentation needs to be submitted in person at the Land Registry office responsible for the territory where the property is located, electronically or directly through the notary who granted the deed as stated in the official Land Registry blog.

Cost of buying a property in Spain

As a general rule of thumb, the cost of buying a property in Spain is somewhere between 12% and 15% of the property price, depending on the property type, the region, legal fees and other variables. These costs include taxes such as VAT or ITP, as well as notary, registration and agency fees.

Utility bills

Setting up utilities is a tedious process that you need to go through after purchasing a property in Spain.

First of all, it is important you compare utility providers for electricity, gas, internet and others, as there can be significant differences in price and quality of service. If you aren’t able to do this yourself, there are companies and professionals who can do this for you, which might be the best choice in the long run as it can result in lower bills and a better service overall.

Additionally, regarding installation and required certificates for certain installations, it is important to only employ qualified professionals in their field, as it is an essential part of the property and setting up the right capacity for the property is key to its longevity.

Sometimes the property might have existing utility contracts that you can simply change to your name, which would make the process easier. You need to provide the utility company with a copy of the title deeds (copia simple), your identification document (passport or ID) and a bank account (usually you will need to fill in a SEPA mandate) where you would like to set up direct debits.

If the property had no existing contracts or you would like to set up brand new contracts for utilities, check with the providers to confirm which documentation is needed to set them up.

Other recurring payments

Apart from utility bills such as water, electricity, gas, internet and so on, will also be other recurring payments associated with the property such as waste management, council tax, community fees, etc.

Council tax (IBI) is a local tax that needs to be paid to the city council where the property is located. Each city council has their own particular way of dealing with this tax, some handle it themselves while some delegate the handling of the tax to separate entities, so you will need to inquire at the corresponding town hall.

Just like with council tax, waste collection is another local tax. Depending on the city council, it could be paid yearly, quarterly and sometimes even handled by the water provider directly, so it is best to inquire at the local council office to make sure.

Insurance

I strongly recommend taking out home insurance when buying a property in Spain. Building insurance (continente) is especially important as it will cover things like pipes bursting, fires and other accidents that could damage the property.

Content insurance (contenido) will cover the contents of the property that occur by any accident (depending on the insurance conditions), so you will need to estimate how much the property contents are worth.

Property insurance isn't legally required unless you take out a mortgage ( article (article 10 of Real Decreto 716/2009, de 24 de abril) (article 10 of Real Decreto 716/2009, de 24 de abril) but I highly recommend taking out a good insurance, especially if you plan to rent out the property or if the property is your holiday home.

Useful Resources

• INE.
• (IPC)
• English-speaking lawyers and translators in Spain (e.g., via British Embassy list)
• Abogacia – National website for Spanish lawyers
• How to rent a house in Spain (related resource)