APPOINTING A LEGAL REPRESENTATIVE
It is highly recommended to appoint a legal representative as early as possible in the purchase process. Your lawyer will explain to you the legalities involved in the purchase and also carry out due diligence on the property, including advising you of any debts, provide you with an estimate of the annual running costs of the property and prepare all the documentation required to complete the transaction.
POWER OF ATTORNEY
Should you not be able to be present to sign all the necessary documentation related to the purchase, then you may grant power of attorney to your legal representative or to another third party. The power of attorney would list all the duties that can be carried out by the third party, which may include buying and selling property, opening and administering bank accounts, applying for and accepting a mortgage, representing you with respect to utility companies and the tax authorities etc. The power of attorney would be signed before a notary public in Spain, and should cost approximately 200 euros.
Should you not be able to visit a notary public in Spain and need to formalize the power of attorney in your home country, the procedure is different. We will prepare the document in Spanish and English, and this will need to be signed before a notary public in your home country and then provided with the "Hague Apostille” at the Foreign and Commonwealth Office in London. All notaries will take care of this process too. Information on the procedure can be obtained from their website: www.fcogov.uk
DECIDING ON A PROPERTY
Once you have decided on a property, you will need to pay over an initial deposit/reservation fee to ensure that the property is taken off the market. The fee may be placed normally with your lawyer. A corresponding "offer and reservation document” should be signed on making the payment, indicating the basic terms of the purchase, i.e. the price, details of the vendor and buyer, details of the property, and the date by which the "private purchase contract” should be signed.
THE PRIVATE PURCHASE CONTRACT
The private purchase contract will then be signed approximately 20 days after payment of the initial deposit/reservation fee, and once due diligence has been carried out on the property.
Normally a 10% deposit would be paid; however, this may vary according to the vendor’s wishes. The contract will stipulate all the terms and conditions of the sale, including the final date by which the title deeds must be signed and final payment made, and this will then give the buyer time either to obtain a mortgage or get together the money required to complete the balance.
Should the buyer fail to complete the sale by the final date, the buyer would lose the deposit. On the other hand, should the seller decide to pull out of the sale, or should the seller find another buyer who offers to pay more, then the original buyer has the right to claim back twice the amount of the deposit.
It is important to note that should you consider applying for a mortgage in Spain, this will add approximately another 4% to 5% to the purchase costs. For a non-resident buyer, the mortgage is usually limited to around 70% of the valuation of the property. Once the mortgage is approved by the Spanish bank based on your proof of income, the bank will issue a binding offer which can be compared with other bank’s offers.
DUE DILIGENCE / LEGAL SEARCHES
Apart from checking the legalities of the property such as:
1) Checking that the property has a license of occupation or responsible declaration certificate which proves that it has been built according to the building license and is duly granted by the Town Hall,
2) Land Registry report confirming that the property is free from any charges and duly registered in the name of the vendors, if the property has any extension which does not appear on the title deed of purchase and
3) we will also check that all running costs and local tax payments are up to date. This will also enable us to advise you of the approximate annual running costs.
These checks will include:
Utility bills usually refer to electricity, water, gas and telephone. If you as a buyer are faced with unpaid utility bills from the previous owner, you should be aware that these are in fact personal bills issued by private companies. They are not attached to the property so that only the person who signed the contract with the utility company is liable for them. If left unpaid, the company will cut off the services. However, upon payment of a reasonable fee, the utility company will conclude a new contract with you for these services. This fee is exactly the same as the charge for changing the electricity contract into your own name, which you would have to do anyway.
These fees are charged by the community of property owners which is the legal body that controls all the elements of the property held in common. This includes the lifts, gardens, swimming pools, roads, etc. Each owner is assigned a quota or percentage of the expenses which must be paid by law.
Due to data protection law, the community office will not be able to provide regulations of the community together with a copy of the minutes of the last AGM but once completion has taken place, please remember to request these documents as they can ascertain the current situation with respect to any community issues.
Decisions are taken by majority vote of the owners at each year’s AGM and these actions are recorded in an official document that you are entitled to inspect when you become the property owner.
IBI (local rates) and BASURA (refuse collection)
The IBI is the municipal property tax and BASURA is the local refuse collection tax. When purchasing the property, we as your legal representative must check the IBI receipts and BASURA for the last 5 years, since you can be liable for five years of back tax. The IBI tax can be as low as 120 euros or as much as 2,000 euros per annum.
It is recommended to have these local taxes paid automatically from a bank account each year, in order to avoid unnecessary surcharges, and also to benefit from discounts for early payment, which can be as much as 10%.
If the construction of the property is older than 10 years, we should involve an architect (engineer) which is able to confirm the state of the property : subsidence, roofing, state of the structure, water and electricity installation update, etc.