PURCHASING A SPANISH PROPERTY

Part I

As this is quite a lengthy subject, this week I shall look at the
procedure applicable for this part of Spain prior to signing the
escritura {property deeds), and my subsequent article will deal with
what to do when the property is legally yours.

 The legal work for a property conveyance takes substantially less .
 -time to process here than in the UK, and it is quite acceptable for
 one company to undertake the conveyancing for both vendor and
 purchaser. You do not have to hire a lawyer for property matters such
 as buying and selling - a gestor or conveyancer can do the job equally
 well, and many estate agencies and construction companies have
 in-house teams to handle this aspect of the property purchase for you.
 An outline of the conveyancing procedure is as follows:

 Once you have found the property you want to buy, the first step is
 for the vendor/s and purchaser/s to sign a Private Purchase Contract.
 This secures the property for you, and it is at this time that you
 will be expected to provide a deposit (usually 10% but can be less if
 both parties are in agreement). You should give some thought to the
 date you wish to complete the transaction — the Contract stipulates
 the title should be conveyed on or before a certain date, so this can
 be brought forward by mutual agreement. Should you wish to purchase
 your property with the aid of a Spanish mortgage you will need a NIE
 number, and the bank will wish to carry out a valuation of the
 premises. You can usually borrow up to 70% of the purchase price, but
 do "shop around" as this can vary from bank to bank.

 Private property valuations are much less usual here than in the UK,
 but are recommended if the property is over 25 years old, or a finca
 (old style townhouse or farmhouse) or you see what could be foundation
 cracks running through the premises. Cosmetic cracks and fissures are
 common in Spanish properties and usually indicate natural movement or
 stress due to subsequent building work.

 The next step is to carry out a search on the property to check there
 are no embargos or debts you could unwittingly inherit. For this you
 will need, at the minimum, the name of the current owner and property
 address. The search is forwarded to the appropriate Land Registry
 Office, where details of all the property transactions for the region
 are held. The seller should furnish the buyer or their agent with a
 copy of the existing escritura - this does not have to be the original
 as a new escritura is prepared for each conveyance to a new owner. A
 copy of the last IBI (Rates) receipt will also be required to carry
 out the SUMA checks (see below).

 Should the current owner have a mortgage on the property, this must be
 discharged by the relevant bank on or before signing the new escritura.
 It is possible to "transfer" a mortgage from the old to the new owner,
 thus avoiding legal and possible penalty costs in discharging the
 mortgage; the bank in question will be able to provide more
 information should this be of interest to the new owner. At the same
 time, a search should be carried out at SUMA, the official municipal
 tax collectors for the Tax Office, to ensure there are no outstanding
 tax debts on the property in respect of Rates (IBI) and/or Rubbish
 Removal (Exacciones Municipales).

 The existing escritura is checked, and a copy sent to the Notary
 Office where the new escritura will be signed. This does not have to
 be the Notary whose office is in the same geographic location as the
 property; the new escritura can be prepared by any Notario. Details of
 the new owner are provided, together with confirmation of the Declared
 Value of the premises, and an appointment is requested on a specific
 time and date for completing the conveyance. Don't forget that if you
 are purchasing the property with a Spanish mortgage, the bank manager
 will also have to attend the Notary Office to sign the Mortgage deed,
 so he/she will need to be available at that date and time.

 It is an accepted practice in Spain for the "Declared Value" that
 appears on the escritura to be less than the actual purchase price of
 the property. Nowadays a Declared Value of not less than 70% of the
 purchase price is recommended, and some purchasers feel more
 comfortable declaring a full value. The concept of a Declared Value
 means that on purchasing a property, less tax will need to be paid if
 a lower purchase amount has been declared. However, when selling the
 property, non-residents will have to pay Capital Gains Tax on any
 profit made, so in reality what the tax man does not get from you on
 one side of the transaction, he usually will on the other! It is the
 vendor's responsibility to provide receipts for the utilities and
 taxes. This has the dual purpose of ensuring the correct details are
 changed into the new owner's name, and also so any outstanding bills
 may be apportioned between the seller and buyer. If the property is
 part of a Community or Urbanisation, a Certificate must also be
 obtained from the Administrators to show the Community fees have been
 paid and are up to date.

 If purchase funds are being transferred from the UK, or a Banker's
 Draft and/or cash is needed from your Spanish bank, make sure this is
 ordered in good time, and allow at least an extra day for unforeseen
 delays. If you are declaring a value different from that of the actual
 purchase price, it is customary to provide a Banker's Draft for the
 Declared Value amount and cash for the balance.

 On the day of signing the escritura all parties selling/buying should
 attend the Notary Office with their passports, or residencias if
 appropriate. If one of the sellers cannot be present, they must
 arrange a Power of Attorney" so the conveyance can be signed on their
 behalf (I shall discuss Powers of Attorney in more detail in a later
 edition). This is also possible for a buyer who cannot be present.
 However, if the buyer is able to come out to Spain shortly after
 signing, it is often cheaper and easier for a designated person to
 sign on their behalf as Verbal Representative. In this instance the
 absentee buyer prepares and signs a letter of authority for the
 Representative to sign on their behalf, visiting the Notary office to
 ratify the escritura when they are next in Spain.

 Once the escritura has been signed in the presence of the Notary it is
 a legally binding document which transfers all title of ownership to
 the person/s specified in the new escritura. In my next article I
 shall cover tax liabilities for both seller and purchaser, changes of
 name for utilities, etc, registration of the escritura and general
 points of interest once the property has been signed over to the new
 owners.