Frequently Asked Questions

Buying Property in Spain: An Essential Guide

Purchasing a property in Spain appeals to many, whether for a holiday home, permanent relocation, or as a real estate investment. However, the process can be intricate, particularly for non-residents who may be unfamiliar with Spanish property laws and market nuances. From legal procedures to tax considerations and financing, several key steps are essential to a smooth transaction. This guide provides an overview of buying property in Spain, helping you avoid common pitfalls and navigate the journey with confidence.

The Property Buying Process

1. Choosing Your Ideal Property and Preparing to Purchase

The property itself is important, but choosing the right location is crucial. Spend time exploring different regions to find the area that suits you best. Once you’re confident about the location, consider a range of property styles to understand what’s available within your budget. Additionally, conducting checks on the property, land, or developer may be advisable before finalizing a decision.

Getting the Right Assistance for Your Property Purchase

It’s highly recommended to engage a lawyer based in Spain. Local legal expertise can expedite the process, avoiding the delays and potentially higher costs associated with hiring a lawyer from abroad.

While real estate companies may offer legal contacts, it’s best to select an independent lawyer who will prioritize your interests. At Heniam, our lawyers are committed solely to representing our clients’ interests, ensuring transparency and protecting you at each stage of the purchase.

2. The Legal Process

Step 1: Initial Negotiations

At this stage, hiring a lawyer to review the purchase details and conduct initial checks is crucial. Negotiations cover not only the price but also elements like completion timelines, payment terms, included furnishings, and tax responsibilities. Your lawyer can help navigate these terms and negotiate adjustments as needed.

Step 2: The Reservation Contract and Deposit

After reaching an agreement, the Reservation Contract (Contrato de Reserva) is signed to outline the purchase terms. This usually includes a Reservation Deposit (Señal de Reserva), generally between 3,000 and 12,000 euros, which removes the property from the market for a set period. Be aware that this deposit is typically non-refundable if the buyer withdraws, but if the seller cancels, they must return the deposit.

To avoid losing your preferred property, Heniam advises buyers to have sufficient funds on hand. It’s also best to pay via credit card or cash rather than a cheque, which can delay the reservation.

Step 3: Exchange of Contracts

The Private Purchase Contract (Contrato Privado de Compraventa) is a binding agreement that outlines the sale’s terms and completion date, typically signed about four weeks after the reservation. Your lawyer will conduct necessary legal checks and obtain a Property Registry certificate (nota simple) to verify ownership details and any attached liabilities.

If any debts are associated with the property, your lawyer will negotiate a settlement plan, ensuring debts are resolved prior to finalization.

Step 4: Completion of Sale

Completion occurs once the Sales Contract (Escritura de Compraventa) is signed with a Public Notary, marking the legal transfer of the property to the buyer. If the buyer is unavailable, a Power of Attorney can authorize a lawyer to act on their behalf. The contract ensures the property is free from any encumbrances or debts unless agreed otherwise.

Step 5: Registering the Title Deeds

Although optional, registering the title deeds is recommended for security. Once the Sales Contract is signed, it is sent to the Property Registry, where the process of formally registering the title begins. Your lawyer can manage this step and handle any associated tax payments on your behalf.

Special Considerations for Off-Plan Purchases

Buying off-plan involves purchasing a property that is yet to be built. It’s vital to exercise caution here. Payments are made in installments, typically at various construction stages, so it’s essential to secure a bank guarantee that funds will be reimbursed if construction is delayed or fails to complete. Developers may offer this guarantee for a fee, which is strongly recommended.

Buying a new build also entails costs like VAT (10%) and stamp duty (1.5%). Additionally, connecting utilities may require an extra fee, and it could take several weeks before the property is ready for move-in.

3. Understanding Costs and Taxes

Buyers should anticipate purchasing expenses around 11-12% of the property price. Key fees include:

• Legal Fees: Generally 1% of the purchase price (+ VAT), although this can vary with complexity.
• Notary Fees: Typically between 500 and 2,000 euros, based on property value.
• Property Registry Fees: Based on a scale relative to the property’s declared price.

Taxes include:

• Property Transfer Tax (ITP): For resales, usually 8-10%; for new builds, 10% VAT.
• Municipal Tax on Property Sales (Plusvalía): Usually paid by the seller and is based on land value appreciation.

4. Other Costs to Consider

Additional expenses can include creating a Spanish will, utility connection fees, property insurance, and costs for fiscal and resident association representation.

An NIE number (Número de Identificación de Extranjero) is a distinct identification number designated for non-Spanish citizens who have official dealings in Spain. This number acts as both an identification and tax reference for foreigners, and it is crucial for numerous administrative and financial processes within the country.

The NIE number is necessary for:

• Opening a bank account
• Buying property
• Establishing a business
• Employment in Spain
• Registering for social services
• Tax obligations
• Purchasing a vehicle
• Conducting official transactions

The General Directorate of Police issues the NIE, and it must be acquired by anyone intending to remain in Spain for over three months or those needing to undertake the aforementioned activities. This document can be obtained from any police station that handles foreign affairs, not just the local one.

If you have a valid Power of Attorney, your representative can collect the NIE on your behalf when necessary.

To obtain an NIE number, applicants generally need to:

1. Fill out the relevant application form (EX-15).
2. Provide a valid passport or national identity card, along with copies.
3. Include a document outlining the reason for the application (like a job offer or property purchase).
4. Pay a small fee.
5. Submit the application at the local police station or at the Spanish consulate or embassy in their home country.

The procedure may differ slightly based on personal circumstances and the location of the application. Due to high demand, securing an appointment can sometimes be challenging, so it’s advisable to consult with a professional as early as possible to initiate the process.

Guidance

When navigating real estate transactions in foreign markets, complexity often arises. In Spain, one effective way to simplify and manage these processes is through the use of a Power of Attorney (POA).  This article explores how a Power of Attorney can streamline Spanish real estate transactions, enabling individuals to make more informed choices and move through the Spanish property market with greater ease.

Streamlined Transaction Process

By appointing a Power of Attorney, individuals can designate a trusted representative – known as an attorney-in-fact, to act on their behalf in handling Spanish property transactions.  This setup allows the attorney-in-fact to take on various legal, administrative, and financial tasks, sparing the grantor from time intensive, complex steps. Rather than attending each stage in person, the grantor can rely on their representative to conduct property searches, negotiate terms, sign contracts, and even handle property registration.

Convenience and Flexibility

A Power of Attorney offers significant convenience, particularly for those who cannot be in Spain during crucial transaction phases. Whether due to distance, time constraints, or other commitments, individuals can remain actively engaged by empowering a representative to manage their interests.  This arrangement enables participation in real estate deals with minimal impact on the grantor’s personal or professional responsibilities.

Overcoming Language and Cultural Barriers

Engaging in legal proceedings abroad can present challenges, especially in terms of language and cultural nuances. Appointing a local attorney-in-fact with a solid grasp of Spanish and an understanding of local real estate practices can help bridge these gaps.  This representative can effectively liaise with authorities, negotiate with sellers, and ensure contracts and documents are accurately translated and understood, reducing the chance of misinterpretations or unintentional breaches of legal requirements.

Efficiency in Time and Cost

Spanish real estate transactions often involve extensive paperwork and formalities.  With a Power of Attorney, individuals can expedite these processes, conserving both time and resources.  The attorney-in-fact can manage meetings, documents, and other essential tasks swiftly, reducing delays and lessening administrative burdens.  This streamlined approach also offers cost savings, avoiding unnecessary travel and mitigating risks of potential mistakes that could lead to extra legal fees.

Assurance of Legal Representation

Appointing an attorney-in-fact through a Power of Attorney provides the grantor with legal representation and added protection.  The attorney-in-fact is legally bound to act in the grantor’s best interests, ensuring responsible and ethical decision-making. This layer of trust allows the grantor to feel confident that their rights are being safeguarded, terms are negotiated favorably, and their interests are fully represented throughout the property transaction.

Adaptability for Unique Needs

Powers of Attorney for Spanish property transactions can be customized to match individual preferences and special circumstances.  For instance, individuals planning an extended stay outside Spain may choose a General Power of Attorney, which enables the attorney-in-fact to address a wide range of legal matters on their behalf.  Alternatively, a Specific Power of Attorney can be set up for a single transaction or a specific period, allowing for precise control over the representative’s scope of authority.

In conclusion, using a Power of Attorney in Spanish real estate transactions offers several benefits, including process simplification, adaptability, bridging of language and cultural barriers, cost and time savings, and legal protection.  By entrusting a capable attorney-in-fact with authority over their transaction, individuals can approach the Spanish real estate market confidently.  This solution offers a practical way to remain involved while minimizing potential obstacles, whether the goal is convenience, efficiency, or overcoming logistical challenges.

Since 2005, holiday rentals in Murcia have been on the rise. With this growth, the process of legally registering a holiday rental property has become essential, as local government and tax authorities intensify efforts to regulate undeclared rentals. Decrees like 75/2005, later updated by Decree 37/2011, established the framework governing these rentals, ensuring compliance and transparency for both property owners and guests.

Understanding what qualifies as a holiday rental and the steps required to register your property in Murcia is crucial for any homeowner or property manager.  Let’s walk through the essentials of obtaining a holiday rental license.

What Qualifies as a Holiday Rental in Murcia?

The Murcia Government defines two main types of holiday rentals under Decree 75/2005:

1. Holiday Homes – Single properties owned by an individual, such as apartments, villas, chalets, or mansions, designated for tourist use.
2. Tourist Apartments – Managed properties or groups of rentals, typically in the same building or complex.  A property manager may oversee multiple units, referred to as “tourist apartments.”

Regardless of the type, all holiday rentals in Murcia must meet these basic conditions to qualify for a license:

• Accessibility Compliance: Properties must adhere to local accessibility standards.
• First Occupation License: This certification confirms the property is suitable for occupancy.

Defining Tourist Apartments in Murcia

Tourist apartments in Murcia are generally situated within the same building or complex, comprising multiple units. These rentals must be clearly advertised with detailed descriptions to avoid any ambiguity for guests.  They are also required to keep a guest registry for tracking each stay.

To signify quality, tourist apartments are classified on a scale from 1 to 4 keys (with 4 keys being the highest).  This rating must be visibly displayed at the entrance of the property.

Understanding Holiday Homes in Murcia

Holiday homes are standalone properties, such as villas, chalets, bungalows, or single apartments rented out for holiday purposes.  Unlike tourist apartments, holiday homes do not follow a classification system to indicate their quality, but must still comply with certain standards to operate legally.

Tourism Requirements for All Holiday Rentals in Murcia

Before being rented out, all holiday rentals must meet specific criteria:

• Distinct Units: Each rental must operate as an independent unit, such as a bungalow, villa, or apartment.
• Restriction on Multi-Residence Use: Under Murcia law, multiple properties in separate locations or buildings cannot operate under the same business license for holiday rentals.

Basic Operating Standards for Holiday Rentals in Murcia

All holiday rentals, whether tourist apartments or holiday homes, must meet these basic operational standards:

• Constant Supply of Hot and Cold Water
• Reliable Power Supply (Electric or Gas)
• Guest Registry: Every guest’s stay must be recorded and maintained by the owner or property manager.
• Maintenance Requirements: Properties must be kept in optimal condition for guests.

How to Register Your Holiday Rental in Murcia

Registering your holiday rental property in Murcia is straightforward with Compass. We are here to help you obtain your license and ensure you meet all requirements seamlessly.  Reach out to us today to get started!

Yes, a home can depreciate in value under certain circumstances.  While many people expect real estate to appreciate over time, there are situations where a home´s value can decrease.  Several factors can cause a home to depreciate, including,

1.  Market Conditions.  Real estate markets can fluctuate.  If demand for homes in an area decreases or there is an economic downturn, property values may drop.

2.  Neighbourhood decline.  If a neighbourhood experiences an increase in crime rates, poor local services, or a general decline in desirability, home values can depreciate.

3.  Physical Deterioration.  Homes naturally deteriorate over time and if maintenance is neglected, the property can lose value.  Things like structural damage,  outdated interiors, or major system failures, (like plumbing or electrical) can reduce a home´s value.

4.  Environmental Factors.  Natural disasters, environmental hazards, or other external factors, such as proximity to a polluted area or zoning changes that bring undesirable businesses nearby,  can lead to depreciation.

5.  Economic Factors.  Broad economic factors like high interest rates, unemployment rates, or a general recession can reduce the demand for homes, causing prices to fall.

6.  Overbuilding in the Area.  If there is a large increase in housing supply in a given area without matching demand, it can lead to a decrease in property values. 

7.  Changes in Local Amenities or Infrastructure.  Loss of important community features, such as schools closing, businesses leaving or transportation routes becoming less accessible, can make a location less desirable and lower home values.

Even though real estate is considered a long term appreciating asset, these factors can lead to depreciation over short or extended periods.

Whether an older home is as good a value as a new home depends on several factors, including the buyer´s preferences, the condition of the home, and the local housing market.  Here is a breakdown of how older homes and new homes compare in terms of value.

Advantages of an Older Home

1.  Established Neighbourhoods.  Older homes are often located in more established neighbourhoods with mature trees, parks, and local amenities that have developed over time.  These areas can offer more character, stability and community.

2.  Larger Lots.  Older homes tend to sit on larger plots of land, as newer homes are often built on smaller lots due to land costs and property development practices.

3.  Charm and Character.  Many older homes have unique architectural details and craftsmanship that can be hard to find in new builds, such as woodwork, moldings, fireplaces, and built-ins that give the home character.

4.  Price.  Older homes may be more affordable than new homes, especially if the area has experienced price appreciation for newer developments.  Buyers might get more square footage for their money, even though the home may require updates.

5.  Proven Durability.  If an older home has been well maintained and survived decades of weather and wear, it may indicate solid construction, especially in homes  built before certain modern techniques  mass production.

Disadvantages of an Older Home

1.  Maintenance Costs.  Older homes typically require more maintenance and repairs, particularly for major systems like plumbing and electrical.  The materials and fixtures may be outdated and need replacement.

2.  Energy Efficiency.  New homes are built with modern lifestyles in mind, featuring open floor plans, larger kitchens, walk in closets and spacious bathrooms.  Buyers also have more say in customizing finishes and layouts when purchasing a new build.

3.  Lower Maintenance Costs.  Since everything in a new home is brand new, maintenance costs are typically lower in the first few years.  Additionally new homes often come with warranties on the structure and systems.

4.  Technology Integration.  New homes often include modern technology such as smart home systems, energy efficient appliances, and pre wired set ups for high speed internet and home automation.

Advantages of a New Home

1.  Modern Design and Layout.  New homes are built with modern lifestyles in mind, featuring open floor plans, larger kitchens, walk-in closets, and spacious bathrooms. Buyers also have more say in customizing finishes and layouts when purchasing a new build.

2.  Energy Efficiency.  New homes are built to modern energy standards, with energy-efficient windows, insulation, appliances, and HVAC systems, which can lead to lower utility bills and a smaller carbon footprint.

3.  Lower Maintenance Costs.  Since everything in a new home is brand new, maintenance costs are typically lower in the first few years. Additionally, new homes often come with warranties on the structure and systems.

4.  Technology Integration.  New homes often include modern technology such as smart home systems, energy-efficient appliances, and pre-wired setups for high-speed internet and home automation.

Disadvantages of a New Home

1.  Higher Initial Costs.  New homes are generally more expensive upfront, as builders charge premiums for modern construction, materials and finishes.

2.  Smaller Lots.  Newer homes are often built on smaller lots as developers try to maximise land use, meaning less outdoor space for garden or privacy.

3.  Lack of Character.  Some buyers feel that new homes lack the architectural character and uniqueness of older homes, as many new developments use similar designs and materials to reduce costs.

4.  Location.  New homes are often located in suburban or newly developed areas.  Which may be father from city centres, established schools or cultural amenities.  In some cases infrastructure and services may not be fully developed yet.

Which is Better Value?

The better value depends on what you prioritize.  If you are looking for something move in ready and lower maintenance costs and modern amenities, a new home might offer better value.  However, if you prefer a home with more character, potentially larger land and don´t mind handling renovations and updates, an older home could be the better option, especially if it is priced competitively.

Ultimately it´s a personal decision based on lifestyle, budget and long term plans.