Cheaper and faster traveling, cheap finance, underperforming pensions and a volatile stockmarket make buying a property abroad an attractive proposition. But buying abroad is VERY DIFFERENT from buying one in the UK and also varies considerably from country to country. So, whatever you do, NEVER buy or sign anything on impulse and ALWAYS use a solicitor. Also, some of the biggest mistakes are made because of language misunderstandings, so it’s a very good idea to use an interpreter.
DO YOUR HOMEWORK
Before you even start to look for a property, you need the answers to some important questions –
- Why are you buying a property abroad? Will it just be a holiday home you use 2 or 3 times a year and let it out for the rest of the time?
- Do you intend to live there for a significant part of the year or do you intend to move there permanently?
- How much can you afford to spend without stretching your finances too much? Will you be getting a mortgage or paying cash?
- If you intend to let it out, will you be finding tenants/collecting rents/organising repairs yourself or will you be getting a Managing Agent to look after everything for you?
- Do you want a new or existing property?
- Do you want to be on a community development?
The answers to these questions will have a big influence on the type, size and location of suitable properties. For example, if you will be letting the property, it needs to be in a tourist area and close to shops, restaurants, bars etc but if you intend to live or retire there, you’ll want to be away from these areas but still close to amenities, shops etc. Also, remember that it does rain in Spain and it can also get quite chilly, but not all properties are suitable for year round living because they may have inadequate heating and insulation, so choose carefully.
There are also a number of arrangements you will have to make before buying, including getting an ‘NIE number’ (Numero de Identificacion de Extranjeros) which is essential if you will be carrying out any financial dealings. You may need to set up a bank account in Spain. If you will be spending more than 6 months of the year in Spain, you will need to apply for a ‘Residencia’ to become a resident, otherwise you will need to appoint a ‘fiscal representative’. Property in Spain is subject to Spanish laws, so you would be advised to draw up a Spanish will.
THE BUYING PROCESS
Although you don’t need to use an Estate Agent, it would be folly to buy without a Solicitor. When you have found the right property and want to make an offer, this must be confirmed in writing and should include –
- The price
- The declared price on the ‘escritura’ (title deeds) as this may be different.
- The amount of the deposit and when you are prepared to pay it.
- The completion date.
- Payment method and currency.
- Fixtures and fittings to be included.
- Furniture included together with an inventory.
- The agreed arrangements as to who pays which taxes.
When your offer is accepted, the solicitor takes the legal responsibility for checking the Land Registry and will then prepare a contract which will bind both parties. The solicitor will then prepare the public deeds (Escritura de Compraventa) for signature in front of a Spanish Notary. When the balance of the purchase price is paid and vacant possession granted, the sale is complete.
The ‘Notary’ is the public official appointed by the Spanish government to witness the signing of all legal public documents and who will put on the public record the fact that the title deed recording the sale/purchase has been signed in their presence and understood by all parties.
After completion, the Notary will send details of the title deed to the Land Registry to inform them of the new owner. This will prevent the property from being sold twice.
Buying costs are usually a lot more than in the UK and around 10% should be anticipated. This will vary, however, depending on Lawyers fees, Notary fees and the level of the ‘plus valia’ (increase in the value of the property since it last changed ownership).
Lawyers fees will be around 1% plus the cost of any official documentation, whilst Estate Agents fees (if you use one!) could be around 6% or even more.
Also, don’t forget that there will be living costs as in the UK. These could include ‘Urbanizacion and Community fees’, Local rates (Patrimonia), Property tax, Insurances, Water and Electricity charges, telephone, Tax on rental income, cost of appointing a Fiscal Representative and also (in some areas) the ‘Basura’ for rubbish disposal.
This is not a complete list of all the matters you will have to deal with, but it will give you some idea of what you will face if you buy property abroad – Good luck!