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Selling your property in Spain

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September 20, 2019

You are a happy property owner in Spain but for some reason you decided to sell your estate. What is the sale process once you have received your offer? In this article, we will describe the basic steps in a property sale process.

Reservation agreement

As a rule, the first step is to conclude a reservation agreement (contrato de reserva).
The reservation contract is made in order to take the property off the market. It also give the seller time to collect the necessary documents. Meanwhile the potential buyer can run a legal check on the property that is to find out if there are any encumbrances on the property that can restrict the owner’s ability to transfer title to the property or lessen its value.

To reserve, the buyer is usually required to pay from 3000 to 5000 euros. Most often, the reservation is paid to the real estate agent’s account.

To conclude a reservation agreement, it is enough for the owner to provide copia simple de la escritura or the original escritura (title deed to the property). It is also usually required to provide a recent nota simple (max. 3 months old), obtained in the municipal registry of owners.

Contrato de arras or deposit agreement

The next step is the conclusion of a contrato de arras or a deposit agreement. For the conclusion of this agreement, the owner will have to prepare a complete set of documents for the sale of the house.

List of required documents

Here is a list of documents that are usually required to draft a deposit agreement:

  • Copy of seller’s ID (passport / resident card / certificate with NIE number).
  • Energy Efficiency Certificate (certificado energético). It is usually valid for 10 years from the moment of its issue. This certificate is issued by a Spanish architect or a technical architect.
  • Certificate on the absence of debts on community fees (certificado de deudas de la comunidad de propietarios). This certificate is issued by the management company (administrador de fincas).
  • License to occupy the property (cédula de habitabilidad, also called licencia de ocupación). There is a primary license (de primera ocupación) – it is issued for new buildings, as well as a renewal (de segunda ocupación), which is ordered after the expiration of the primary license. The validity of licenses issued before 2004 is 10 years; after 2004 – 15 years; after 2013 – 25 years for the primary license, 15 years for the secondary license. If the license has expired, it can be ordered at the city hall (ayuntamiento). You will be required to hire an architect who will make a special report that will state that the apartment house complies with housing standards.
  • Certificate of current debt from the bank in the event that you have a mortgage.
  • Receipt of payment of the annual municipal property tax (IBI).
  • Receipt of payment of the last utility bills (electricity / water / gas).

The deposit agreement specifies the deadline for concluding the transaction, namely the signing of the title deed at a notary’s office (fecha de escritura). When signing a deposit agreement, the buyer pays 10% of the property value minus the previously made reservation. Money is transferred to the seller’s account.

The law (Article 1454 Cit. Code) stipulates a fine in case of breach of the deposit agreement by either party:

– The buyer loses his deposit in case he changes his mind and the sale is not carried out,
– The seller returns to the buyer double the amount of the deposit in case he changes his mind and the sale is not carried out.

Taxes and expenses

Who bears the property sale costs?

By law, the seller pays for:

  • Original title of deed (escritura)
  • Plusvalía municipal. This is a municipal tax on the increase of the value of urban land. The amount of this tax is calculated on an individual basis and depends on the cadastral value of the land, the term of ownership of the property and the coefficient of increase in the value of land depending on the municipality in which the property is located.
  • Mortgage closing expenses.
  • Property Tax (IBI) for the current year. By law, this tax is paid for the whole year by that person, who was the owner on January 1 of the current year. However, there is are exceptions. There’s a decision of the Supreme Court, which indicates that the amount of this tax can be divided proportionally between the buyer and the seller.
  • Capital gain tax paid by non-residents in Spain. This tax is withheld from the seller who is a non-resident at the time of the transaction by a notary. The amount is 3% of the sale price. Read more about this tax in our article “Taxation of non-residents in Spain”.

Buyer pays for:

  • Copy of the title of deed (copia de escritura)
  • Property registration in the Real Estate Registry
  • Tax on transfer of ownership (Impuesto de Transmissiones Patrimoniales) if it’s secondary housing or value added tax (called IVA in Spain) if it’s new construction.

In general practice, the buyer usually pays all notary expenses, while the seller pays IBI for the whole year.

At the Notary

The choice of a notary usually remains with the buyer, because it is the buyer who pays the notary costs. However, as a rule of thumb a notary is chosen by mutual agreement. The date of the transaction is set.

When there’s mortgage on the house, the seller must first notify the bank of the date of the transaction, so that the bank can send its representative on the day of the transaction to close the mortgage. It is also necessary to order a special letter from the bank indicating the exact amount of debt on the date of the transaction, so that the buyer can prepare banker’s cheques.

You as the owner must also send a package of collected documents to the notary in advance for verification.

At the schedule time and day, the seller and the buyer, or their legal representatives will meet at the notary to sign the title of deed. First all the documents are checked, a draft sales contract is prepared. After checking the draft contract (be sure to read the entire contract, check your passport data, NIE number, full name and data on the property) and making necessary corrections, the notary will come to complete the transaction. The notary will make sure that everything is in order with the documents, that both parties are legally capable to sign and understand the essence of the contract (if you do not speak Spanish, you must bring an interpreter with you). Next, the contract is signed, the seller gives the keys to the property to the buyer, and in return receives a bank check. That’s the whole deal.

Aftermath

Within 30 days from the date of the transaction, plusvalia municipal tax must be paid. As a rule, either it’s the notary’s office or the buyer’s lawyer who deal with this tax. The transaction is also registered in the municipal Real Estate Registry within 30 days. The buyer receives the original title of deed, and the seller a copy.

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