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How much will I spend when buying a property in Spain? | Cognitive Law20/04/2022
It is many people’s dream to buy a property in Spain, even after Brexit. The quality of life, generally low prices and the sunshine are appealing factors. When buying a property in Spain, it is important to anticipate the general costs and expenses you will incur, as well as possible pitfalls as a result of unexpected expenses.
I will outline this information for a resale property purchase, as the cost of buying a newly built property will differ slightly. They will be considered in a future article or feel free to contact me to discuss.
On occasions, when you are buying a luxury holiday home, you may decide to engage a property agent to find the right property for you. These types of agents do not sell properties and would be acting just for you and look after your own interest. Their fees may vary and, although they are not totally necessary, if you are very specific in the property you would like and without compromising and wasting time, they can be a good investment to find the right property for you and can also negotiate a reduced price.
So unless you are instructing a top agent, normally the estate agencies are instructed and paid by the seller. The seller may request that an additional cheque be paid to the agent on their behalf and deducted from the price upon completion, but apart from your bank commission to issue cheques or otherwise agreed with the sellers, these fees should be borne by them.
Appointing a good lawyer who can advise on the whole process is important. You need an approachable lawyer with whom you can communicate and who can also respond to your queries. Instructing a lawyer who is also familiar with English law can be very beneficial, as they can explain your queries with the jargon you are more used to in English conveyancing.
Legal costs may vary depending on the property you are buying. As a general rule, they may be around 1% plus VAT of the property price, with a minimum price in the case of small value properties.
Your lawyer will ask you to sign a Spanish power of attorney to assist with the whole transaction. This will assist with many steps in the transaction, but also avoid you having to go to Spain for every signature which may be required. A UK based Spanish lawyer will be able to make this process easier, as they can draft the document and organise signature and legalisation for you. This will have additional costs as a UK Notary Public will be required to assist with the signature (fees vary from £70 to over £250 plus VAT) and legalisation of the document (£30 per document plus postage).
There is a tax which you will always need to pay when buying a resale property. This is the transfer tax. This tax varies depending on the region of Spain where you are buying the property and your own circumstances, but generally will be between 7% to 10% over the purchase price.
It is important that your lawyers consider the minimum tax value of the property before completion. This is because if you buy a property at a bargain price, you may be buying it at a price which may be less than the value set up by the Spanish tax authority. If so, they are likely to demand further taxes in the future. Currently, the Spanish tax authority calculates the minimum tax value by applying a tariff to the cadastral value of the property. The tariff depends on the region where the property is located and it may not be very straightforward. The way of calculating this minimum tax value is changing from 1st January 2022, therefore it is very important to consider this point before completion so you know exactly how much tax you need to pay and avoid unpleasant surprises in the future.
The new minimum tax values are likely to be based on average prices in the area, without taking into account the specific condition of a property, whether it is in need of repairs for example. A house that needs a full refurbishment may have, before the Spanish tax authority, the same value as a luxury property situated next to each other. So watch this space!
You can read the full article here.