Buying property in Spain has become an increasingly interesting alternative for investors from other countries, retired people, and those who work remotely. However, the legal process can differ significantly from that of other nations. This guide provides a clear summary of the key legal steps that any foreign buyer should be aware of to complete the transaction safely and in accordance with Spanish law.
The first step would be to obtain a Foreigner’s Identity Number (NIE). This step is of the utmost importance, as this tax identification number is imperative for all non-resident buyers. This number must be applied for either at the Spanish consulate abroad, at a police station in Spain, or through a legal representative in Spain, such as Franke & de la Fuente, who can assist with the application process.
Once the aforementioned NIE is obtained, the next step would be the opening of a bank account in Spain. In most cases, the documents that banks usually require include a valid passport, the completed application form, and proof of purpose (purchase of property). It is important to note that the origin of the funds will have to be justified in order to comply with anti-money laundering regulations.
The legal, urbanistic, and registry review of the property in question that you wish to purchase is key, as we must not forget that when you buy a property, you acquire a right, but also obligations, so it is extremely important to have a lawyer specialised in the real estate sector, like Franke & de la Fuente, who carries out the corresponding complete legal due diligence and accompanies the buyer throughout the purchase process. This step is crucial to avoid financial and legal risks in the future. This stage includes:
- Verification of ownership and encumbrances in the Land Registry.
- Confirmation of the town planning status of the land or building.
- Verification of building permits and completion certificates.
- Verification that there are no liens, mortgages, tax debts, or unpaid fees.
Once it has been verified that the property is completely legal, the earnest money contract is signed. According to the Civil Code (hereinafter CC), specifically article 1454, if the buyer withdraws, he will lose the deposit. If the seller does so, he must return double the amount deposited. In Spain, this is normally 10% of the sale price, but as it is an atypical contract in the sense that it is not regulated as such in the Spanish Civil Code, it does not always have to be 10%. Although the Civil Code establishes the consequences of the three types of earnest money (confirmatory, penitential, or down payment), the figure of the earnest money contract is not explicitly mentioned as a specific type of contract. Normally, what is included are the parties buying, selling, description of the object of the contract (the property), the price of the property, the date foreseen for the signing of the deed of sale at the notary’s office, and the documentation to be provided before the signing.
On the day of the signing of the public deed before a notary, both the seller and the buyer or their legal representatives must attend the signing and practice the “traditio” (from the Latin “tradere”, which means “to hand over”) which refers to the handing over of the keys. Once the signature has been made, the final step is the settlement of the corresponding taxes, which depending on whether it is a second-hand property, will be the Transfer Tax or, if it is a new property, the VAT+AJD. Subsequently, the proof of payment of the tax together with the original deed is presented at the corresponding Land Registry, and the registration of the new owner is carried out, at the same time the changes of ownership in supplies, IBI, and community of owners are carried out.
All in all, the process of buying and selling in Spain is relatively straightforward, but requires legal attention at every stage. Obtaining the NIE, conducting rigorous due diligence, and signing the sale and purchase before a notary are essential steps to ensure a secure and compliant transaction in Spain.
