What are the pitfalls of buying property in Spain?

While buying a house in Spain may be one of your dreams in life, keep in mind that the process can be complicated. Since there are many pitfalls of buying property in Spain, Tejada Solicitors would like to emphasise the importance of good advice in Property Conveyancing procedures.

This article will summarise the pitfalls of buying property in Spain and some of the common mistakes that people make during this process. Tejada’s team of professionals will work together to identify problems, inform you on what kind of questions to ask, and offer you professional advice to save you from surprises, headaches, and hidden fees when purchasing property in Spain.

1. Not having your documents prepared in advance.

Legal, Technical, and Fiscal Due Diligence

One common pitfall of buying a property in Spain is failing to carry out complete due diligence. By complete, we mean approaching the study from a legal, technical, and fiscal perspective. At Tejada Solicitors, we have lawyers, tax advisors and architects who will help you with property conveyancing from all areas. Our 360º service will identify problems that may arise in the sale procedure, such as:

  • Postponing your NIE application. An NIE number is your foreigner ID in Spain. It is mandatory to have a NIE number to buy a house and begin legal conveyancing. A NIE is not assigned automatically, so you must apply for it as early as possible to speed up the buying process
  • Failing to register the property in the property registry
  • Conducting a property registration that does not accurately reflect the reality of the property. For example, if an extension of the house or the construction of a swimming pool is not registered in the property registry
  • Verifying that the owner of the home is the registered owner
  • Checking if the property is affected by public domain or protected assets
  • Checking if the property is affected by legal protection easements
  • Checking if there are embargoes against the property object of sale for existing debts with the tax agency or a third party, such as Property Tax (IBI), Personal Income Tax, Wealth Tax, etc.
  • Checking if the property is affected by land protected by sectoral legislation
  • Checking if the property is affected by an inheritance file
  • Looking for debts with the Homeowners Association, electricity, or water companies
  • Checking if the property is affected by disciplinary and sanctioning proceedings (AFO, DAFO, or SAFO)
  • Checking if the property is affected by Urban Legality Protection File (EPLU)
  • Checking for the absence of a Building Licence or First Occupation
  • Looking for debts for non-payment of Property Tax (IBI) or other municipal taxes
  • Checking to see if the property is in a flood zone

2. Incomplete property research

One mistake people make when buying a property in Spain is not viewing both the inside and outside of the house in person. Visit the property well in advance and take your time viewing the house, observing its surroundings at different times of the day, and walking around the neighborhood or area where the property is located.

This visit will help you notice issues like:

  • Humidity
  • The energy efficiency of electrical installations
  • Broken windows, frames, tiles, or doors
  • Swimming pool and sewage treatment
  • If the house is furnished (make an inventory and take photos of the furniture)
  • Issues with the boundaries of adjoining plots. In this case, it is advisable to request a measurement from a technician
  • Noise or neighbour issues

Yes: If the house has a building licence issued by the City Council, and has not been annulled by a court ruling or Consultative Council, then the house is deemed legal for all purposes. Remember to check if any unlicensed work has been done on the house.

No: If the house does not have a building licence issued by the City Council, the DAFO (The Spanish version of SWOT-Strengths, Weaknesses, Opportunities, Threats, also called AFO in certain regions) must be processed to ensure that the building will not be subject to a demolition order.

Avoid properties that require big renovations, especially if you don’t speak Spanish. Many construction companies are unreliable and may give you false estimates. We recommend choosing a building that requires little to no work or renovation and signing an official contract if you need to renovate.

If the house is licensed for modifications, check that existing changes follow what is indicated in the building licence and that no additional or unlicensed works have been done.

If unlicensed work was carried out, a technical specialist must analyse whether it is legalizable, and, where appropriate, request legalisation or DAFO if the conditions are met.

If yes, future modifications should follow the regulations of the General Plan of the City and current legislation. Restrictions, such as the height of the building, the minimum dimensions of the rooms, the maximum area that can be built on the plots, etc. can vary.

Due to a large number of existing regulations in Spain, we recommend seeking advice from technical specialists and architects.

Specialist lawyers and urban planning architects should analyse the urban planning records on the property. They will tell you if the home may be subject to demolition, if there are large fines for the owner, if processing a DAFO or AFO is necessary, and about the costs that each procedure entails.

If the house does not have a licence or if work has been done on it without a licence, you must obtain the DAFO to ensure that the extensions cannot be demolished. This will prove that the administration certifies that the house or the extensions can be preserved and maintained by its owner.

Interesting read: Property condition survey

3. Avoiding professional help, such as real estate agencies or solicitor services

Choosing the same lawyer as the seller of the property

Hiring the same lawyer as the seller will give the lawyer a greater chance to make a profit on your purchase.

To prevent misunderstandings and loss of communication, we recommend seeking advice from a lawyer different from the seller’s lawyer. It is also very important that your solicitors speak English.

Get advice from your lawyer before making a reservation or deposit on the property. The initial stages of the process might expose irregularities, so it is important to have a lawyer who can help you make decisions.

In property conveyancing in Spain, it is of the utmost importance to choose a law firm that has lawyers, tax advisors, and architects who are in communication with each other so that you have a study from all possible angles.

Remember to look for a lawyer who represents your interests and will negotiate the best deal for you.

Real estate agents usually try to encourage a fast and emotional buying process. We suggest working with different agents to compare their offers and analyse their behaviour. Check for significant differences in the price of a square metre in the same area.

Another mistake made when buying a house in Spain is failing to choose a local real estate agent. A local realtor will know the local market and can help you negotiate with the seller to get a fair price. Since local realtors usually collaborate with other agents in the area, they can also inform you of other offers on the property.

Keep in mind that real estate agents are not qualified to assist with legal, tax, or immigration matters.

Property Conveyancing Solicitors Rosana

Rosana Tejada – Tax Adviser

In property conveyancing in Spain, it is of the utmost importance to choose a law firm that has lawyers, tax advisors, and architects who are in communication with each other so that you have a study from all possible angles.

4. Not understanding the real costs when buying a property

Another pitfall of buying a property in Spain is not knowing, in detail, all the expenses related to the purchase of a home. You need to focus on more than just the purchase price. If you want to avoid losing money, ask your solicitor for a real estimated cost.

The purchase of a home entails additional expenses, like the payment of real estate tax, the transfer tax or stamp duty, the registration of the home in the Property Registry, notary fees, mortgage costs, the cost of utilities, etc. Concerning transfer tax, the tax regulation requires that said tax be paid for the cadastral reference value (in the autonomous community of Andalusia, it’s 7%). If the acquisition price is lower than the reference price, the transfer tax must be paid at the cadastral reference value, without prejudice to the subsequent procedure to challenge the self-assessment by requesting a refund of undue income.

The reference value (appraisal value) is established by the state/government and is used to calculate the number of taxes that must be paid for the house.

The Tejada Solicitors team suggests that you check the cadastral reference value before depositing a property in Spain. This way, you will receive a very accurate cost estimate and avoid unpleasant surprises.

Interesting read: Cost of buying a house in Spain

5. Not understanding the contracts and full process

Buying property in Spain is a big investment with numerous responsibilities, so it is important to have a professional lawyer check all the terms.

There is a tendency to think that the legislation of your country of residence is also valid in Spain, which may result in the buyer including clauses that are inadmissible under Spanish law. Make sure that you understand the purchase contract, and that you ask questions.

6. Not calculating the yearly costs of the property

Buying property in Spain is a big investment with numerous responsibilities, so it is important to have a professional lawyer check all the terms.

There is a tendency to think that the legislation of your country of residence is also valid in Spain, which may result in the buyer including clauses that are inadmissible under Spanish law. Make sure that you understand the purchase contract, and that you ask questions.

IBI or Property Tax

The IBI (Impuesto sobre Bienes Inmuebles), also called Property Tax, is paid annually based on the rates in each town. This tax is managed by both the State and the individual municipalities. Property Tax is normally between 0.4% and 1.16% of the cadastral value and can be verified at the cadastral.

Both residents and non-residents pay Property Tax. In addition to this, if non-residents decide against renting a property in Spain, there must pay an Imputed Income Tax. If they decide to rent the property in Spain, they must pay a Rental Tax. Most municipalities and councils will send you a written request for property tax payment. These letters also contain more information about when and where to pay the Property Tax so that you can avoid any additional charges or fines.

Non-Resident Tax for homeowners (including for private use)

Anyone who owns an urban property in a plot in the countryside (including for personal use), is liable to pay the Non-Resident Tax Return. To do so, you must complete Form 210 and file it by the 31st of December every year.

7. Pitfalls when you Buy-to-let and a Tourist Licence

If you plan to buy-to-let a house in Spain, your lawyer and architect should make the relevant investigations with the town hall to determine whether the property has the licence of the first occupation. In these situations, it is difficult to obtain the authorizations required to offer your property as a tourist rental. This means that you will have to process a file and request a licence from the corresponding town hall. This whole process involves legal uncertainty and extra expenses. With a team of lawyers, architects, and tax advisors, you can conduct a legal, technical, and fiscal study (legal searching and due diligence) to make an informed decision.

To avoid further pitfalls when buying a property in Spain, keep in mind that the Owners’ Association can limit the number of flats/properties used for holiday rentals. Urban housing that provides accommodation “in a regular manner and for touristic purposes” is referred to as a home for holiday use. According to Royal Decree 28/2016 of February 2nd, if located in Andalusia, this type of dwelling needs to be registered in the Andalusian Tourism Register. For more information about this procedure and its requirements, visit our urban property registration page.

In addition to the Royal Decree above, the Horizontal Property Law of March 6th, 2019 limits the holiday letting of all urban properties that form part of a community of owners. The terms are as follows:

  • The owners’ association can limit the number of flats/properties used for holiday rentals if three-fifths of the total number of owners are in favour of doing so.
  • Similarly, the residents’ association can agree to increase the maintenance fees for properties that will be used as tourist rentals, as long as this increase does not exceed more than 20% of the original fee
  • When you buy a property in Spain that you intend to use as a tourist rental, the property must meet several requirements from the regional administration. These requirements can be related to equipment, ventilation, and lighting. If you want to obtain a tourist licence, but the property does not meet these conditions, you must provide an extra investment to ensure that the property coincides with current regulations

Things get more complicated when the taxpayer is unaware of their tax obligations with the Spanish Tax Office. In these cases, Rosana Tejada, tax advisor and expert in International taxation, will inform you on how the rental incomes in Spain are taxed, how your residence or non-residence status affects your taxes, the possible deductions, and how to avoid double taxation between Spain and your country of residence.

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8. Spills related to community facilities

When buying a property in Spain, your property lawyer should check with the community of property owners to see if there are approved future proceedings or pending works on the property. This could include works in common areas, gardens, swimming pools, renovations or improvements of the facade, etc. These situations will involve additional costs for the new owner.

If your lawyer notices this situation, they will help you negotiate with the seller to reduce the purchase price according to what finances you will have to assume in the future for pending works.

9. If you are not an EU citizen, check that you have the corresponding visa

If you are a non-EU citizen, and you are thinking about moving to Spain, you will need to apply for your Visa. At Tejada Solicitors, immigration lawyer Maria Soledad Sala will be able to advise you on how to obtain both your Non-Profit Visa and Golden Visa.

The Spanish Golden Visa or “Visado No Lucrativo” is one of the visa programs that non-EU citizens can apply for.

10. Buying off-plan property in Spain

There are several pitfalls when buying off-plan property in Spain.

Occasionally these types of sales and purchases seem simpler, but don’t make the mistake of not hiring a lawyer, who specialises in property conveyancing, to defend your interests.

The purchase of off-plan housing requires that promoters guarantee the amounts they receive on account of the purchase price, plus a certain annual interest.

We recommend conducting an ocular inspection of the house to show the promoter any possible flaws or necessary repairs before signing and completing the sale.

Avoid nightmares and contact a lawyer specialising in sales and purchases to ensure that your rights and money are guaranteed.

Frequently Asked Questions

Buying a property in Spain will always be a good idea if you value a good climate, the Mediterranean diet, good road connections, the beach, the sun, multiple airports, and international schools. Tejada Solicitors will be happy to assist you in this process.

Even with the current high inflation and low-interest rates, buying a property in Spain is a value-for-our-savings haven. If we opt for buy-to-let, we won’t lose purchasing power because we will pass on inflation through the rental price of the home.

If you buy a new property in Spain, you will pay VAT (10%) and Stamp Duty, and if it is a second home, you will pay the Tax Transfer. The Stamp Duty and Tax Transfer rates depend on the autonomous community the property is located in. For the autonomous community of Andalusia, the current tax rates are 1.2% for Stamp Duty, and 7% for Tax Transfer.

We help you avoid the pitfalls of buying a property in Spain

If you’ve read this article, you now have an understanding of the problems that can arise when buying a property in Spain, which is why we recommend seeking the advice of a lawyer specialising in property conveyancing.

Tejada Solicitors Law Firm has lawyers, tax advisors, and architects to help our clients with complete, 360º advice. Get in touch with Tejada Solicitors via our contact form to avoid the pitfalls of buying property in Spain and enjoy a smoother property purchase experience.

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