Guide to the Legal Process of Buying Property on the Costa Blanca
Foreign home buyers are often enchanted by the charm of the Costa Blanca. Its breathtaking scenery and vibrant local culture make it an ideal getaway spot for many. However despite its allure the main problem for potential buyers arises not from the area’s appeal but from the complexities of dealing with Spain’s red tape, administrative processes, and legal intricacies when acquiring real estate.
Don’t worry, our aim as estate agents is to make sure your property buying process goes without a hitch by collaborating with a conveyancing solicitor to prevent any complications or legal issues that could arise down the road.
To get an idea of the magnitude of the problem, a few years ago, Spain’s land registry raised a concern. Drones and satellites had found over 3 million irregularities in residential properties nationwide. It was only a few years ago that the Spanish treasury conducted a nationwide study into building irregularities. This is what they found: more than 194,000 ‘illegal works’ carried out on properties in nearly every municipality in the Valencia Community. Half of them were in the province of Alicante where the Costa Blanca lies.
Conveyancing solicitors often come across issues like extensions or renovations and the presence of swimming pools in properties that are being resold. It’s not rare to discover orders for demolishing walls or fences that were built without permits. These are the types of problems that solicitors can detect during their research.
But there’s more to consider beyond obtaining building permits. A real estate attorney will also verify that the previous owner has settled all utility bills and local taxes (like the IBI) and cleared any mortgages or other financial obligations linked to the property before closing the deal. If you buy a property with debts in Spain, you’ll be held accountable for them – not the previous owner.
Conveyancing lawyers draft contracts requiring the seller to address them before finalizing the sale shielding you from any surprise expenses or legal hassles post moving.
A Detailed Walkthrough, on Purchasing Real Estate, in Costa Blanca
Here is a guide to assist you in navigating the procedure and steering clear of trouble.
Exploring Options, for Purchasing Real Estate, in Costa Blanca
Many British and other expatriates prefer the Costa Blanca to the Costa del Sol. They are drawn to its scenery, coastlines, and vibrant local culture.
Grupo Garcia offers a selection of properties on the Northern Costa Blanca region that includes Jávea, Altea and the scenic valleys of Jalón and Orba. Here are some locations worth checking out:
Planning Your Finances for Your Costa Blanca Property
Before embarking on your property search journey it’s important to plan your finances. Whether you are considering selling a property in the UK, a cash purchase or seeking a mortgage, in Spain this is what you can expect:
Taxes
When buying a property on the Costa Blanca, expect to spend about 10% – 12% of its value on taxes and fees.
Taxes for new builds include a 10% VAT and an extra 1.5% AJD (a document tax in the Valencian Community). On the other hand, for second hand homes the tax is referred to as ITP and is set at 10% within this specific region of Spain.
Notary, lawyer and registry fees
The costs of the notary, lawyers and the land registry are usually between 2% and 3% of the value of the property.
Expenses related to home loans.
When you’re looking to get a mortgage, in Spain you should also consider some additional expenses.
The bank needs a property valuation to decide on financing options and in 2024 this costs from €250 to €600 depending on what the bank asks for and the size and value of the property.
At the beginning of the mortgage process, you may encounter an opening fee that can be high, as 2% of the loan amount, however these days many banks are foregoing this fee altogether. Check with different banks when shopping for a mortgage.
Banks might ask for home or life insurance to reduce your mortgage interest rate.
Looking for a home in Costa Blanca.
Licensed real estate agents.
As of October 2023, all real estate agents in Costa Blanca, Spain, must have a certification from API (Agentes de la Propiedad Inmobiliaria). At Grupo Garcia we have obtained the API certification to assure compliance with the top tier standards.
Regrettably there are agents lacking the qualifications in this area. It’s crucial to engage with an approved agent since unaccredited agents frequently need to partner with an API certified agent for sales transactions, potentially resulting in increased costs and commissions.
When you’re looking for properties on the internet it’s crucial to choose an API certified agent to assist you. Working with multiple agencies can complicate matters and make it harder to build a strong relationship with an agent who’s focused on finding the best property for you.
The Conveyancing Process: Legal Checks and Contracts
Once you’ve discovered the home of your dreams and decided to go forward with the purchase, the legal process starts.
The Reservation Agreement (Reservation Contract)
The reservation contract secures the property once the seller agrees to your offer by taking it off the market for a deposit of around €5000. The property will be withdrawn from any listings and no further visits or offers can be entertained during this time frame.
Some important aspects to consider are;
- A reservation period of 3-4 weeks for legal checks.
- The deposit is refundable if the legal checks reveal significant issues.
- The seller is prohibited from accepting other offers during this time.
Legal Checks (Equivalent to Searches in the UK)
Your attorney will proceed to conduct legal checks, with three key organizations;
- The local municipal office (Ayuntamiento) is the place where various issues arise concerning upgrades or modifications in properties. A common concern is additions like walls, courtyards, and pools. The municipal office can impose penalties. You might be required to settle property taxes for up to four years in case any irregularities are detected.
- The Cadastre (Catastral Office): This organization maintains the property documentation detailing property boundaries and sizes. It is not uncommon for surveys to uncover renovations which may result in higher property taxes or even requests for demolition.
- The Land Registry (Registro de la Propiedad): This official record office offers the Notary Note (Nota Simple). A document that verifies the owner of the property and any financial obligations or loans associated with it. Issues, like ownership documentation or unpaid debts well, as unrecorded property extensions are frequently discovered in this record.
If your lawyer discovers any problems during the process of buying a property. You may choose to withdraw from the agreement and get your deposit back. However normally, in situations like this, sellers are usually willing to address these issues before finalizing the sale.
The Deposit Contract (Contrato de Arras)
Next in the process comes the Contrato de Arras. This agreement lays out the duties of both sides. Typically, it involves a 10% deposit of the property cost from you as a buyer. Additionally it specifies any issues the seller needs to address before finalizing the transaction.
Essential characteristics consist of:
- The seller needs to settle all debts and mortgages and take care of any demolition or other orders that need attention.
- The seller must cover the costs of any taxes.
- The Seller must handle the registration of any unpermitted property amenities, like swimming pools.
If the seller cancels the signed contract, they must refund the buyer double the deposit. On the other hand, should you as the purchaser choose to withdraw from the deal your deposit will be lost as a penalty.
The Signing of the Deed (Escritura)
The last thing to do is to sign the Escritura at the notary’s office where they make sure all the paperwork is correct and that both the buyer and seller have followed the terms of the Deposit Contract. Once that’s done you settle the balance and get handed the keys to your new home.
Note that the notary will only be able to notarise what is front of them. If there are other issues that are unresolved or not in the contract you will not be signing an agreement about them. Having a good conveyancing lawyer is crucial at this point.
If you are unable to make it to the signing event, in person you have the option to authorize your lawyer to act as your representative and sign the documents on your behalf.
The Registration of Ownership
After the document is signed and sealed by the parties involved in the transaction the notary will proceed to record the transfer of ownership, with the Land Registry thereby formalizing the completion of the sale.
How Long Does the Process Take?
The length of the conveyancing process depends on the complexity of the legal checks. Properties with no significant issues can be completed in a matter of weeks, while properties with legal complications can take several months.
Making a Will When You Buy Property in Spain
Although it’s not compulsory, we strongly recommend that you make a will when buying property in Costa Blanca. A will ensures that your assets are distributed according to your wishes in the event of your death.
By following these steps and using a trusted conveyancer, you can avoid legal issues. Then, you can enjoy your new life in Costa Blanca with peace of mind.
NOTE: The legal information contained in this article has been provided by the Benissa lawyer DANIEL HERRANZ. https://dhtaxandlaw.com/