Contact your notary

Purchase and sale of residential property

Buying a property is the most important investment that most citizens will make, and so our advice is that if you are thinking of acquiring a property you turn to a notary for assistance before concluding any procedure. The notary will advise you about all the steps you need to follow to purchase your home with the utmost guarantees.

The current Spanish system, based on close collaboration between the Notary and the Land Registry, provides the highest level of legal certainty. Advice must be sought before signing any documents or receipts, and even before handing over any money, even if its in only a token deposit.
 
 
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Prior procedures: the private document
When buying a property, before drafting a notarial authentic instrument of sale, it is commonplace to sign a private contract between seller and buyer, called preliminary contract, commonly known as deposit agreement (See point 4. Price and deposit). This contract is not mandatory, although it is always carried out when the seller is a real estate developer, and among private individuals is also widely used, especially in major cities, in order to ensure the operation.
 
The Law considers the private document as a perfectly valid way to formalize a business, which means that if an individual signs this type of document he will be legally bound to fulfil all its contents, provided that they are not contrary to the Law. Therefore, it will not be possible to refrain from compliance by stating that what was agreed is no longer adequate, or claiming ignorance of what was signed, without prejudice to the double-rate deposit cancellation penalty (see point 4. Price and Deposit).
 
Hence the importance of being properly advised before signing a document of this nature. The notary does not intervene in the formalisation thereof, but may provide information about its content and resolve any doubts that might arise, free of charge.
 
The notary will always advise that nothing should be signed that is not adequately understood, or if the parties are not fully convinced.
 
Here are some important issues to consider:
 
1.- Who signs for the selling party: When the selling party is a real estate developer, the company manager or his agent should sign the public document, and in their absence, the real estate developer himself. If the sale takes place between private persons, the document must be signed by all owners, either personally or represented by duly qualified persons.
 
In case of jointly owned property, both spouses must sign the document; they will also be required to do so if the property is private of one of them (not matrimonial property), provided it is the effective marital home of the seller.
 
If the seller has granted a power of attorney to another person to sign the document, the legal representative must submit the authorised copy of the power of attorney, not a mere photocopy, and the power of attorney must entitle him to sell.  It is therefore advisable to check, reading the power of attorney, that the legal representative is authorised to formalise the sale.
 
If the heirs of the deceased owner are the ones who intend to sell the property, it is advisable to ensure that they have the documentation in question and that they are the only ones with rights thereon. It is important to visit the notary if you are not sure or have any doubts.
 
2.- State of the charges borne by the property: It is very important to check whether the property is unencumbered, whether it is burdened by a mortgage or if a foreclosure has been issued on the property. To this end, the corresponding Land Registry must be requested an unofficial record extract.
 
There will often be a mortgage, in which the buyer will have to assess whether to subrogate or not. In other words, to accept it and to become a debtor of the remaining party to be paid, before the bank or savings institution that has granted the mortgage or to enter into its own mortgage loan. As the buyer assumes all the previous mortgage agreements, it is very advisable to obtain information about these, especially about the interest rate, if there exists a minimum and a maximum, the repayment period and the agreed commissions, and also, of course, about the remaining amount to be paid. The simplest way will be to ask the financial institution for advice. For more information, please consult the section Mortgage and loans.
 
3.- Owners' association dues: If the property is integrated into a community of owners, the corresponding fees will have to be paid regularly. You must check that the property is up to date on payments or, if not, about missed payments, requesting this information from the community president or administrator, which may also inform about the internal rules or statutes of the building. It is also advisable to know whether there are payments approved by the community, the amount of the fees, and how often to pay.
 
4.- Price and deposit: The price of the property will be included in the contract. Also if it is fully paid or if there is any payment deferred in whole or in part, and the way to satisfy the deferred part, either in successive payments once the notarial authentic instrument has been granted or subrogating the buyer in the mortgage. It is common that in the preliminary contract a deposit is agreed, that is, establishing a certain amount that the buyer delivers to the seller as token (that will be discounted from the price). The most common are the so-called double-rate deposit cancellation penalty: the buyer will lose the deposit if cancels the agreement, and if it is because of the seller, he will have to return double the amount.
 
There are certain properties (social housing, mainly), which have an established maximum sales price. The administrative body responsible for the housing of each Autonomous Region will inform if the property is included in that case, and its maximum price. 
 
5.- Sales costs: There are four costs arising from the sale:
 
  • Municipal urban land gains tax (commonly called municipal capital gains).
  • Notarial authentic instrument at the notary office.
  • Registration in the Land Registry.
  • Taxes (formerly called Real Rights). To know more about these amounts, see Subsequent Procedures.
If nothing is agreed in the private contract, or if it is indicated that the expenses are ‘according to the Law’, the seller will pay the capital gain, and most of public document expenses - the master copy or original - while the buyer will pay the other part of the authentic notarial instrument -copies-, (although this rule varies according to the Autonomous Region), the registration costs and taxes. The agreement changing the taxpayer of the Municipal Property Gains Tax (the seller) or the real rights tax (the buyer) does not affect the Administration, which will always claim these taxes to the taxpayer.
 
In the event that the seller is a real estate developer, it is prohibited by the legislation that the buyer bears expenses that by law must be paid by the selling party, such as the municipal capital gains, the expenses of the declaration of completion of a newbuild property and horizontal division, or the cancellation of the mortgage existing on the property, (when it is to be acquired free of liens or is preferred to contract).
 
6.- Choice of Notary: Any notary is impartial, in that there are no ‘party’ notaries, but it may be interesting to come to a specific one to formalise the authentic notarial instrument. Whoever sells, whether it is a real estate developer or a private person, the buyer party is entitled to choose a notary. (View Notarial Guide).
 
7.- Effects of the private document: Although the private document is fully valid, it is not sufficient to register the property in the Land Registry, nor to apply for a mortgage to the bank. To this end it is essential to have a document the effects of which go far beyond, providing sufficient security required by the system. It is the authentic notarial instrument.

Authentic notarial instrument of sale
 
The authentic notarial instrument is a public document granted before a notary. In our legal system the cases in which the notarial authentic document is mandatory are very scarce. It is a general principle of formal freedom, but although the public document is not compulsory to execute a sale, it is highly advisable, because it has very powerful effects, specifically governed by the laws, which far exceed what the private document can provide. In addition, the professional function of the notary provides more information to the parties, offering security to the contracting parties and giving effect to the business contained in the document which constitutes the right vehicle for the registration of the property in the Land Registry.
 
Corroboration: The parties executing a sale declare before the notary, in the notarial authentic document, their willingness to sell and purchase and the conditions of that, and the notary collects those declarations under his attestation. That’s why it’s said that the notarial authentic instrument is corroborated , that is, it bears witness in itself. The private document is not corroborated. Hence the importance that in common knowledge is given that declarations are made ‘before the notary’.
 
Legal certainty: The notary is not limited to bear witness, but their professional function provides legal certainty in the sale and purchase, through various verifications; he:
 
  • Checks the identity, capacity and legitimation of the buyer and seller: The notary will verify the identity of the parties involved in the contract by means of their valid ID card or passport, of which he will retain a copy in his physical or telematic files. Likewise, he will confirm that the buyer and the seller have sufficient capacity to purchase and sell, respectively, and that they are sufficiently qualified to do so in the event that they act for and on behalf of others, whether under legal age, legally incapacitated, foreigners represented by powers of attorney or representatives of legal persons (companies, cooperatives, associations, foundations...). He will also check, with respect to the buyer and seller, if they are married and under which marital economic regime to determine whether the seller’s spouse is required to also intervene and, with respect to the buyer, on which basis he buys the property.
  • Checks the Seller's title of ownership: The notary will check the title of ownership of the seller, either a public document, a court decree or a public administration document, and will record the sale in that same title.
  • Checks the seller’s habitual residence: The notary will require the seller to indicate in the public document whether the property he sells is his regular family habitual residence, since in that case the sale must also be consented by the spouse or domestic partner, as the case may be, even if the dwelling is the exclusive property of the seller.
  • Official Housing Event (VPO): The notary shall inform about the maximum sale price which may not be exceeded, of the authorisation required by the Administration in order for the buyer to acquire the property and the requirements, the obligations and limitations to be fulfilled by the buyer in this type of properties while their regime is in force.
  • Rent situation: The notary will require the seller to indicate in the authorised instrument that the property is free from leases and occupants or, otherwise, what their occupation titles are.
  • Check in the Registry the ownership and liens and security in the purchase: By requesting the prior registry information and immediately presenting the authorised instrument in the Land Registry. The Notary, prior to the sale, requests from the Property Registry an informative note indicating who is the owner of the property,  if it is free from liens, or if it is burdened by mortgages, foreclosures, or any other encumbrances (this will be so until the registrars allow online access to the registration books, as established by Law). Once the authentic notarial instrument has been signed, the notary presents it by telematic means, on the same day in the Land Register. This is a dual mechanism intended to provide complete information, and to virtually reduce to zero the risks for the buyer, since once the purchase is made, the notary will enter the acquisition in the registry by telematic means.
  • Check community fees: The buyer must request that the seller provide a certificate from the secretary of the community of owners, with the ‘approval’ of the president, which accredits that the seller is up to date on payments of the community expenses. The notary will require the submission of that certificate, without prejudice to the purchaser having been duly informed of the status of the fees, releasing the seller from presenting the certificate. Likewise, the notary will advise the buyer to provide his/her data to the community administrator for payment of the following fees.
  • Land survey data: The notary will also request the property's land registry number, usually through the last receipt of the Property Tax, which must be presented by the seller, and will obtain a descriptive and graphic cadastral certification, to be incorporated into the authentic instrument to verify the consistency and warn the parties about any inconsistencies between the land survey data, those in the notarial authentic instrument and those resulting from the Land Register. Once the public document of sale has been authorised, the notary will provide the buyer's data to the Land  Survey in order that the upcoming Property Tax receipts are issued in the name of the new owner. He will also check that there are no Tax Property pending payments of previous non prescribed tax years. Land Survey Inquiries
  • Energy efficiency certificate: The notary will ask the seller for the energy efficiency certificate or a copy thereof, to be handed over to the buyer.
  • Occupancy certificate: Autonomous Regions require that the seller provide the buyer with the current occupancy certificate, a circumstance which will be checked by the notary and that he will record in the authentic notarial instrument.
  • Check of the means of payment: The notary will check and record in the authentic notarial instrument how and when the property has been paid: in cash, through normal or bank checks, registered or bearer, the accounts numbers from where the money proceeds, the account number where the money has been paid in the case of bank transfer, the dates of the payments, or if the money is paid in the same act of signing of the authentic notarial instrument. In the event that the sale is subject to VAT, it will also be recorded in the authentic notarial instrument how and when the tax has been paid. If the seller is a foreigner, the withholding by the buyer of three per cent on the sale price shall be recorded and he will advise buyer and seller on the models to be filled for this purpose, and on the deadlines for compliance with their tax obligations.
  • Warnings in the deferred price assumption: In the event that both parties assume that the buyer could defer a part of the price, the notary shall advise the seller of the risks and the guarantees to avoid these risks and about the cost of these guarantees, which should be assumed by the buyer who cannot buy the property in cash.
  • Warning of hidden faults: The notary will advise the seller that he/she responds to the faults that the property might have and which are not obvious at first sight, without prejudice that, for whatever reasons, the buyer releases the seller from this obligation.
  • Warning of tax obligations: The notary will inform the seller of his obligation to pay the municipal capital gain (in the event of an urban property sale); his obligation to pay the Property Tax corresponding to the whole year even though he sells in January, and that he should keep a simple copy of the authentic notarial instrument of sale to make his income tax return for the purposes of a possible capital gain. The notary will advise the purchaser of his obligation to pay the Purchase Tax, either for Onerous Asset Transfers or Stamp Duty (in this last case if VAT is paid), and that he must accredit the submission of a simple copy of the authentic notarial instrument in the Town Hall for the settlement of the Municipal Urban Land Gains Tax (commonly referred to as municipal capital gains, which Law establishes must be paid by the seller), so that the buyer can register in his name in the Land Registry the property he has just acquired. This procedure can be done by the notary if requested by the buyer.
  • Regarding the Tax Property of the year in which the sale occurs, although for the municipal tax office the taxpayer is the seller, as he was the owner on January 1, the judgment of the Supreme Court of 15 June 2016 has established as doctrine of case law that “Article 63.2 of the Law regulating local taxation must be interpreted so that, in the event of absence of agreement on the contrary, the seller who pays the Property Tax shall be entitled to pass it on to the buyer in proportion to the time when each party has held the rights of ownership and for as long as necessary”.
  • Identification of the Beneficial Owner: In the event that a trading company is involved, and in compliance with the Law on the Prevention of Money Laundering, the notary is obliged to identify who is or who are the natural persons who control over 25 per cent of the shares or stock of the company.
Advice: The notary is a legal professional, and among his functions is the advising and counselling in an impartial way and free of charge.
 
The notary is impartial and his mission is to inform all the parties involved equally, although he must offer particular assistance to the party most in need of it. There is no need to hesitate to consult any doubts that may arise, and not only on the day of signature, but before any proceedings are made. It's your right.

Buying a property: subsequent procedures
 
Once the property is acquired by means of the notarial authentic instrument, it must be performed what is called ‘the management’ of the document:
 
1.- Pay the taxes corresponding to the Autonomous Region, for which there is a maximum term of 30 business days or one month (depending on the Autonomous Region) from the date of the authentic notarial instrument, providing a copy thereof and the corresponding model. Once that term is elapsed, a penalty for late payment is applied. At the demand of the Authority, an economic penalty will also be imposed.
 
If VAT is accrued, for example because it is a first sale carried out by the real estate developer, it must be paid, in addition to VAT, which is handed over to the real estate developer himself for payment to the State Treasury, 1 % or 1,5 % (depending on the Autonomous Region) of the price recorded in the sale document, as Stamp Duty. If it is exempted from VAT, it is because this is a second sale and therefore the Asset Transfer Tax will be applied; then the percentage varies between 6 % and 10 % of the price (depending on the Autonomous Region).

2.- Register the purchase in the Land Registry. The public document may be presented to the Land Register by the notary through telematic means if so requested, which is highly advisable as this presentation guarantees the immediacy and blocking of the Land Registry to any other documents which may be issued and which could be prejudicial, such as an seizure on the buyer or a precautionary annotation on the seller. 
 
Also, the public deed may be submitted to the Land Registry by means of an authorised hard copy. There is a security deadline to present the authorised hard copy signed by the notary, following payment of the Onerous Asset Transfer or, if applicable, of the Stamp Duty. Once examined by the registrar, he will register the property in the name of the purchaser, and the notary will deliver the copy of the public document, with the change to his name in the register.
 
These procedures can be done personally, although on many occasions, when the sale is followed by a mortgage, the financial institution requires that the procedures are performed by a certain administrative agency. In this case, it should be asked how much they are going to charge for this service. The notary may likewise administer management. What does the notary do?
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