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Legal Procedures


The legal procedures involved in buying a foreign property can seem complicated, but we can help you with all of it. The following guide is intended as a brief introduction to some of the terminology used by Spanish estate agents, and we hope it gives you a good basic idea of Spanish legal procedures for buying property.

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  Legal Terms Explained

 

New Property
Property that is owned by a developer/builder. All properties are sold freehold and carry a minimum 10 years structural guarantee. Your Home In The Sun has several contracts with local developers in countries all over the world and we will show you a range of developments best suited to your needs.

Resale Property
A resale property is owned by a private individual, family etc. Your Home In The Sun has a wide selection of resale properties available to view for a variety of tastes and budgets. However, the golden rule is that before you make an offer you should be in a position to buy. Therefore, you need to be certain that you can raise the finances before making the offer.

Placing a Holding Deposit
Once you have found a suitable property a holding deposit is required to reserve a property and remove it from the market. While the amount can vary from purchase to purchase, it is normally in the region of €3,000 or £2,000 or $3,000. If you are interested in a property, you have to open a local bank account and lodge this sum. The Holding Deposit is paid to the vendor of the property on signing a reservation/holding contract. The remainder of the purchase price together with all fees has to paid on completion (see below).

Signing a Reservation/Holding Agreement
When putting a deposit on a property you must sign a reservation/holding agreement thereby reserving the property. This agreement will also act as a receipt for monies paid.

Appointing Your Legal Representative
Your legal representative will carry out all the necessary searches and will handle all payments on your behalf. It is generally advisable to engage the services of a local solicitor to look after your purchase. Your Home In The Sun has a relationship with an experienced bilingual legal representative in all the major countries and will always offer you a choice of representation of ofcourse you are free to research and choose you own.

Completion Date
This is the date on which the balance of the purchase price must be paid together with all fees and the title deeds are signed over to the new owner(s). This date should be set when signing the reservation/holding agreement.

Signing of theTitle Deed
This is done on completion in front of the state appointed legal representative, by you or by someone (usually your legal representative) with power of attorney from you to sign on your behalf. Full payment less the deposits given earlier together with all fees (see below) is required before the title deed can be transferred into the name(s) of the new owner(s).

Notary
This is the most commonly used term but this does vart from country to country. The Notary is a lawyer appointed by the local government to ensure that the change of title is properly executed. It is the Notary's job to make sure that the seller is legally entitled to sell and the taxes are paid. The Notary will register the change of ownership in the Land Registry Office (see below).

Land Registry Office
This is where all Title Deeds relating to property transfers are registered after taxes have been paid and where the title and any charges against the property can be checked. All properties promoted by Your Home In The Sun wil require registeration in the local Land Registry which details who owns the property, the exact size of the property and if there are any mortgages etc on it. Only the people named on the title deed have the right to sell the property.

Fees
All fees are due on completion and a typical example follows but please remember to check the most up to date figures for fees in the country of your choice simply by clicking Contact Us.

  • 7% - 10% of the value of the property for local tax for new properties or for transfer tax for resale properties
  • 1% - 2% of the value of the property for legal fees
  • 1% - 3% of the value of the property for Notary fee, Land Registry, changing of water & electricity, wills and local identity registration such as the NIE in Spain.

In total you should allow 10% - 15%of the purchase price for costs but this does depend on the country you are buying in.

Taking Possession
The handing over of the property and the keys will normally take place only when the full purchase price and all fees have been paid on the completion date.

Transfer of Services
Having completed the purchase, it is necessary to connect or transfer services. For example, electricity and water need to be in your name.

Insurances

Fire
Fire insurance is compulsory by law when taking out a mortgage. Comprehensive household insurance is available to protect your home and contents. But make sure you always read the small print carefully so that you understand exactly what is covered. Life insurance can be taken out to guarantee payment of a mortgage in the case of death.

Building and Contents
This is your responsibility upon taking possession of your property, however,Your Home In The Sun can advise you on this matter. For details register for our FREE Factsheet on Buildings insurance.

Community Fees
If you purchase a property within an apartment block or complex, you will become a voteing member of a community of co-owners, which administers the general maintenance of the areas of common ownership, such as gardens, hallways, lifts swimming pools, exterior lighting etc. An annual budget is calculated to cover these costs, which is divided between all the owners according to the size of their properties. All owners have a vote to agree the budget at the annual general meeting.

Property Guarantees
Most countries have laws that state that all new properties must be guaranteed for a period of time. For details register for our FREE Factsheet on Buildings insurance. During this Guarantee period the architect and the builder being legally responsible for design or build defects. Most new developments also include a bank bond within the terms of their contract, guaranteeing each stage-payment and frequently a no-later than completion date.

Making a Will
As international inheritance-laws vary vastly from those in the UK or Ireland. Complications can arise if you do not have a separate local Will handling local assets. We, therefore strongly recommend that you take legal advice on this matter when you acquire or transfer foreign assets. For more information please Contact Us.

Capital Gains Tax
A tax that is paid on the gain made on a property when it is sold; the rate of the tax can vary. Your Legal Representative will be able to provide accurate & up to date information.

Become resident or keep tourist status

Legally any foreigner can stay in EU Member countries as a tourist for up to 90 days. Anyone staying for over 183 days is considered to be a fiscal resident (I.e a resident for tax purposes) and is obliged to apply for a Residence permit unless they meet the Residencia permit exemptions. The requirements and exemptions for EU members are continually changing to simplify the process.

Tax implications
When you stay in an EU Member country for 183 days or more in one calendar year, you become legally liable for local income tax, whether you are a formal resident or not. When you take out a residency, you become liable on your total world wide earnings, although international agreements prevent double taxation.

Annual costs
Annual taxation charges vary greatly from country to country so please Contact Us for details of taxation in your chosen country.

Tax advantages for resident property owners
Imputed income tax - is an annual tax on the ratable value of the property and is on average charged at 0.5% of the Land Registry value. If you are a resident you will not be charged this on your principal home.

Wealth tax - is a tax on all assets inmost countries and is typically charged at 0.2% of the title deed value of any house owned. Residents are usually given and allowance befor wealth tax is due i.e.in Spain the first £108,000 of valuation is exempt. Fof a joint ownership this would apply to each partner. These two taxes are paid annually for as long as you own the property.

Non-Residents do not receive any relief so therefore have to pay 0.7% of the catastral value every year.

When you come to sell the property, capital gains tax will be charged on any profit you have made. This is again varies from country to count so please Contact Us for details ofCapital Gains Tax in your chosen country. Also if you are over 65 and want to find out how to avoid capital gains tax altogether please Contact Us or register for our FREE Factsheet.

Importing possessions
European Union citizens are exempt from all duties on importation of household effects to other EU Countries. However the import laws outside the EU are very different, for more information please Contact Us.

If you have any further questions that are not answered here please Contact Us and we will do our best to help.

 

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