Hacienda la Hermita
Ribera GolfThe Process of Buying Property in Murcia
So, you've carefully researched every aspect of your potential property purchase in Murcia and you know this property and this location are the best for you, your family and your situation. You've made your decision and want to go ahead as soon as possible. What happens next?
This article is a quick overview of the process of buying a property in Murcia. It is not an exhaustive or definitive statement on any of the matters dealt with and it is essential to take proper professional advice before acting.
Preparing the ground
If you've not done so already while searching for your dream home in Murcia, find a good agent and use their skills and experience to help you though the process of buying. Their negotiating skills and contacts will help you get the best possible deal and help you avoid the pitfalls which may await the unwary.
Contact a Spanish lawyer who speaks English and has experience of dealing with this kind of property sale. It's hard to emphasise too much the importance of this appointment. At the same time you are well advised to talk to a financial and/or tax advisor, particularly if you are planning to make a permanent move or spend long periods in your new Murcia property.
If you require a mortgage, talk to your agent about the best source for finance for your situation. Mortgage interest rates are lower in Spain than most of the rest of Europe, another good reason for investing there. Before doing any serious property viewing, spend time checking out your financial situation and what kind of mortgage you can secure as this will help you to target appropriate properties.
You will have a number of choices as to where you obtain a mortgage and your agent may well encourage you towards their particular favourite. However, you could save considerably on tax by taking on any mortgage offered by the developer. Your developer will likely already have a mortgage on the property to fund the development. This mortgage can be subrogated (transferred) to the new buyer, effectively you take over the debts and terms and conditions of the existing mortgage rather than taking out a brand new one. (The Spanish legal term 'subrogation' differs in meaning to the usual English understanding so don't get confused). The advantage is it could save you tax and administration expenses which might otherwise amount to several thousand euros. Subrogation may not be the best option , depending on the terms you are able to negotiate for a mortgage yourself, but you should certainly enquire on it and do the sums for yourself.
Before you start the ball rolling get your finances in order. Bear in mind you are probably going to have to find at least 40% of the purchase price (plus taxes and fees) as a deposit on the property. Prepare yourself so you can have quick access to this money in case you need to move quickly to secure a property.
AimforSpain can help you in all these important matters so feel free to contact us at any time.
When in Spain...
Many steps in buying a property in Murcia require you to appear in person. If this is likely to prove difficult you have the option of appointing a trusted representative with ‘power of attorney’. Your lawyer could act in this role.
In order to complete the purchase you will need to apply for your NIE (Numero deI identificacion de Extranjero) number at a police station. You can do this at any time and you will want to do so early on if you are conducting official business yourself, rather than giving power of attorney to your lawyer. In any event it will be required before you can become an owner by signing a title deed. Application is easy but it will take a few weeks to be issued.
Once you have your NIE you can open a Spanish bank account, necessary to deal with all the payments associated with your purchase. There are different types of account available for residents and non-residents. You will need to show an identification document, your passport being the obvious candidate. If you are applying a for non-residential account you may be asked for a certificate (certificado de no residencia) to prove your status, which you can obtain on application to a police station.
Meet with your lawyer and get the necessary background checks done on your chosen property (due diligence). For off-plan property this will include ensuring all the correct licences and certificates have been granted, that the property is debt free and that bank guarantees are in place to protect your deposit in the event of the development not completing. Resale properties are dealt with slightly differently in requiring other checks into the background and history of the property (ownership, debt status etc). Your lawyer will also guide you in setting up an escrow account to enable your deposit to be protected until the deal is completed. It�s also important to speak to them also about making a will to ensure your property is to be inherited as you desire. Spanish law differs from English in this field and unless you take this step your property may not be inherited as you might expect.
Reserving Your Property
Once the ground has been prepared and you are certain in your own mind that you have chosen the right property you will need to reserve it. The precise procedure and amounts involved will vary from developer to developer and it may be possible to do some negotiating, but the broad outline is the same in each case.
For off-plan property a reservation contract is signed and a modest deposit paid. This holds the property for one month to enable you to pay the remainder of the full agreed deposit, probably 40% of the purchase price plus fees and taxes. At this point the purchase contract is signed. Always bear in mind that all contracts will be in Spanish but your lawyer will be able to provide you with a translation copy.
Completing the Purchase
The purchase of your new property will be completed when the property is ready to be handed over. At this point the balance of the purchase price plus taxes is paid and the Escritura Publica de Compraventa (Public Deed of Sale) is signed. It's essential to have your lawyer with you to make sure the document (written in Spanish) is correct. By law this document must be authorised by a Spanish Notary and must also be signed by the buyer and seller in front of the Notary. Effectively this is the moment when the new owner takes possession of the property.
Certain documents should be provided by the seller. The precise documents required vary case by case, and you lawyer will be able to advise you on the documents required in your case. However documents could include: title deeds, proof of payment of the most recent local property tax (IBI), proof of up to date payment of utilities and a certificate from the administrator of the community of owners showing that payments are up to date.
Immediately after completing the purchase you will need to register with the Land Registry and with the Catastro (the local government's registry of property and owners). This will ensure that you receive all correspondence relating to the local property tax.
Taxes relating to Property Purchase
Various taxes need to be paid as part of the purchase and as a rule of thumb you need to allow for an additional 10% or so over and above the purchase price to cover these. The taxes you pay, as opposed to the seller, will be negotiated by your lawyer but, for an off-plan property, you are likely to have to pay 7% IVA. (Impuesto sobre el Valor Anadido), 0.5% I.A.J.D. (Impuesto Sobre Actos Juridicicos Documentados), the Plus Valia (usually a small amount) plus legal and notary fees amounting to around €2000.
Ongoing Taxes and other Costs
Just as in Britain, owning a property in Murcia involves ongoing costs. When setting down your budget allow for annual expenditure on Community fees (shared expenses for the upkeep of the development). You'll also have regular utility bills ' their charges are roughly commensurate with UK costs. Additional costs may be incurred at the beginning by the utility companies connecting their services to your property.
You will also be subject to various taxes. Your tax situation will vary depending on whether you are resident for more than 183 days in the year. Taxes you will be subject to include: Impuesto Sobre Bienes Inmuebles, (IBI), similar to our Community Charge, Impuesto Sobre la Renta (Notional Letting Value Tax) which varies depending on whether you are a permanent resident or not, Impuestos Sobre la Renta de las Personas Fisicas (Income Tax) payable on ALL income if you are resident or just income earned in Spain if you are non-resident and finally Impuesto Sobre el Patrimonio (Wealth Tax) a tax calculated on the value of your assets (property and bank balance). Because taxes can be a grievously complicated matter at the best of times, but particularly in Spain where tax law is quite complicated, you should really consult a Spanish accountant on these matters.