HEALTHPLAN MAGAZINE

If you're a property owner, there may come a time when you need to sell your property in Spain.

In recent years due to the financial downturn, the property market has been fairly stagnant, but the outlook has been steadily improving with sales starting to increase.

Once you've found a buyer, the process of completing the sale is relatively straightforward. However, there are some things you must be aware of including fees and taxes that you may or may not be liable for.

Proving That You Own The Property

Before you sell a property in Spain you first have to prove that you actually own it.

Property ownership in Spain is certified by the deeds as is the case in the UK. In Spain, the property deed is generally referred to as the Escritura.

Escritura

The Escritura or public deed is as its name implies a public document that certifies that there is to be a change of ownership. The public deed is signed by both buyer and seller in the presence of a Notary who then uses this information to lodge the new ownership at the Spanish Land Registry.

The Escritura may include the following information and more:-

• Terms and conditions of the sale
• Identification details of both buyer and seller
• Full description of the property including build size
• Registration number at the land registry
• Any pending encumbrances, fees or liens such as mortgage or community fees
• Any taxes involved
• Details of any legal representatives involved
• Cadastral reference
• Information on utility or council tax (IBI) bills

Unfortunately, many older properties, especially those in rural parts of the country do not have an Escritura and hence are not inscribed at the land registry. This is usually done to cut costs and save on Notary fees.

Needless to say, you should avoid attempting to buy or sell a property that does not have an Escritura and of which has not been registered at the land registry.

Having the title inscribed at the land registry is the only way to guarantee that you are the legal owner the property.

The Catastro

The Catastro is a comprehensive register of the land and properties in Spain and is separate to the land registry. Because of this, it is important to make sure that the Catastro is up to date, not only when you buy a property, but also when you sell it. Therefore, it is important that both the Land Registry (Record of ownership) and the Catastro contain the same information.

This will usually be done by your lawyer, however, it’s important that you have at least a basic knowledge of what the Catastro is and the kind of information that it will contain.

The Catastro will contain:-

• The number of plots (Parcelas) of land contained within the property.
• The boundaries of the property.
• The class of land
• Position of the property and swimming pool (if applicable)
• Total area of the land in sqm
• Name of the property owner

The data held at the Catastro is also used to calculate the ‘Valor Catastral’ value of the property for tax purposes and is used to produce your yearly IBI tax bill. It is also commonly used to settle boundary disputes and to calculate capital gains and Plusvalia tax.

Nota Simple

Although your lawyer will check for the accuracy of the Escritura at the land registry it is important that this is accurate in order to avoid any issues when selling your property.

The Nota Simple is an official document, which is used in the conveyancing process and acts as a short report, which outlines the current information held about the property at the land registry.

The Nota Simple will contain the following information:-

• The current owner/s of the property
• Full description of the property including number of rooms
• Size of the property in square metres and any communal areas
• The boundaries of the property
• Any pending encumbrances, fees, debts or liens such as mortgage or community fees, unpaid council tax and any foreclosure procedures.
• Property classification such as residential or agricultural etc.

Unfortunately, the Nota Simple is not always correct as the owner may have made refurbishments and not updated the land registry. This is why it is important for your lawyer to check this during the conveyancing. If the information is incorrect, it is the seller's job to make sure it is corrected at the land registry.

Estate Agent Fees

Although you do not have to use the services of an estate agent, it can of course help to get your property in front of more potential buyers than if you decided to go it alone.

Many estate agents in Spain use what is called an MLS or Multi Listing Service, which means that any properties that they list can be shared and viewed by other agents. This is of particular benefit as your property will potentially appear on the websites of hundreds of other real estate agents.

Estate agents typically charge between 4% and 7% plus VAT of the sale price to market your property. The payment is usually paid on the signing of the deed and can be offset against any outstanding capital gains tax.

Hiring a Lawyer

Although it's possible to sell a property in Spain without hiring the services of a specialist lawyer, it isn't advisable.

The buying and selling process is a potential minefield for both vendor and buyer and if due diligence is not performed by an experienced lawyer, you may end up with either a huge expense and/or a complete legal nightmare.

A lawyer will be able to make sure everything is legally in order and will be able to represent you at every stage in the process

A solicitor specialising in Spanish property law will generally charge between 1% and 1.5% of the sale price and is well worth the cost for that added peace-of-mind.

Energy Performance Certificates

In 2013, Spain introduced a new decree (law), which states that any property that is either rented or sold has to have an Energy Performance Certificate ( Certificado de Eficiencia Energética or CEE ) as is the case in other parts of Europe.

The purpose of the CEE certificate is to allow the buyer or renter to ascertain how energy efficient a property is compared to other properties so that they are able to make an informed decision.

There are a few exceptions as to when the certificate is required, for example, if a property is less than 50 sqm in size or where the property is used for less than four months per year or when the energy consumption is 25% or less of the expected yearly energy consumption of the property. In these cases, the energy performance certificate is not a mandatory requirement.

In all other cases, a certificate must be produced to the buyer or renter prior to any negotiations or transactions taking place. A certificate must also be included in all marketing material both on and offline. If you sell or rent a property without an energy certificate, you can be heavily fined by the Spanish authorities.

Energy performance certificates are valid for 10 years at which time they will need to be renewed. They may also be updated if there is a change to the property.

Prices for a certificate vary and depend on the size of the property, but can be up to €300 per certificate. New build properties should automatically come with a certificate.

To obtain an CEE certificate via a certified assessor, you can visit the following web page to find your nearest provider.

https://certificadoenergetico.es/

For further information on CEE certificates, please view our page at

https://www.healthplanspain.com/blog/spain-news/181-new-energy-performance-certificate-law-spain-1st-june-2013.html

Capital Gains Tax

Capital Gains Tax in Spain is sometimes referred to as Plusvalía Fiscal and should not be mistaken for Plusvalía Municipal, which is a totally different tax. Plusvalía Fiscal is paid to the central tax office (Agencia Tributaria) whereas Plusvalía Municipal is a local tax and is paid to the town hall (Ayuntamiento).

Up until fairly recently, non-residents were being charged 35% for capital gains, but thankfully this was reviewed and subsequently reduced to be more in line with what residents pay, which is:-

Residents

First €6,000 - 19%
€6,000 - €50,000 - 21%
€50,000+ - 23%

Non-Residents

Non-residents pay a flat rate capital gains tax of 19%.

If a property is sold by a non-resident, the buyer must withhold 3% of the purchase price, which is then paid to the tax authorities as an advanced payment of any potential capital gains on behalf of the vendor. The vendor may then reclaim this amount if it is more than any capital gains tax due or pay the balance if less than what is owed.

If the money is not withheld by the buyer and paid to the tax authorities, the buyer can be fined and the outstanding tax will become a charge over the property itself!

The whole withholding exercise is to prevent a non-resident from selling the property and then not paying the CGT tax. It is the job of the Notary to make sure that this is adhered to.

The buyer will have 30 days in which to complete the Modelo 211 form and pay the 3% withholding fee. To download the form and for further details please see the following official page from the Agencia Tributaria https://sede.agenciatributaria.gob.es/Sede/procedimientoini/GF01.shtml

If a vendor believes that they have not made any capital gains on the sale, they can request a refund within three months of the sale by presenting the form Modelo 212 at the local tax office. Be warned though, the tax authorities are notorious at delaying this refund and in many cases may dispute the actual sale price of the property and insist that no refund is due!

Any refunds will generally take up to 1 year to be paid, but there are stories of vendors fighting for two years or more in order to get their money back.

You can read further information on all forms of capital gains tax in Spain via our article below.

Capital Gains Tax In Spain
https://www.healthplanspain.com/blog/expat-tips/461-capital-gains-tax-in-spain.html

Plusvalía Tax

Plusvalía is a local tax that is often referred to in Spanish as either Plusvalía Municipal or Impuesto Municipal sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana.

Plusvalía is levied on the increase in value of the urban land from the date that the owner acquired the property up until the time of the present sale.

As it is a local tax, Plusvalía is paid to the town hall rather than to the central tax authorities and is based on the Valor Catastral value of the land, which is also used to calculate your yearly IBI bill or Impuesto sobre Bienes Inmuebles.

The vendor will usually pay the Plusvalía tax although it can be split with the buyer. Plusvalía tax usually has to be paid within 30 days of completion of the sale.

Generally speaking, the longer a person owns a property, the higher the Plusvalia tax will be.

In some cases a buyer may insist on withholding any Plusvalia tax that may be due, otherwise non-payment of the tax by the vendor would mean that the property and hence the new owner would inherit the debt!

Other Fees and Costs

There are one or two other potential expenses involved in selling a Spanish property including:-

• Mortgage Cancellation Fees with Bank - Typically 0.5-1% of any outstanding mortgage amounts.
• Mortgage Cancellation Fees with Notary - When you cancel your mortgage, you will also need to make sure it is cancelled at the land registry. This is done by the Notary with a representative of the bank present. Typical costs are between €600-€1,000.
• Utility Bills - These will need to be fully paid up before completion.
• Community Fees - Like other bills, these will also need to be paid upon completion.

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