Buying a property in Spain: a legal guide, steps and costs

Buying a property in Spain is an important decision. As well as finding a home that suits your needs, it pays to understand its legal status, calculate the total cost of the transaction and know what commitments you take on when you sign.

Whether you are looking for your main home, a second residence or an investment, good preparation helps you make informed decisions and reduces the risk of surprises.

In this guide from MH Legal & Seguros we explain the main steps to buy a property in Spain and the issues worth reviewing before, during and after the transaction.

1. Budget and finance for buying a property

Your budget should include the price of the property and the associated taxes and costs. Allowing an additional 10 % to 15 % can serve as an initial guide, but it does not replace a personalised calculation: the amount may fall outside that range depending on the location, the type of property and your circumstances.

If you are buying with your own funds, plan how you will prove their origin and how you will make the payments. A Spanish bank account can make certain arrangements easier, but it is not a general legal requirement for every sale.

If you need a mortgage, check the conditions before committing. The amount the bank is willing to lend will depend on your creditworthiness, residence, income, valuation and its lending criteria. A favourable initial assessment is not the same as a final approval.

If the purchase depends on obtaining finance, that condition must be expressly regulated in the contract. Do not assume you will recover your deposit if the bank declines the mortgage.

2. Legal advice before reserving a property

The location, the condition of the property, the services and the maintenance costs are essential factors. An estate agent can help you find homes and negotiate, while an independent lawyer will review the legal and contractual aspects of the transaction.

It is advisable to have that advice before signing an offer, a reservation or an arras contract, and before handing over any money. Even a short document can create obligations.

As well as viewing the property, consider a technical inspection when its age, condition or features warrant it. The legal review and the technical review complement each other.

If you are a foreign buyer, you will need the corresponding tax identification, normally through the NIE (foreigner identification number). This number identifies the foreigner before the Spanish authorities; by itself it does not grant a residence permit nor determine tax residence.

3. What to check before buying a property in Spain

Before going further, it pays to check who can sell, what is being transferred and in what condition the property will be delivered. The review should be adapted to each property and include:

• Title and powers of the seller: owners, co-owners, powers of representation and possible inheritance situations.
• Registered charges and rights: mortgages, attachments, usufructs, easements and other limitations.
• Registry, Cadastre and physical reality: surface area, boundaries, annexes and possible extensions or discrepancies.
• Planning status: legality of the construction and of any works carried out, as well as the occupation licences or documentation that apply.
• Owners' community: debt certificate, fees, minutes and approved or planned special levies.
• Taxes and utilities: bills and possible outstanding obligations.
• Possession and use: leases, occupants, delivery date and the possibility of using the property for the intended purpose.
• Energy performance certificate: availability, registration and validity where required.

The nota simple (simple note) shows the registry status, but is informational in nature and does not replace all these checks.

Nor should the community debt certificate be waived without assessing its effects: certain earlier debts can affect the acquired home.

Off-plan purchases, of rustic properties or of homes intended for short-term tourist letting require specific checks. Buying a property does not mean it can automatically be used as tourist accommodation.

4. Reservation contract and arras: what to review

Not every transaction follows the same sequence. There may be a prior reservation, a private or arras contract, or you may go straight to the public deed.

The reservation

Before paying, the document should specify who receives the money, what obligation the seller takes on, how long the reservation lasts and in which cases the amount is returned or forfeited.

There is no legally mandatory reservation amount. Nor should it be assumed that a reservation is always a formality with no binding effect.

The private contract and the arras

The contract should set out the price, payments, deadlines, charges, the allocation of costs, the financing conditions and the consequences of breach.

10 % of the price is a common reference for the deposit, but not a legal requirement. Moreover, not all arras allow withdrawal by forfeiting the deposit or returning it doubled: those effects belong to penitential arras (arras penitenciales) when clearly agreed.

If there are pending checks, works to regularise or conditions necessary to buy, they must be expressly recorded. It is preferable to resolve these issues before taking on significant financial commitments.

5. Taxes and costs when buying a property

Taxation depends on the property, the transaction and the territory. It should be calculated before signing.

Second-hand home: ITP

The purchase of a used home is usually taxed through the Transfer Tax (Impuesto sobre Transmisiones Patrimoniales, ITP). Rates, tax benefits and requirements depend on the autonomous community and the buyer’s circumstances.

The tax is not always calculated on the agreed price. Where a Cadastre reference value exists, the taxable base will generally be the highest among that value, the declared value and the price. Where no reference value exists, the rules for declared value, price and market value apply.

New home: VAT and AJD

For first deliveries of homes subject to VAT (IVA), the general rate is 10 %, with specific cases that may apply a reduced rate. The deed may also be subject to Stamp Duty (Actos Jurídicos Documentados, AJD), whose rate and benefits depend on the territory and the transaction.

These VAT references apply to its scope of application: the Canary Islands, Ceuta and Melilla have different tax regimes.

Notary, Registry and advice

Notary and registry fees are set by statutory scales and depend on the characteristics of the documents and acts. The allocation of sale costs should be reviewed in accordance with the law and the contract.

Lawyer’s fees are agreed with the client. Ask for a quote detailing the services included, taxes and any possible additional costs.

Mortgage costs

For loans subject to Law 5/2019, the borrower pays for the valuation and the notarial copies they request. The lender pays for the conveyancing, the mortgage deed and its registry registration; the AJD on the loan corresponds to the lender under the tax rules.

Agreed fees and linked or combined products should also be reviewed. Mortgage costs should be distinguished from the costs of buying the property.

If the seller is not a tax resident in Spain

Where applicable, the buyer must withhold 3 % of the consideration and pay it via form 211 (modelo 211) as an advance payment against the seller’s tax. That amount is deducted from the amount to be paid to the seller.

In addition, if the seller is a non-resident individual, the buyer may be the taxpayer’s substitute for the municipal capital gains tax (plusvalía municipal). This obligation should be checked and how it will be met regulated.

6. Signing before a notary and handover of keys

Before signing, review the draft deed, the updated status of charges, the means of payment, any retentions and the conditions of delivery.

If the seller has a mortgage, its economic and registry cancellation must be coordinated. Paying off the outstanding loan does not by itself remove the registered charge.

When you take out a mortgage subject to the mortgage credit rules, you must receive the pre-contractual documentation within the legal deadlines and complete the prior notarial advice, with the corresponding acta.

The notary performs an impartial role of legality control and advice. The involvement of an independent lawyer also allows the transaction to be reviewed and negotiated in your interests.

The deed usually coincides with payment of the balance and handover of the keys. If handover is deferred, the deadline, liabilities and guarantees must be clear.

7. Formalities after buying a property in Spain

After signing, important formalities remain:

• File and settle the taxes within the applicable deadlines.
• Process the registration of the acquisition and check the cancellation of the agreed charges.
• Notify the change of ownership to the community and manage the utilities.
• Review the cadastral details and direct debits.
• Organise your tax obligations and consider suitable insurance for the home.

As an owner, you must pay the IBI (Real Estate Tax) and, where applicable, other fees and community costs.

If you are not a tax resident in Spain, the Non-Resident Income Tax (IRNR) will depend on the use of the property: a rented home generates tax on the income obtained, while an urban dwelling for own use may generate imputed income. The filing, calculation and deadlines must be reviewed for each case. There may also be obligations related to wealth.

MH Legal & Seguros: advice for your property purchase

A well-prepared purchase begins before the reservation and continues after the deed. Reviewing the documentation, negotiating the conditions and planning the taxes lets you face the transaction with greater clarity.

At MH Legal & Seguros we help you review the legal and tax aspects of your purchase and understand the commitments you will take on. Our advice in property law and conveyancing adapts to the characteristics of the property and your situation as a buyer.

Contact our team before signing a reservation or paying a deposit to study your transaction.