Despite the horror stories we read about in our newspapers or see on our televisions you should have nothing to worry about if independent advice is sought from suitably qualified and experienced professionals.

Choosing a solicitor
Prior to starting your property search you should select and meet with your solicitor and, if at all possible, do not sign any document or hand over any money without your solicitor’s consent. It’s important to independently verify that your solicitor is registered and regulated in the jurisdiction in which they practise.

The role of a notary
Do not make the mistake of assuming that a notary occupies a similar position to that of a conveyancing solicitor in UK or Ireland and that you then do not also need to instruct a solicitor. Notaries have no duty of care to either party and are only concerned with the validity of the paperwork and that certain government regulations have been satisfied and various taxes paid.

Signing a reservation contract and paying a holding deposit
Once you have found your property the usual practice is to sign a reservation contract and pay a holding deposit. The holding deposit is usually €3,000 for smaller properties and €6,000 for larger properties. This deposit is usually held by the estate agent in order to take the property off the market until the private contract is signed. Before signing any agreement or handing over any money you should consult with your solicitor by phone or fax, if not in person.

Your solicitor should review the contract with you and in particular:-

• Review the terms of the proposed contract
• Advise whether the terms are fair and reasonable
• Suggest amendments
• Negotiate those amendments with the agent or property developer

Above all do not feel pressured by overly enthusiastic estate agents. Bear in mind if you do not go ahead simply because you have changed your mind, you will usually lose this deposit. Also try to ensure there is at least 3-4 weeks between signing the reservation contact and the private contract to allow sufficient time for all searches and enquiries to be made.

Private contract (Contracto Privado de Compraventa)
This is a very important stage in the process. It is normal practice for the buyer and the seller to enter into a Private Contract. A deposit of usually 10% is paid at the time of signing the private contract. In the private contract the seller and buyer agree all the details of the purchase. This private contract commits both parties to the sale and purchase of the property and of course to the price and conditions therein.

In Spain there is no equivalent of a contract being “subject to survey”, therefore if a survey is required, it is necessary to commission one prior to signing the private contract.

Before signing the private contract there are essential preliminary enquiries that your solicitor should carry out:

• Establish the seller’s title to the property by obtaining a report from the Property Registry called a nota simple.
• Check with the tax office (Hacienda) that there are no unpaid taxes which are likely to be recorded against the property and also request the paid-up receipt for the annual property tax (Impuesto sobre bienes inmuebles or IBI).
• Inspect the Catastral Certificate which gives the physical description of the property, the exact location of the property, its boundaries and square metres of area.
• In the case of land sold for building purposes or new properties check that there is general and detailed planning permission.
• New dwellings should have certificates issued by the local planning office confirming that they comply with planning rules and are fit for human habitation.
• Where there is construction on the land, it is necessary to check that the corresponding declaration of new building has been executed and registered and that the surface area and description of the property in the title deeds is correct.
• Inspect receipts for electricity, community fees, annual rates, water, telephone and proof that the Plus Valía was paid by the previous seller when the current sellers originally bought the property.
• Consider having the property surveyed, particularly in the case of older or unusual properties, to ensure that it is structurally sound and that the foundations are adequate etc
• If buying a flat, apartment or town house forming part of a building complex then one should also inspect the residents’ association rules and request a copy of the minutes of the most recent AGM.
• If buying off-plan then under Spanish consumer protection laws purchasers are entitled to receive adequate insurance or bank guarantees to secure any stage payments.

Completion – signing the deed of transfer (escritura de compraventa)
This is the final stage. Both parties must attend the notary’s office on/before the date stipulated in the private contract, at which time the balance of the purchase price is paid, and a new title deed is prepared and signed by the notary. Once the deeds are signed they will then be submitted to the land registry for registration.

Applying for an NIE number
Prior to purchasing a property in Spain you must obtain a fiscal identity number known as an NIE number (Número de Identification de Extranjeros). Application must be made in person to the foreigners’ department of the local police station or alternatively your solicitor can obtain this number on your behalf with an executed power of attorney and a notarised copy of your passport.

Power of attorney
If it is not possible to be in Spain to sign the escritura (deed) you can give a power of attorney to someone else (i.e. your solicitor) to do so on your behalf. It is always easier and cheaper to execute a power of attorney in Spain but if time does not permit then it can also be executed in front of a notary in UK or Ireland who will also arrange for the document to be apostilled.  A general power of attorney should only be executed in favour of a trusted individual as there have been many recorded cases of fraud (including solicitors!). Consideration should therefore be given to signing a limited or restrictive power of attorney or alternatively attending and signing in person.

Costs involved in buying a Spanish property
The costs of purchase in Spain are approximately 10% of the purchase price of the property. The main items of cost are:-

• Transfer tax (ITP)/VAT(IVA) – 7%
• Stamp duty (ADJ) – 1% (new properties only)
• Notary fees – calculated in accordance with scale fees (approx €600 to €900)
• Land registration fees – €500 to €600
• Solicitor's fees – normally 1% + VAT

Mortgages
The property can be purchased by either taking out a Spanish mortgage or a UK/Irish mortgage advance or indeed a combination of both.
 
The benefits of a UK/Irish mortgage are there will usually be no additional significant fees to pay on the basis you already have a mortgage and sufficient equity in your UK/Irish property.

Spanish mortgages tend to have high set up costs including harsh redemption penalties for early repayment.

Typical mortgage costs are as follows:-

• Opening commission – 1% to 1 ½%
• Valuation fee – EUR350
• Tax on mortgage – 1% (calculated on principal + interest)
• Notary fees – EUR600
• Registration fees – EUR400
• Gestoria (Conveyancing agent appointed by bank) – EUR300

One benefit of a Spanish mortgage is that it reduces the net value of the Spanish property which could reduce any Spanish inheritance tax payable.

UK purchasers will also have to bear in mind exchange rates fluctuate which could erode any anticipated savings that might arise from a low interest euro mortgage when the mortgage is being repaid from UK earnings.

It is always sensible to consider your finance options before embarking on your property search and at least obtaining approval in principle. Also bear in mind that eligibility criteria for Spanish mortgages vary from those in UK/Ireland. Mortgages offered to non-residents are usually only available up to a max of 70% of the value of the property.

Foreign Exchange
Although no longer relevant for an Irish purchaser this is still a very important consideration for a UK purchaser. Currencies do fluctuate which can significantly increase the cost of purchase which means this is a risk that needs to be managed.
 
Basically there are two choices either do nothing and simply buy at spot rates on the day you need the currency or alternatively forward buy the currency. With forward contracts it is possible to fix an exchange rate for settlement up to 2 years in the future.
 
It is also worth pointing out that one's own bank tends not to offer competitive rates and may not even offer forward contracts to private clients. Fortunately there are reputable companies in the market place who offer both competitive rates and also advise on when to buy etc.

Plus Valía
Plus valía is a local tax levied by Spanish Town Halls on the increase in the value of urban land (excluding the value of any buildings) when it is sold. Correctly it is the seller that must pay this tax, however it is not unusual for the seller in the case of a resale property to request that the purchaser pays the plus valía tax.

Taxes
There is a common misconception in the UK and Ireland that foreign residents need pay little or no tax in Spain and that the authorities are quite relaxed about collecting taxes. Nothing could be further from the truth. The Spanish rigidly enforce their taxes, requiring both residents, and non-residents owning property in Spain, to acquire tax identification numbers. As a non-resident property owner you will be subject to the following taxes and will be required to file an annual tax return. You should discuss the filing of these returns with your solicitor whom you should consider appointing as your fiscal representative.

Property owners' imputed income tax
The property owners' imputed income tax is based on a deemed rental income. The tax is calculated based on the rateable value of the property. The rental income is deemed to be 2% (1.1% if the valor catastral has been revised since 1994) of the rateable value and one is then taxed on that amount at 24% which is the non-resident flat rate of income tax.