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PROPERTY

EXPLAINED: How buy a property with cash in Spain 

If you have the savings to pay for a Spanish property in one instalment without the need for a mortgage, here are ten key steps you’ll need to follow to complete the payment with cash quickly and successfully.

EXPLAINED: How buy a property with cash in Spain 
It will take less time to move into a property you've bought in Spain if you pay 'al contado'. Photo: Alexander Gresbek/Pixabay

Three in every ten homes in Spain are purchased up front without a loan from the bank.

It’s only an option for those with considerable savings available, and a decision which often depends on the price of the property, but there are several major advantages it offers.

Paying for a property al contado (up front in one instalment) is one of the best ways to negotiate down the price of a property as you offer better guarantees of solvency to the seller. 

It can also mean you save a huge amount you would otherwise pay in interest as a result of mortgage payments as well as fees and commission from other processes.

And there’s the fact that overall it will be faster to complete the purchase and move into your new Spanish home if there isn’t the need to wait for mortgage approvals from the bank.  

So if you’ve found a property in Spain that you like and you have the funds to pay for it, what are the steps you have to follow to complete the process properly and quickly? 

Get a gestor, and a bank account if you don’t have one 

Whether it’s a lawyer, an estate agent or a gestor, it’s advisable to have a professional helping you along with such an important process, especially if a lot or all of your savings are at stake here.

READ MORE: What does a gestor do in Spain and why you’ll need one

They will be able to advise you on the steps to follow, tell you what to watch out for and assist you with much of the process.

It’s also recommendable to get a Spanish bank account even though it’s not compulsory, as it will facilitate the payment of taxes and other expenses.     

READ ALSO: How to open a bank account in Spain if you’re not a resident

 

Get the escritura notarial 

This notarised house deed is the one that certifies that the person selling the property is indeed its rightful owner. You’ll have to request this from the seller and if they’ve lost it, they will have to get a copy from the notary who originally signed it. 

Get the nota simple 

This land registry certificate is crucial because it contains a full description of each property, what condition it’s in, who the legal owner is, when they bought it, any debts or legal charges against the property, defined use of the land, and any community costs for which prospective buyers would become liable.

This is all very important information you want to make sure you have before committing to such an important purchase.

You can request the nota simple in person at your closest land registry office, but note that it will only be available in Spanish and there should be a legitimate interest in buying the property.

If you’ve viewed the property through local estate agents, it’s also worth asking them if they can provide you with a copy. 

READ MORE: What is the ‘nota simple’ and why is it so important?

Check IBI payments 

IBI stands for Impuesto sobre Bienes Inmuebles in Spanish, which translates to tax on property goods, but it also goes by the name SUMA.

It’s a local tax which has to be paid once a year by all property owners in Spain, and it serves as a benchmark to calculate all other Spanish property-related taxes.

You must ensure that the property is up to date with payments by the homeowners’ association (la comunidad) and that the seller has paid their IBI. 

In order to find this out, you should request the last IBI receipt from the town hall where the property is located. Some municipalities offer this service online. 

READ ALSO: 

What property owners in Spain need to know about homeowners’ associations

How to pay less Spanish IBI property tax

Make a down payment and sign the contrato de arras 

In English contrato de arras translates to a deposit contract or deposit agreement and is an important, in most cases, essential, legal document to finalise an agreement for the purchase of a property in Spain.

In Spain, the deposit to pay to the seller when signing the contrato de arras is usually between 5 and 15 percent of the final agreed sale price, a sum that can only be cashed by the owner of the property being sold and which is deducted from the agreed property price.

The main purpose of an ‘arras‘ is to give peace of mind to all parties involved in a property sale, as the agreement contract confirms in writing that the terms agreed for the sale are respected.

When reading through a deposit contract, it’s important to pay attention that all the details of the purchase are included in writing, such as the deadline by which to formalise the operation before a notary, the agreed sale amount and the payment method.

READ MORE: What you need to know before making a down payment

Sign the contrato de compraventa 

Once you make the downpayment and have proof of it, you must sign the purchase contract with all the details about the house and the transaction. It’s the agreement between both parties in which all the details of the seller appear and in which the property is described.

Having the advice of a professional such as a gestor or a lawyer at this point is important as an extra precaution. 

Notarise the escritura pública 

In order to formalise the contract, you must have the public deed of sale notarised. 

This gives both the seller and the buyer legal security for the transfer of property and its new registration at the land registry. It’s not mandatory to sign the public deed of sale to buy a house, nor is it to register the property at the land registry, but it is highly recommended.

The escritura pública should include many of the details mentioned above such as any outstanding debts, IBI and comunidad payments, payment details and more. 

The notary will certify the authenticity of the information, give the buyer’s data to the cadastre, require the seller to provide mandatory documents such as the CEE (Energy Efficiency Certificate) and establish the distribution of expenses of the sale.

Once everything is in order and signed, this is when the buyer gets the keys to their new property, meaning that the seller must have moved out of the property before the public deed of sale.

Pay ITP tax

ITP is the acronym used to describe the tax that applies to the transfer of ownership of a second-hand property in Spain. 

It varies across Spain’s regions, ranging from 4 percent to 10 percent currently.

These tax rates can change every year but in general Madrid’s are among the lowest in Spain. If it’s a brand-new property, the buyer pays IVA (VAT).

ITP payment must be carried out at a tax agency in your region, city or town within 30 business days from when the contract was signed.

Register property

Once the sale has been completed, you must officially register the property in Spain’s Property Registry so that it appears in your name as the new owner after having purchased the home.

You will need a notarized copy of the public deed of sale, proof of ITP property transfer tax payment, proof of having presented the documentation for the payment of the municipal capital gains.

Again, this is not compulsory but it is highly recommended in order to have legal protection. 

Set up bills 

You’re ready to move into your new Spanish property but you’re going to need to put the water and electricity in your name in order to be able to actually live there. 

You can start by requesting these details from the previous owner, such as who the suppliers are, any reference numbers you may need such as the CUPS code for electricity and so on. Most of which will be available on previous bills. 

Once you have this information, you can call up to request the cambio de titular ( the change of ownership).

READ ALSO: The real costs of buying a home in Spain as a foreigner

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For members

RENTING IN SPAIN

How to rent a property in Spain without a job contract

When looking to rent in Spain, property owners and estate agents often ask for a 'nómina' and work contract - something that can prove tricky if you're self-employed or not working. Here's how to prove your solvency and secure the rental.

How to rent a property in Spain without a job contract

If you’re looking for a house or apartment to rent in Spain, there can be a multitude of different factors to consider.

The price, the size, the location, the neighbourhood, which floor the flat is, on and whether there’s a lift, whether it’s interior or exterior, how many apartments there are per floor, whether to go private or through an estate agents and, of course, the search itself.

When you’re going on visits, you’ll have to contend not only with owner or agent trying to ‘sell you’ the place, but also explaining the terms and conditions (often referred to as las condiciones or requisitos para entrar).

In Spain, the process can be a little complicated. Often landlords ask for two months deposit upfront, and those that go through an intermediary estate agent tend to ask for two months, plus an extra month (plus VAT, or IVA as it is in Spain) that goes to the agent! It certainly adds up. 

Not only that, but very often in Spain you are expected to prove you will be able to pay your rent every month. And it’s not as simple as you might think. 

Most estate agents or landlords think hat the best way to ascertain this is by you providing proof of an employment contract (contrato laboral) and recent payslips (la nómina) that demonstrate you are paid the same amount every month, and that it’s enough to cover the rent and other expenses.

Here’s where things can start to get tricky for self-employed people (known as autónomos in Spain), who number more than 3 million in Spain.

Regardless of whether your monthly autónomo earnings are high pretty much every month, regardless of how consistent they may be, or even if you have regular clients, the irregular and insecure nature of Spain’s work market have ensured that landlords and realtors take a rigid attitude towards the rules.

This is especially true following the turbulent economic times of recent years as we’ve moved from global pandemic to war in Europe to spiralling inflationary pressures on the global economy.

Landlords want to be sure you can pay the rent. Therefore, they may favour a waiter with a nómina of €1,000 a month over an autónomo who can prove monthly earnings double that for the previous six months. Doesn’t seem fair, right? 

READ MORE: Why you should be raising your rates if you’re self-employed in Spain

Well, that’s often how it can be in Spain. Fortunately, if you find yourself in this situation, there are various ways you can convince potential landlords that you are financially solvent enough to rent their property, with or without a fixed contract

The law

Now, it is not unheard of – in Spain nor anywhere else in the world – for an estate agent or landlord to try and squeeze more money out of you, or to add on some extra charges. In most people’s experience, Spanish estate agents and landlords are no better or worse than anyone else, but it’s worth keeping in mind.

It has been known, however, for some in Spain to try and get an extra month’s deposit by telling potential tenants that they need a nómina by law in order to rent a property in Spain, and that they’re doing you a favour by allowing it.

Simply put, this is not true. According to Spanish law, more specifically, La Ley de Arrendamientos Urbanos (Urban Renting Law), although many landlords require some form of financial insurance, there is absolutely nothing to say a nómina is necessary to rent a property in Spain. A deposit is legally required, but a nómina?

Helpful? Certainly. Legally necessary? Definitely not.

That said, if you explain to the property owner that you’re self-employed, some landlords maybe be willing to make other arrangements to ensure the rent.

Here are some options, and other bits of paperwork that could help:

Aval bancario: Like a bank guarantee, some landlords request tenants without nóminas or work contracts to set up an aval bancario.

You must pay in an agreed amount (often worth the value of two or three months of rent, sometimes more) into a bank account that you’re a customer with.

It’s money that you cannot touch for an agreed period of time and which you pay some interest on, and in the event that you do not pay your rent, the landlord will be able to access said funds.

This is not the cheapest way to rent a property, but it may be one of the more effective ways of convincing a landlord to accept you as a tenant.

If you pay your rent diligently every month and prove that you are reliable, after a year you should speak to your landlord to ask them them to cancel the aval in order to not continue paying interest on it and recover your stored money.

Anuncios de particulares: If you’re using the usual rental search engines like Idealista or Fotocasa, the vast majority of rental adverts are from estate agents (inmobiliarias) who ask for all the proper documentation, including contracts and pay slips, and often the extra month’s rent as a fee.

When you’re making your search, keen an eye out for anuncios particulares , which are private ads direct from landlords.

Sometimes if you deal directly with the owner themselves, they are less strict about rules with regards to nóminas and contracts. Maybe you’ll get really lucky and find a landlord that takes a liking to you and who only asks for one month’s deposit.

Seguro de impago de alquiler: A landlord may be more likely to rent to you even if you don’t have a nómina when they have seguro de impago de alquiler, non-payment rental insurance. It protects the landlord for the duration of the contract and covers the rent and any repairs or legal fees.

IRPF: IRPF is Spain’s personal income tax, and providing your most recent income tax return could help put your potential landlord at ease by proving that what you’ve earned over the last year could cover the cost of the rent.

Seguridad Social: Similarly, providing proof of your social security payment can help prove your financial solvency.

Bank statement: a simple bank statement to show account activity – and that you have enough to pay the rent and deposit, of course – might ease the mind of your landlord as it allows them to see your incomings and any debts you might have.

IVA: Showing your VAT (IVA in Spain) returns could be another tool that, when used in conjunction with other ways of proving your solvency, could convince a landlord to rent to an autónomo.

Pensioner documentation: If you’re retired and you’re looking to rent, any official documents which show how much pension money you receive every month, along with bank statement reflecting savings, should suffice to convince a landlord or estate agent that you’re solvent.

READ ALSO: Renting in Spain: Can my landlord put up my rent due to rising inflation?

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