Spain: Sometimes it’s good to hesitate, before buying real estate

In Spain like in many other places, especially on the Balearic Islands, your first contact person may be a real estate agent whose job it is to show you the properties, having been commissioned to do so by the real estate owner. This is why the estate agent's fees are usually to be borne by the owner themself. However, please look closely: You should find the details of whom must bear the agent fees in the respective real estate brochure.

 
If you find what you have been looking for and would like to "reserve" it, in Spain you might be asked to con­clude a private but legally binding preliminary contract (in Spanish: Contrato de arras). At which point the purchaser party is usually asked to make a down payment commonly for the amount of 10 per cent of the purchase price to the seller party and/or to an escrow account held by a Spanish notary. Please note, that this payment is already considered to be legally binding.

 

 

As the transfer of real estate in Spain requires notarization, the parties to the preliminary contract in any case are obliged to get the purchase certified by a notary. Please note, – as stated above – that after signing a pre­liminary contract it may not be possible to withdraw from the purchase without losing the down payment; while on the other hand in case the seller withdraws from the preliminary contract before notarization, they will have to compensate the purchaser with an amount of two times the down payment.
 
Such are in general the basic legal rules of real estate purchase in Spain, but in comparison to many other jurisdictions, the parties in Spain have the freedom to deviate from the legal provisions in certain cases, so once again, it may be good to hesitate before quickly signing up on any real estate.
 
It is always advisable to run a quick check regarding the legality of the property before signing any type of contract. Legality means that the construction works which have already been performed complied with the construction permit standards to be fulfilled at the time the permit was granted as it might be the case, that constructions have been completed without the appropriate or even corresponding construction permit. How­ever, in the best of cases the construction may be legalized retroactively if it has been constructed in accor­dance with the applicable building permit standards. Once again, please look closely, as every illegally con­structed part of any building affects the entire property and, in a worst-case scenario, threatens not only de­molition but may also lead to problems with future renovations and cause huge difficulties if you are planning on financing the deal or applying for a mortgage
 
Finally, we wish to point out the tax implications which real estate purchases may have in Spain. Real estate transfer on the Balearic Islands is taxed in case of old buildings at 11 per cent based on a purchase price of 1 million euros, but an increase up to 13 per cent is planned. In addition, the annual income tax for non-residents in Spain must be considered as well as the annual property taxes, and wealth tax where applicable.

 

 

If you are planning on offering the property for holiday rental purposes, a so-called holiday rental license (in Spanish: licencia de arrendamiento vacacional) is mandatory on the Balearic Islands. The costs and availability of which, as the quota is limited (until 2026 no further licenses will be issued), are important to clarify before signing any type of purchase agreement.

Nevertheless, if you look closer, and seek expert advice, you may enjoy your real estate dream without worries!