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Purchase of real estate in Spain

Contrary to German law a contract for the purchase of property in Spain need not be notarised, however it is essential in order to appear in the land registry. Land registry is in turn, essential for the buyer, as without it he has no established legal right and runs the risk, for example, that the previous owner makes further use of the property. For this reason, any property purchased in Spain is notarised.

Although basically both parties could go directly to the notary, in practice, and for various reasons, other contracts are used before the notary contract.
If the prospective buyer has found their ideal home there are often a number of questions to be clarified: an architect or expert to view the property, if necessary negotiate a loan with the bank, an accountant or lawyer to clarify contractual arrangements, and the seller must produce various documents pertinent to the property. Usually a few weeks pass before the signing of the notarial contract, although both parties have tentatively made a commitment. The most common form of contract for this purpose is the reservation contract, option contract or the private purchase contract.

Reservation contract

If the buyer expresses a definite interest in purchasing, then a reservation contract will be used. This contract requires that the seller guarantees to hold the property for a certain period of time, usually a couple of days for the cost of a small fee. If the prospective buyer decides to buy within the reservation period, then the contract passes to an option contract and the amount paid is considered as an advance and deducted from the purchase price of the property. If he decides against buying then the reservation fee is usually lost.

The Option contract

The option contract is much more binding. In this case, ususally the Seller (option giver) grants the Purchaser (option taker), for the cost of a small fee ‘option fee’, a period of time during which he will reserve the property at a specified price. During this time the seller may not sell to a third party. More often than not the option fee is 10% of the purchase price. In the event of a sale this fee will be deducted from the purchase price, otherwise the seller keeps the fee. If the buyer decides to exercise his right of option and the seller does not comply, for example he has sold the property to a third party at a higher price, then the seller must refund the option fee plus an equivalent amount as lump-sum damages. Whether or not the buyer has the right to ask that the contract be fulfilled depends on the wording.

The private written contract

The completion of a written private sale agreement is legally effective. This contract is often used in cases when people want to close the sale immediately and have the intention of saving tax, stating before the notary a lower purchase price than is actually negotiated. In this contract the true purchase price is indicated. This practice is common but nonetheless breaks the rules.

The notarised purchase agreement

The notarised purchase agreement commonly known as the "escritura" is used as a pre-requisite to ensure that the new owner may be registered in the Land registry. In addition to the personal information of both parties, the notary deed contains, essentially, the exact description of the property with existing encumbrances, the purchase price and payment terms. The Spanish notary, when preparing real estate contracts, has a list of information required for the preparation of the relevant document. He must verify the identities of both parties and check, by means of a previously applied for current land registry extract, that the identities of the parties coincide with the land registry. He ensures that the last receipt is paid on the local council tax and, in the case of a property in a community, confirmation from the administrator or President that community fees are paid up to date. Within 24 hours of signing the deed the notary must inform the Land registry about the change of ownership.

The Spanish Property Register, the Land Registry

The notary informs the seller and simultaneously performs registration of the property in the Land Register, so that any entry for that property will be blocked for 10 days. Within this period of time if the purchaser presents the new sale document in the land registry, then this will be extended by a further 60 days. Once the real estate transfer tax has been paid at the tax office, then the new owner may register the property at the Land Registry.

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