1. THE PRIVATE CONTRACT

Initially, a suitable COMPLETION DATE will be agreed with both parties. The date will be fixed and inserted in the contract. All details relevant to the property will be included in the contract, i.e. description, price, form of payment, penalty clauses etc. Your Estate agent or Lawyer will establish whether you and/or the vendor/s wish to complete the transaction with Notarised Powers of Attorney. Contracts will be drawn up and given to both parties, or their legal advisors. On signing of contracts, a deposit, normally ten percent of the purchase price, will be required. The validity of this document is normally 30 days from the date of signature, or longer if mutually agreed.

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2. SEARCHES AND ENQUIRIES

During this period (of 30 days) and prior to the signing of the public deed (escritura), it is necessary to have the contract checked out by your legal advisor or agent, who will obtain a "NOTA SIMPLE" to ensure that the vendor is the registered owner of the property, by carrying out a search at the local Deed Registry, and will ensure that all taxes have been paid, establish the existence (if any) of any debts, charges or mortgages, or, that clear title exists. In addition, all current bills for services such as electricity, water, rates and community fees etc. will be checked to ensure that the vendor has paid all due accounts.

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3. BANK ACCOUNTS

For foreign purchasers there are two basic types of bank accounts available:

NON-RESIDENT EURO ACCOUNT - If you are likely to earn Euros, through letting or some other form of modest activity, you can pay Euros into this account. On-going running expenses can be paid using this type of account.

FOREIGN CURRENCY DEPOSIT ACCOUNT - These accounts are for the deposit of foreign currency in it's existing state without conversion to Euros. The funds are therefore freely convertible into other foreign currency and are outside the Spanish Exchange Control regulations. Interest rates vary from one currency to another. It is recommended that an account in Spain be opened at the earliest opportunity. Accounts in Spain can effect deposits and withdrawals from abroad without limit.

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4. MORTGAGES

If you require a mortgage against the property in Spain, your agent must be informed as soon as possible. A mortgage can be applied for in Spain or abroad. If you have not arranged a mortgage, we may be able to help you, through an offshore or Spanish bank. If you are making your own arrangements you will need to advise the agent/vendor of the date by which you expect to have the funds available in order to complete the purchase. A non-resident purchaser may apply and obtain a mortgage of up to approximately 50% of the banks valuation of the property. A resident purchaser may obtain up to 80% of the valuation. Under such circumstances the property purchased in Spain would act as guarantee for the mortgage.

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5. MAKING PAYMENT

Full payment is required before the title deed can be transferred into your name. Ensure that when transferring money to Spain the funds arrive in enough time to enable the transaction to take place on the agreed date. If you are buying a property under construction, follow the payment schedule in the contract, according to the stage reached. When buying a new property in foreign currency you must ensure that all payments are registered through your Spanish bank, in order that the funds can be repatriated upon the eventual resale.

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6. SIGNING OF DEEDS

The next stage is to complete the purchase at the Notary's office, where the escritura (title deed) will be signed. A number of purchase costs and taxes now need to be paid:

PROPERTY REGISTRY FEES
These are based on the official registered value of the property, which are now much higher than in the past but normally below the market value. The length and complexity of the deed and other factors are also considered. These fees do not normally exceed 1% of the registered value.

NOTARIAL FEES
These are collected by the Notary for preparing the deed and presiding over it's signing. His/her fee is on a set scale according to the property value and again is not normally more then 1%.

PROPERTY TRANSFER TAX (I.V.A. - V.A.T.)
You must pay this tax before the escritura can be registered into your name. In the case of both new and resale properties the tax is 7% of the registered value (a commercial property is 16%). When buying a new property there is also an additional tax of 1% to cover "Actos Jurídicos Documentados" (A.J.D.). These percentages are based upon the value declared in the "escritura".

"PLUS VALIA" TAX
This is a tax relating to the increase in the value of the land only, and is calculated and applied by the local town hall according to the increase in value between the present purchase and previous sale, the value or size of the building does not affect this tax. The vendor normally pays this tax, unless otherwise agreed by both parties.

RETENTION TAX
This is a tax relating to capital gains on the property and only applies to a "non-resident" vendor (if resident, any capital gains due would be paid in the person's declared annual tax returns). To ensure that the vendor, upon the sale of a property, pays capital gains tax, it is the purchasers responsibility to retain 5% of the declared value and pay to "La Hacienda", the Spanish tax authorities. The purchaser's legal representative would normally handle this matter. The vendor, at a later date, can claim back any tax that may be due. This tax only applies to privately owned properties registered after 1st January 1986. In the case of company owned properties, this tax would apply to those registered after 1st January 1976. Properties registered prior to these dates, respectively, are exempt.

LAWYER'S FEES
These will depend upon the services rendered. The normal custom is for the purchaser to pay these fees and taxes. If, however, the vendor agrees to pay the "Plus-Valia" tax, remember that it is registered against the land and you (the purchaser) will have to pay if the vendor fails to do so. This tax is often not demanded until some time after completion (approx. six months).

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7. TAKING POSSESSION

Handing over of the property and its keys will normally take place once the FULL PURCHASE PRICE has been paid. However, your contract may state a different arrangement especially if purchasing a new property under construction.

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8. TRANSFER OF SERVICES

Having completed the purchase it is necessary to engage or transfer services. Both electricity and water meters need to be transferred into your name. Where possible all regular bills should be paid by a direct debit "standing order" through your bank.

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9. INSURANCE

This becomes your responsibility upon POSSESSION OF THE PROPERTY. Normally, Spanish insurance companies offer a split policy, whereby the property and its contents are assessed separately. Note, that in the case of some property owner's associations, community fees may include cover of the building and/or third party risks.

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10. RATES AND TAXES

These are similar to the taxes in your own country, and become your responsibility upon completion.

LOCAL RATES
Payable to the town hall on an annual basis. Payment can be arranged through a local bank account or your appointed agent.

PATRIMONIO TAX
Literally translated as a "wealth tax", paid annually, it is calculated at 0.2% of the value declared in the deeds.

TAX REGISTRATION NUMBER
All property owners in Spain, whether resident or not, must obtain this number from their local tax administration office. A tax administrator or "Gestor" can deal with this task along with payment of "Patrimonio" tax.

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11. PROPERTY OWNERS ASSOCIATION

If you purchase a property within an apartment complex or urbanisation you are obliged to join it's residents association, which administers general maintenance of zones of common ownership, such as streets, gardens, hallways and swimming pool etc. An annual budget is calculated to cover these costs, which is divided between all owners according to the size of their properties.

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So, there you have it...

Congratulations on moving into your new home!

Guide prepared by:

Albujaira Inversiones S.L.
Urbanización Laguna Beach, 21
29793, Torrox-Costa, (Málaga)
Tel: 952 53 22 02 / 952 53 22 25
Fax: 952 53 12 86
email: info@albujaira.com
Web: www.albujaira.com

(NOTE. This guide, although accurate, has been kept as brief as possible. Please do not hesitate to enquire further on any point. Please note, also, that the guide is not a substitute for proper legal advice. The contents herein are correct at the time of publication. Albujaira Inversiones S.L. cannot be held responsible for any changes in the law, or legislative practices in Spain.)

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