Mallorca Estate Agents Property Buying Guide

Purchasing a property in Mallorca can happen quickly; therefore you will need to have your wits about you as the process can be over and paid for before you have had time to finish your coffee (or wine).

The following information does not in any way represent proper legal advice or information. It is provided solely as a guide to help give an idea of the process of buying a property, the costs involved and who does what on your behalf. As legislation constantly changes, we strongly recommend the use of legal qualified professionals.

We have provided links to those with whom we have experience and can recommend, we DO NOT financially benefit from these recommendations.

GLOSSARY:

Abogado: Lawyer, solicitor

Escritura Pública: Registered titled deed

Escritura de Compraventa: Sales Contract

Nota Simple: A document from the registry giving details of mortgages/charges

Notario: Public Notary, a public official like/similar to a judge

Registro de la Propiedad: Registry Office for Property

Catastro: Land Office concerned with measurements & description

Certificado Catastral: Certificate describing land and buildings

IBI: Annual real estate tax

IBI Receipt: Shows the catastral reference number & valor catastral

Valor Catastral: Assessed value of property for tax purposes

Plus Valia: Municipal tax on the value of the land since the last sale

IVA: VAT if you purchase new property from a developer

ITP: The transfer tax

NIE: Número de Identificación de Extranjero, tax identification number

Hipoteca: Mortgage

Tasación Evaluation of property

Comunidad: Community of property owners

Poder: Power of Attorney

Note: In addition to what you pay for your property you should allow approx another 10% of the price to pay for purchase cost such as Tax, Notary fees, IVA, etc.

PROCESS:

The Vendor accepts your offer.

At this point in the purchase there are several directions in which the process will continue depending on how you are buying your property. For example if you have purchased through an agent who is also arranging a mortgage or loan, it is likely they will handle the complete transaction for you from start to finish. It may almost feel at times that nothing is happening because the transaction is going so smoothly. They will hold any deposit you have paid for the property and you will receive properly documented paperwork.

They will gather all relevant information from you to start the process, from that point they will arrange with the bank for a valuation of the property and negotiate the best loan deal for you. You may hear nothing for around a week or so then receive a call to confirm the valuation; in the meantime they will have obtained a nota simple from the registry and the title deed from the seller, their legal representative will carry on with checking all is in order on your behalf collating all the necessary documents legally required to present to the Notary.

Shortly after this stage you will receive an appointment to go before the Notary to complete the purchase.

If you are purchasing by cash or making your own financial arrangements then at this point you will instruct an Abogado, a lawyer who will act on your behalf to ensure everything is correct and that you are buying exactly what you think you are buying. He will make sure by acquiring legal registration documents from various areas that the property you have been shown does indeed represent what you have viewed and that the boundaries, size of property, terraces etc are all legally registered.

As a thumbnail guide before you sign anything or hand over a reservation deposit there are some documents that your abogado will request and want to see.

1. The title deed of the seller, escritura pública and a nota simple from the Property Registry.

1. The most recent paid receipt for the IBI. It is not unusual for receipts to be requested for the last five years.

1. The catastral certificate which gives the exact boundaries and square metres of area.

1. Paid receipts for the comunidad if applicable.

1. Paid receipts for all utility bills.

At this point it should be noted that if you are purchasing a brand new property directly from a developer, buying off plan or purchasing land then there will be other requests made for the appropriate documentation.

The above are the most likely ways that you will buy your property or land. Others do exist such as buying without escritura, whilst it may be possible to establish title you need to take expert advice and it could be very costly.

Buyer Beware: Naturally you will be asked at an early stage to pay a deposit normally this is 10% to secure the property, be sure you have taken professional qualified advice before signing anything or paying any money over.

Note: This private sale contract specifies a completion date, which is treated seriously so make sure the date suits you, also and very importantly the 10% is non returnable should you change your mind, only if there is something seriously amiss which your Abogado discovers would your deposit be returned. Should the seller back out after the contract is signed you can apply for up to double your deposit back.

Attendance at the Notary will be with your abogado or legal representative and possibly a member of the bank if a mortgage or loan is being arranged. It is at this point the balance due on the property and any cash transactions will be made. Depending on arrangements made you will possibly pay the Notary at this stage. At this signing with the Notary (whose duties include making sure that everything has been done correctly) once everything is finalized you will be given the keys to your property.

Note: A new Escritura is drawn up each time a property is sold unlike DEEDS in the UK. If you cannot attend personally on the date you can nominate someone as your Power of Attorney.

When the process at the Notary has been completed, the Escritura then goes to the Registry, in and around a week after the signing you will be able to go to the Notary's office and collect a nota simple of the Escritura. Several months can lapse before the stamped Escritura Pública arrives back at the Notary's where it remains safely on file, authorised copies are issued.

Further Information:

MORTGAGES:

Banks here will give loans of up to 100% to residents and 60-70% to non-residents, of the value of the property. Until recently, normally banks would lend up to 80% of the property's bank valuation but with changing times and more mortgage choices becoming available, there has been a general overhaul of lending.

If you are a resident and working, the paperwork you will be asked to supply for a mortgage is relatively straightforward. In any event you will need to prove you can sustain the mortgage whether you are resident or non resident. Naturally the larger the deposit the better.

CAPITAL GAINS TAX:

If you are a non-resident and you sell your property here in Mallorca you will be liable for Capital Gains Tax of 3% of the value of the property with the purchaser retaining the 3% which is paid to Hacienda towards taxes.

If you are a resident and you sell your property here in Mallorca your Capital Gains Tax is 18%, this for the resident forms part of his income tax declaration and is declared when filing for income tax. Also for the official resident who uses the proceeds (or part of) of the sale to buy another home here as his main residence he can roll this into the next purchase thereby reducing the gain payable, as always there are certain criteria to be fulfilled.

Capital Gains is a complicated issue and you are well advised to seek tax specialist help.

COSTS:

Be clear in the early part of your purchase and negotiate who is paying what, your abogado will advise you what you will be required to pay under Spanish law.

In respect of the plus valia it is for the seller to pay although very often it is put into the sale contract that the buyer will pay it without the buyer being aware of it until the Notary appointment. It is for the seller to pay as it is he/she who has gained through the increase in value. The danger of a high plus valia tax is of course when a property has not changed hands in recent years therefore the increase in value will be greater. It can particularly lend itself to the example of a house with several thousand square metres of land which hasn’t changed hands in the last twenty five years as against say an apartment which would have a lower plus valia tax

Mortgage Fees: normally between 0.5% and 1% consult your lender for a specific quote.

Any property and related taxes: Ask your Abogado or tax advisor to assist you with these, including your own tax declarations whether you are resident or non resident.

Notary Fees, Legal Fees and Registry Fees: Your abodago will tell you exactly what these are likely to be.

Transfer Tax & VAT/IVA: You are liable for these and what you buy dictates which you will pay. Your advisor will calculate with you the exact amounts the purchase will carry.

UTILITIES:

IBI: An annual tax, the receipt shows the catastral reference number and also your valor catastral the assessed value of the property which various taxes are based on. It is not a high tax but obviously it depends on the type and size of property etc. You will know exactly what your IBI will be as the vendor has to supply this information and produce paid receipt

Refuse Collection Rates/EXACIONES MUNICIPALES: this charge is annual and ranges from approx 40 euros to 90 euros per annum. Again you will see how much when the vendor provides you with a copy of the bill for your Abogado.

Telephone: Telefonica are the telecom provider here. They have English speaking staff if you ask and the number is 1004. A little like BT in England they can take a while to get through to. Your Bank or Abogado can set up your phone line for you.

http://www.telefonicaonline.com

Mobile Phones: Movistar and Vodafone are main providers here although there are others. There are retail outlets that you can visit, and you can purchase pay as you go or go contract, however you may need to provide more information to get a contract phone than you did for your mortgage! Your passport, proof of address, bank details, utility bill are the minimum documents that you will need to take with you to sign up.

http://www.movistar.es
http://www.vodafone.es

Electricity: E gesaendesa provide electricity. The customer service line is 902 500 902 or online at www.endesaonline.com. As with your phone line your Abogado or bank can transfer this utility into your name.