Gecko Towers
A ‘Wealth Warning’! ….This is a breakdown of the costs of buying in the Marbella region of Southern Spain – but specifically excluded is the agreed purchase price of of the property itself. Furthermore, the following is in relation to the “typical” purchase. It is intended as a rough guide only and is no substitute for proper independent professional advice that is based on the property being purchased and your personal circumstances. It is illustrative of the elements that constitute the costs of buying a property in the Marbella region but there are many variables dependent on how you fund your purchase and how you chose to own your property. Simply, this is not a one size fits all situation. Also excluded are any application costs for securing Residency that an owner may be advised to take, particularly following the expiry of the Brexit Withdrawal Agreement.
There is no way to sugar-pill this post nor make the contents either particularly engaging or thrilling. They are what they are! However, if you are interested to supplement your lifestyle by adding a property in Marbella or the Western Costa del Sol, they are part of the price you’ll be required to pay. For many the costs of making a property purchasers in Marbella comes as a shock, they are comparatively high when seen against, say, the UK equivalent.
It is not unusual for the costs of completion to typically add around 10% to the purchase costs of your chosen property. In the main these are State Taxes and associated Land Registry costs, so cannot be minimized.
Power of Attorney and NIE:
There is no substitute for you committing the time to attend in person to deal with the formalities of a your purchase in Marbella. There are situations where you presence is usually needed, including any bank from whom you are seeking a mortgage or to open banks accounts. They will want to meet you and record a copy of your signature in their records. This is all part of this usual “Know Your Client” checks and you will need to make time in your diary for these visits. Of course, your chosen and trusted lawyer (“Abogado”) should guide you through this.
The purchaser, who is buying at distance, may well choose to nominate their preferred Abogado as one of their signatories under the terms of a “Poder” (Power of Attorney). This may allow monies to be withdrawn from the nominated bank account upon the satisfactory completion of the agreed stages of the property transaction. The Poder, if correctly executed abroad and Apostiled (a process whereby a local Notary in your home country’s attests to the Poder’s originality and obtains a government seal) in accordance with the Spanish requirements, may include appropriate wording enabling the Abogado to obtain for the non-Spanish purchaser an “NIE” which is essential document necessary for the completion of a purchase in Spain.
Whether or not a Poder is used, every purchaser and each co-purchaser of a property in Marbella needs to have an individual NIE.
If the purchaser is a Non-EU citizen (such as a UK citizen) and often if the purchaser is an EU Citizen but Non-Resident in Spain, it is usually necessary when applying for an NIE to supply a document proving the need for the NIE. This will require disclosure of the sale and purchase contract or reservation document together with a copy of the document proving the payments then made.
The Costs
Once the price of a chosen property has been agreed upon it is usual that a reservation deposit is requested. This will be deducted from the purchase price upon completion. Usually set at around €6,000, it will need to be lodged with the developer’s sales agent for an new build or the seller if it’s a pre-existing property. This deposit is often non-refundable and its effect is to reduce time wasters who are unable to complete their purchase.
Assuming an agreed Purchase Price of between €500,000 and €700,000 the Purchaser will usually responsible for the following.
Taxes: These depend on the property being purchased:
A. For newly built property the following are to be expected:
IVA – (Value Added Tax) which is levied on a newly developed property and charged at 10% calculated on the agreed purchase price plus Stamp Duty at 1.5% for new properties purchase price.
B. For pre-existing property – often described as a second transaction – the following Transfer Tax (ITP) is usually due:
These are based as a percentage of the agreed purchase price which at the time of writing were 8% up to a property value of €400,000, 9% for the next €300,000 up to €700,000 and from €700,000 upwards 10%.
Interestingly, in relation to the general or standard ITP arrangements, if there are more than one co-purchasers, each co-purchaser is ascribed their own distinct band for the purposes of ITP calculation. Meaning, for a €800,000 property that is being purchased by two co-purchasers or a couple in equal shares, they each would be ascribed 8% up to a maximum of €400,000. Rather than the entire purchase price attracting a scaled ITP rate starting at 8% and rising to a maximum rate of 10%. In such a case a capped rate of 8% would be payable. Further, for three co-purchasers the property price would need to exceed €1.2m before the rate higher than the 8% band would apply.
C. For the purchase of Plots, these are treated differently and will require more detailed consideration.
Fees:
• Notary Public Fees. Scale of fees dependent on the price of the property. (circa €800 for our suggested property but they will be higher if the agreed purchase purchase is higher).
• Property Registration Fees – Land registry. Around 40% of the Notary’s charges. (circa €600 for our suggested property but they will be higher if the agreed purchase purchase is higher).
• Legal Fees: 1% of the agreed purchase price plus IVA. Plus: A further fee depending upon the precise dealings in relation to the client’s mortgage needs and the financing of their purchase.
Agreed fees for processing the NIE application circa €200 plus IVA.
At this stage it is also considered prudent to conclude and register a formal Spanish Will resulting from your ownership or co-ownership of a property in Marbella as this should simplify matters later.
Mortgage:
Following the usual hurdles for the approval of mortgage funding the Costs will include, in addition to your Abogados’ fees mentioned above.
• It is likely that an up to date Bank Valuation will be required: Bank Valuation Fee – a percentage of the valuation for smaller properties usually in the region of €1000 plus IVA.
• Mortgage Commission: Charged on a developer mortgage or regular bank mortgage at usually 0.5% to 1% of the outstanding mortgage.
Additional Costs:
Connection costs Water, telephone and electricity. (circa €700)
• Law Agent fees for dealing with the registration of the documents such as the Purchase Agreement and Mortgage deed (circa €500 per document).
• If a seller asks you to cover a tax known as “Plus Valia Tax” this should be resisted as it should be paid by the seller.
Other ongoing annual property costs:
• Impuesto Sobre Bienes Inmuebles or “IBI” is a local Town Hall charge and effectively an annual real estate tax.
• Community charges. These charges will be set and levied by the legally defined Community where the property is located often referred to as an Urbanisation.
• Basura – Rubbish Collection tax. An annual tax is payable by all property owners to the local Town Hall. This is set by the Town Hall and is calculated on the basis of the properties Catastral Value as periodically updated.
• Insurance – Most lenders will only release the funds to complete the purchase when evidence is given that an insurance policy against fire, water damage etc is in place with their interests noted on it.
• Income tax which is payable annually. It is based on the Catastral Value of the property – often different to the sales price and income – either notional or actual – derived from the property such as from renting.
E&OE
Should you be interested in discussing the process involved in buying a property in the Marbella region, we would be delighted to assist you. Please contact me to discuss your precise requirements.
Please note that our posts are for general interest. There is no substitute for proper advice tailored to your specific circumstances as provided by a qualified Abogado who is experienced in the application of the Spanish Law.
Nothing contained in this article should be seen or taken as the writer or the publisher providing legal, tax or financial advice. All details have been reasonably fact-checked and all efforts have been taken to ensure that facts are accurate as at the date of publication.
My details: Mark FR Wilkins, during usual business hours on +34 600 343 917 or e-mail me at mark@therightsgroup.com
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