The buying procedure
The purchaser’s lawyer draws up an option to buy contract and a deposit is paid (normally 10% of the sale price and paid directly to the owners bank account).
Both the seller and the buyer subsequently sign the contract. Once the contract is signed and the deposit has been paid, both parties are legally bound to the price and to the conditions therein.
Prior to payment of the deposit, it essential to have the following items inspected and approved by your legal representative:
A copy of the Escritura (Title Deeds)
This confirms the validity of the owners of the property.
The Nota Simple
This is a document from the Land registry office showing who is the legally registered owner of the property. If there are any mortgages or other encumbrances this will also show. The name/s on the Nota Simple should match the name/s on the Escritura (Title Deed).
When all documents are checked and the lawyer has ensured that the property belongs to the person who claims to be the owner, and has confirmed that there are no unforeseen mortgages or other encumbrances, the buying procedure can proceed.
The contract and other useful information
Inspection of the contract must verify:
Purchase price and conditions of payment are unambiguous.
Any debts on the property, for example: community fees, electricity, water (which may be included in the community fees), telephone bills and rates, have been paid in entirety by the vendor until the date of signing the Escritura. This is most important, as many debts in Ibiza are on the property NOT the person. The buyer is only responsible for any debts on the property from the day of the signing of the Escritura and handing over of the keys. It is most imperative that your lawyer has confirmation that any outstanding debts have been paid prior to signing the Escritura and transferring purchase monies.
A complete description of the property, including the size (square meters) of the building and plot.
The full registration details of the property. This information is obtainable from either the Escritura or the Nota Simple.
There should be a section in the contract headed “cargas” (charges). This should read ‘Free of charges and encumbrances’ – if there is a mortgage on the property this should be stated here. If you do not wish to take over the mortgage but would like it paid off by the vendor, this should be stated in the “conditions of payment” section of the contract.
Mortgages in Ibiza are usually ‘assumable’ – if there is an existing mortgage on a property and a buyer wishes to take it over and carry on the remaining payments – this is sometimes possible.
There must be a clause in the contract concerning vacant possession on completion of the sales process and settlement of funds. This should read “Free of sitting tenants”.
If the property is being sold furnished – which is often the case when buying a property in Ibiza – a complete inventory should be drawn up and signed by both parties. This document should be annexed to the contract.
The Spanish legislation dictates that, if the vendor is a non-resident of Ibiza, the buyer is obliged to retain 5% of the value declared on the Escritura. It is the responsibility of your lawyer to arrange this with the notary and this must be clearly stipulated in the option contract.
Note that the 5% retention only applies if the vendor is a non-resident of Ibiza.
The 5% retained by the notary is paid over to the Spanish hacienda (Inland Revenue), who ascertain if the vendor has any outstanding tax liabilities before returning the 5% to him – usually within 3 months.
The contract will normally contain a penalty clause, which states that if the balance outstanding has not been paid by the agreed date (as specified in the contract), the buyer will lose the amount paid, and the vendor is subsequently free to offer the property for sale again. A potential purchaser has no comeuppance in this respect, so prior to signing a contract and paying the deposit you must be 100% certain that you can and have arranged to finalise payment of the balance on due date.
Although it is highly unlikely that the vendor would back out of ‘the sale’ at the last minute – after signing the contract – this is always such a possibility. Therefore, it is a recommended to have an additional penalty clause inserted in the contract stating that if (for any reason) the vendor does not complete his legally binding obligations and wishes to withdraw, he is required to pay said purchaser an indemnity of double the amount paid as a deposit for the purchase of the property.
If the property you are interested in purchasing was built within the last 5 – 6 years ensure that your lawyer has sought to view evidence that a bonafide Building Licence was obtained, a Certificate of the Termination of the Building (Certificado de fin de obra), and the Licence of the first occupation (Licencia de primer ocupation) issued. (Your lawyer can get copies of these documents from the local town hall).
If you plan to rent out your property it is important to make sure the property also has a so called Cédula de habitabilidad or/and a current rental license already. The Cédula de habitabilidad needs to be renewed every 10 years and is a small one page document that can only be obtained if the property has a “final de obra” or is totally legalised. In the past this was only obtained so water and electricity could be connected to the property – however now it is also necessary to apply for a touristic rental license.
The vendor is also obliged to present the last receipt of payment of rates (Contribuciones or I.B.I.) at the Notary’s Office or to your Lawyer, prior to the signing of the Escritura. It is photocopied onto official Notarial paper and included in the Escritura. Your Lawyer should also obtain a certificate from the local Rates Office (Recaudacion Provincial) stating that there are no outstanding rates to be paid.
With regard to the annual community fees, it is now necessary for your lawyer to obtain a certificate from the administrator of the community showing that the fees are paid up-to-date on the property you are purchasing. This is for the notary; your lawyer should obtain this certificate for you and present it to him, along with the other documentation necessary for Notary to prepare the Escritura.
Important – it is an critical that your lawyer checks and confirms on the day of signing the Escritura that no debts or mortgages have been registered against the property subsequent to him carrying out the initial search, (when purchaser would usually have signed the contract of sale).
Purchasers used to under-declare the value of a property when registering an Escritura – the obvious benefit was a saving of the up to 10% transfer tax. However, these days the Spanish authorities take a stern attitude and substantial under-declaration is likely to be discovered and heavy fines levied accordingly. ZAN recommends that you categorically ‘take your lawyer’s’ advice on this ‘touchy’ subject.
This is the “Numero de Identificacion de Extranjeros” (or foreigners identification number). It is mandatory for non-residents of Ibiza to obtain this prior to signing the Escritura. If you a getting a mortgage the banks require this. If you do not require a mortgage it is still OK to get the NIE number immediately after the notary.
Certificado de divisas
This is a certificate provided by the Bank, stating that the funds for purchase were sourced from outside of Ibiza. If you have used your lawyer’s clients’ account to internationally transfer (IT) the money for the purchase of your new home, he will arrange a certificate from his bank. The details of this certificate are recorded on the Escritura.
Completion and Settlement
If it is not possible for a purchaser to be in Ibiza in order to attend the Notary’s office in person, then his/her lawyer is able to use a notified Power of Attorney (POA) to act on purchaser’s behalf (and complete the sales/purchase/transfer process). The purchaser’s lawyer would sign the Escritura on his/her behalf.
Once the Escritura has been signed and the purchase price paid over to the vendor, you will be able to obtain a “copia simple” (simple copy) of the Escritura of your new property from the notary.
The notary sends the original Escritura to the Land Registry Office, so that they can register your name as the new owner. Depending on the workload of the Land Registry Office, your original Escritura can usually be collected from the notary’s office within 2 – 3 months. Normally your lawyer would collect this for you and advise you that he is holding it on your behalf ready for collection.