How to buy a new-build home in Spain as a foreign buyer

The three signatures

Buying a new-build home in Spain goes through three documents, and it is worth knowing what each one does before you reach the first.

The reservation takes the property off the market for a short period. It sets out which property it is and for how long it is held.

The private purchase contract is the long document. It sets the price, the payment terms, the schedule of payments on account, the expected handover date, the description of the property and the specification. It is the central document for reviewing price, payments, handover date, property and specification before you sign.

The public deed is executed before a notary and normally coincides with handover. It is then submitted for registration at the Land Registry.

• That the description of the property matches what you have seen: size, floor, aspect, parking space and storage room if there are any.
• That the specification is incorporated into the contract and is not a separate brochure.
• That the handover date, or the criterion for determining it, is clearly stated in the contract.

Your money before handover

When you buy a new-build home you pay part of the price before the property is handed over. It is one of the central questions when buying off plan, and in Spain it has a specific answer.

The Spanish building act (Ley de Ordenación de la Edificación) provides that a developer receiving payments on account before handover must do two things. Guarantee their repayment from the moment the building licence is obtained, through a surety insurance policy or a bank guarantee; the guarantee covers the amounts paid, taxes included, plus statutory interest. And receive that money into a special account, separate from any other funds of its own.

If construction does not start, or is not completed within the agreed period, the law provides that you may claim against the guarantor, having first formally required the developer and on the conditions the law itself sets out.

We cannot tell you that a particular development complies with this: it is in its documentation and it has to be seen. What we do is request it when you tell us which development interests you, and go through it with you before you sign.

• Which account is the special account, and that your payments go to that one and not another.
• The individual guarantee covering the amounts paid on account under the contract.
• That what is guaranteed corresponds to what has been paid, taxes included.
• That the handover date, or the criterion for determining it, is stated in the contract.

The NIE and the bank account

Two formalities that have nothing to do with the property and are worth starting early, because they are the ones that tend to delay a purchase that was otherwise going well.

The NIE is the foreigner's identification number. You need it to sign the deed, to pay the taxes and for practically every formality. It is applied for in Spain or at the Spanish consulate in the country where you are, and timescales vary a great deal depending on where you apply.

A Spanish bank account is needed in practice to pay, and to set up direct debits for utilities and community fees. Opening one as a non-resident is routine and banks have their own procedure for it.

If you are going to need financing, it is worth starting it before taking on a reservation commitment. The bank takes time, asks for documents from your country and sometimes wants them translated.

Who checks what

This is the part that surprises foreign buyers most, because in many countries it works differently.

The notary gives public faith: identifies the parties, checks that the document is formally correct and authorises it. That intervention does not replace an independent review of the registry, contractual and documentary position of the purchase.

The Land Registry publishes the legal position of the property: who the owner is and what charges it carries. The nota simple is the document that sets out that information, and it can be requested.

An independent lawyer — independent of the developer and of the agency — is the one who reviews the contract for you, requests the nota simple, checks the charges, looks at the licence and the development's documentation, and tells you what you are signing.

We are the agency. We help you find the property and understand the process. But whoever reviews your contract with your interests and only yours should be someone who is not paid out of this transaction.

What you pay beyond the price

The price you see is not the total outlay, and in new build the items are not the same as in a second-hand home. It is worth not taking a figure off the internet: almost all the ones in circulation are calculated for second-hand homes.

A second-hand home does not carry VAT: it carries Transfer Tax. That is why the percentages you read around cannot be moved from one to the other.

When you tell us which development interests you, we send you the breakdown with the figures for that specific purchase, not an average.

• VAT. A new home is taxed at 10%, and at 4% if it is subsidised housing.
• Stamp Duty, which taxes the execution of the deed. The rate is set by the autonomous community.
• Notary and Land Registry. The costs and how they are shared depend on the transaction and the applicable documentation.
• Your lawyer, if you appoint one, which is what we recommend.
• Mortgage costs, if there is financing: valuation and whatever applies under the loan.

Handover day

Between the works being finished and signing the deed there is an important moment before you sign: the inspection visit.

It is worth putting any issue in writing before signing and keeping all the handover documentation.

Among the development's documentation and the handover there may be the first occupancy licence, the building book, the certificates for the installations and the construction guarantees. Which documents exactly, and at what point, depends on each development.

• That what is delivered matches the specification in the contract, item by item.
• Size, layout and the annexes — parking and storage — exactly as described.
• That what should work does work: water, electricity, heating and cooling, blinds, taps.
• The condition of the communal areas, which are part of what you have bought.

What it costs every year

Beyond the purchase price, a home has recurring costs. On the Costa del Sol one in particular is worth looking at.

If you are not tax resident in Spain, ask a professional to calculate your specific obligations.

Ask for the community budget and look at what you pay each month for services you may not use. Two homes at a similar price can carry very different fees depending on the development's facilities, and that does not appear in the listing.

• IBI, the annual municipal property tax, which varies a great deal between municipalities.
• The community fee. A development with twenty-four-hour security, gardens, several pools, a gym and a spa carries a high fee, and it is paid whether or not you use any of it.
• Refuse collection and utilities.
• Home insurance.

Frequently asked questions