Gastos de registro

All real estate properties, including land, will be owned by someone and will have specific characteristics that will be recorded in the Property Registry. This is a type of “census” in place so that people can identify who a property belongs to, any charges, encumbrances, easements, debit memos it may have, etc. For this reason, when someone buys a property, they have to make the corresponding changes in the registry and pay the corresponding registry costs.

Is there a way of avoiding or negotiating registry costs?

No. Spanish law demands that any real estate purchase/sale be recorded in the Property Registry. For these purposes, there are legally approved basic fees that apply equally to everyone. Consequently, these are fixed costs and not negotiable in any way.

Can I follow the procedures in any Property Registry office in Spain?

No. You cannot choose the Registry with which you wish to record the property: you have to go to the corresponding one based on location. Property Registries divide territories by regions, neighbourhoods, districts or areas, meaning you can only go to the one serving the corresponding area.

How much are the registry costs?

The cost of registration varies depending on the value of the property declared in the public deed of sale, to which we have to add the accrued taxes for submission entry and the marginal notes. Nonetheless, registering a public deed of sale is cheaper that registering a mortgage. If the property purchased is a normal home, with an average market value, the price may be about half of the Notarial costs. As an example, if you purchased a home for approximately 100,000 Euros, you would have to pay about 250 Euros for registering the mortgage and about 160 Euros for registering the public deed of sale.

When do the registration costs have to be paid?

The registration costs are paid once you receive the notification that the deed for the property has already been registered and you can go to collect the public deed, which usually occurs a few weeks after the mortgage has been registered. However, if we are signing the public deed of sale at the same time as the mortgage deed, the procedure will be carried out by the real estate manager/agency and the funds should be provided in advance.

Agency Expenses

The agency expenses include all the costs incurred in processing, advising and managing a real estate sale transaction. The tasks carried out by the agency include:

• Paying the notary for signing the public deed corresponding to the transaction.
• Payment of the “Impuesto de Actos Jurídicos Documentados” (tax on Legally Documented Transactions or Stamp Duty), where applicable.
• Payment of Property Transfer Tax on second-hand homes.
• Payment of VAT if the purchased property is a new-build.
• Registration of the property.
• Other deeds and procedures deriving from the sale/purchase of the property

Is paying an agency for the procedures obligatory?

Each and every one of the procedures required to complete the sales transaction and register the property can be carried out by the new owner on their own account. There is no rule that forces them to contract these services. However, most people choose to use an agency as it is easier and saves time. ¿Cuánto cuesta tramitar una compraventa a través de una gestoría?

What is the cost of processing a sales transaction through an agency?

The market prices for these kinds of services can be freely set, which means that each individual agency can decide what they wish to charge for them. However, currently, the procedures necessary to complete the process can incur agency/management fees of between € 250 and € 550, depending on the area.

The price of this service is not connected in any way to the value of the property that is being purchased, because the procedures are identical in all cases. The differences in price result solely from how agencies choose to compete.

As a general rule, payments to agencies/managers are made in advance. During the course of the entire process, different fees and taxes have to be paid, so it is common practice to create an approximate provision of funds to cover these. The fees of the agency/manager are usually added to this provision. If the provision made is greater than the expenses finally paid out, the difference will be refunded.

Known colloquially as the “plusvalía” or “capital gains”, this is a tax on gains in the Value of Urban Land (IIVTNU). It is a tax that applies to increases in the value of a property over the course of time (up to a maximum of twenty years) in any of the following cases:

• Transfer of the property between two parties:
• Transfer through inheritance or legacy.
• Transfer through declaration of inheritors, without testament.
• Transfer through direct donation.
• Transfer through purchase of the property.
• Swap.
• Forced expropriation of the property.
• Alienation through public auction.
• Limited rights of use of domain
• Usufruct (use and enjoyment of the property for life or for a limited time)
• Right of use and habitation

Who must pay the capital gains?

This will depend on the type of operation.

Lucrative title: the person purchasing the property pays the capital gains. An example of this operation is when a property is donated, thus there is no purchase/sale transaction, and therefore the party receiving the property, or transferee, is responsible for paying the tax.

Onerous title: this is where the property is exchanged for valuable consideration, thus there is a purchase/sale transaction, and thus the transferor of the property pays the capital gains. However, there is an exception: transferors who are natural persons who do not reside in Spain are exempt.

How is this tax calculated?

When calculating this tax, two factors need to be taken into consideration: the increase in the value of the land (established through an official property survey, measuring the difference between the appraisal at the time of the initial purchase and the current value) and the tax rate applicable to this type of operation, which is established directly by the local council in place at the time, which means that there can be large differences between the capital gains paid in one city and in others.

A tax is a duty that is paid when private use is made of a public utility or service, in this case water. It is separate from a fee or rate, because the fee or rate used in the private sector, is variable and changes depending on supply and demand and general market conditions.  Where water tax is concerned, it is the municipalities, through the councils (in most cases) that collect water tax from the citizens.

Why is there a tax in place for water?

The water service in Spain is public. Although in some towns and cities it may be privatised, it is the public sector’s obligation to provide this service to the people. Unlike many other markets where there is private competition and several companies can offer their services, this market is kept exclusively public because due to its nature, having different companies enter the market would not be economically efficient, as it would result in redundant infrastructures and inefficiencies in the system.

Who has to pay the water tax?

Every natural or legal person that uses the public water system and who owns real property must pay for its use. The method most commonly used is independent collection for each home, property or installation. A technician or sometimes the owner will read the cost directly from the water meter. Depending on the council, this tax may be collected every two months, every three months, or together with other local taxes.

How is it paid?

In general, there will be an office where the tax is paid in cash by presenting the corresponding bill. However, if the meter is publically accessible, it may be possible to establish a standing order with a bank account. The council is responsible for facilitating payment methods and the citizen is responsible for paying the tax.

A works license is a permit that the council issues that will authorise works such as reconditioning, improvement, construction, refurbishment or repurposing works. The license is obligatory when carrying out any kind of work that modifies the structure of a building.

When is it necessary to apply for a works license?

When carrying out a refurbishment inside a house that does not affect any external elements, common elements or elements protected for national heritage reasons, a works license is not required. If the works affect or may affect the structure of the building (demolishment or replacement of a load-bearing wall or pillar), then it is necessary to apply for a works license.

There are three types of administrative procedure for requesting a license:

• Prior notification: these are for actions that will have a very limited urban and environmental impact, and which are not technically difficult. An example might be the construction of a shed on your property.
• Simplified procedure: if the action does not require a technical project and the effects will be limited, it may be sufficient to follow this simplified procedure, which consists of getting a signed statement from a technician certifying that the installation or refurbishment fulfils the applicable regulations. Obtaining this license may take one month, sometimes more.
• Ordinary procedures: this is for works that require a technical and detailed study and project to ensure it fulfils the regulations; in these cases, you must apply for the license using the ordinary procedure.

What documentation is necessary when applying for a works license?

The procedure will vary depending on the council, but they are usually the same and comprise four stages:

1. Submission of an Official application form, duly filled-in and sealed, to the Council.
2. Documentation of the natural or legal person that will be in charge of works management/supervision.
3. Itemised budget and technical details (where applicable) of the works, including VAT, signed by the contractor or builder.
4. Receipt proving payment of the corresponding taxes.

In most cases, it isn’t necessary to process any license whatsoever, but it is important to be aware of the characteristics of the property and its surroundings before beginning the works.

One of the characteristics of new build homes is that the developer will have obtained a works license so that they can then sell the homes. This is not the case with second-hand properties and in fact, this is one of the problems with second-hand homes: what happens if you buy a house in which refurbishments have been made without the corresponding works licenses?

The answer is simple and, unfortunately, also unfair: the new owner has to legalise the works performed by asking the Council to issue the license that was not issued at the appropriate time, along with the “Approved Technical Project” (which is not really a project, because the works have already been performed), drawn up and signed by an architect.

The Urban Development Act (LOE), commonly known as the Construction Law, which has been in force in Spain since 1999, is the law that regulates the spheres of application and the competences and obligations of the agents involved in the construction project of a permanent building, whether public or private. This law serves to protect the buyer’s rights if after a certain period of time constructional defects appear in the purchased property. A case may be brought before the courts to determine whether there are parties liable for those defects and thus offer a solution to the purchaser if the judge finds in the purchaser’s favour.

What is the warranty period for constructional defects?

The are three warranty periods established for each type of constructional defect in the Construction Law:

• 1 year: for defects affecting finishes, such as flooring and tiling.
• 3 years: for defects related to habitability, such as humidity.
• 10 years: for structural defects, such as cracks caused by bad foundations.

These timeframes begin from the date of the Deed corresponding to Handover of the Works by the developer or, in its absence, the Final Works Certificate or First Occupancy License File issued by the Council in the municipality. If a defect does appear, it is not obligatory to file the suit during the warranty period, but it is necessary to be able to prove that the defect appeared during that period, by obtaining a notarial certificate with photographic evidence and a Technical Opinion issued by a surveyor/appraiser/expert.

What is the timeframe for filing a claim for a constructional defect?

Once a constructional defect has appeared and we have pre-established evidence of the defect, we have two years to file a claim or suit and demand that the seller offer us a solution to the problem. Otherwise, we lose the right to do so. However, it should be remembered that each particular case will have its particularities, which is why it is always advisable to consult with a specialised lawyer who can tell us how best to proceed.

The bylaws of an owners’ association are a set of complementary regulations that establish how the common floors, apartments, premises, services and installations of the Homeowners’ association will be used, along with the expenses that will be required for maintenance, administration, insurance and/or repairs.

According to the Horizontal Property Act, all owners’ associations are obliged to have a foundational deed that includes a description of the building, the floors, apartments and premises and the shares of participation corresponding to each owner. However, the association’s bylaws are not obligatory.

Where can I find out about the bylaws of an owners’ association?

If you are thinking of buying a house, you must be aware that the bylaws of an owners’ association are very often included along with the deed of sale. If they are not, we need to find out if the association has them, by asking the president or administrator of the association to provide a copy. If there is no copy, we can go to the Property Registry where the property is registered. There, they will tell us whether there are any bylaws registered and we should be able to examine them if so.

What happens if the Association has no Bylaws?

Most associations do have them and others simply use a partial transcription of the Horizontal Property Act. In reality and as a general rule, the Association’s Bylaws are simply an adaptation of the legislation in force to the specific circumstances of that association. However, it is important to know that even if there are no official bylaws, we cannot act in any way contrary to the provisions of the law and that when they are adapted they cannot contradict the law and must be decided by the association as a whole. If any subsequent modifications are made, they must be unanimously approved by all the owners and registered in the corresponding Registry.

The land registry report is a document issued by the Property Registry that includes reliable information on the details of a property, its location, the details of the owners, and any possible encumbrances and charges associated to the property. Thanks to this report, anyone interested in purchasing a property can obtain true information on the property for legal purposes. The most common reason to ask for this report is to know about any possible encumbrances on the property, find out about the solvency of the owner or obtain specific details in respect of any court cases or inheritances, which may correspond to each owner. However, the bylaws of the association are not obligatory.

What details do I need to ask for the land registry report?

This information is public and any natural or legal person can ask for it. What should be remembered is that it is a purely informational document and not an official certification. Consequently, although the request for a land registry report can be processed with only the property’s address, it may be rejected. For this reason, it is important to provide as many details as possible on the property, such as National ID Document number and full name and surnames of the owner, the number in the Property Registry or the Registered Property Unique Identifier (IDUFIR).

Why is it important to request the land registry report?

It is very important to have this information in our possession before proceeding to purchase any property, to ensure that the person claiming to own the property actually is the owner and to ensure that there is no kind of lien or encumbrance on the property, as any debts on the property will be passed on to the new owner: mortgage, usufruct, preventive embargo annotation, social housing, tax settlement embargos, violations of town planning/construction regulations, etc.

How do I request a land registry report for a property?

Remember that if you are managing the purchase through a real estate company, this company is obliged to obtain the land registry report before signing the earnest money contract and to attach it with this document. However, if you are buying directly from a private person without any intermediaries, then you will have to obtain it yourself, which can be done online or directly at the local Property Registry.

A notary is an official who formalises the private documents submitted in the form of public deeds, while attesting to the legality and legitimacy of those documents. In a property purchase transaction, once the transaction has been agreed and the mortgage granted, the notary must certify the change of ownership. Notarial services must be used even if you are not applying for a mortgage.

How much are the notarial fees/expenses?

The fees charged by a notary depend on the price of the property and, although they may vary depending on whether there are guarantors or not, the number of copies that have to be issued of the deed or its length. However, they are not set by the professional notary directly, but are determined by law, in the form of a tariff rate that is the same for all citizens. If you have asked for a mortgage, you will have to pay for two deeds, but not if the purchase is through subrogation or paid cash on the spot. Thus, as an example, if we want to buy a house worth 250,000 Euros and we have asked for a mortgage of 175,000 Euros, we will have to pay the notary about 900 Euros for the purchase/sale deed and the mortgage deed.

Who chooses the notary? The buyer or the seller?

As there will always be a conflict between the buyer’s and the seller’s interests, it is essential to have an independent third party to ensure the legality of the transaction and provide advice to the two parties as to the most appropriate solutions. If both parties agree, they can use whichever notary they want. If they do not, the buyer will choose the notary, but within certain limits based on the property’s location. For example, if the property is in Sevilla, the notary must be based in that city or in its vicinities, but not in Madrid, for instance.

This is the first contract that is usually signed when beginning a property purchase transaction. Once the buyer has found the property they want, they will sign a deposit contract, in which the future owner delivers a defined sum to the seller as guarantee for both parties that the transaction will go ahead.

Although many people do not see it this way, this earnest money or deposit contract is more important than signing the official purchase-sale deed before the notary, because the notarial deed will usually simply be a transcription of the previously signed contract.

What information must be included in the deposit contract?

Although there isn’t a single model for these types of contract, it is essential that they contain the identifying details of both parties, the sum delivered as deposit, the data contained in the Property Registry on the property, the price of the purchase/sale and the maximum timeframe for formalising the operation.

What happens if the buyer or seller does not complete the operation?

If the buyer decides to back out or does not receive the bank’s approval for the mortgage, they will lose the deposit. This is why it is essential to have a survey carried out of the property before handing over any money, to ensure that the buyer is able to obtain the mortgage. If it is the seller who withdraws from the transaction, they will have to pay the buyer double the sum delivered as deposit, according to the Civil Code. So in this case, the best advice is to be absolutely certain that you want the property.

What amount should be given as deposit?

The law does not establish a minimum amount or a specific percentage required to formalise a deposit contract. Nevertheless, in most cases, the sum is about 3,000 Euros, regardless of the price of the property that is to be purchased. This payment is considered a payment on account, and will therefore be discounted from the price if the purchase/sale transaction finally goes ahead.

The reservation contract, also known as an earnest money contract, is a private document in which the owner and seller agree on the sale of the property. By paying a certain sum, the buyer reserves the property and the signed agreement is protected under article 1454 of the Civil Code, without requiring the intervention of a notary. To be fully valid, this document must contain the identifying details of both parties, the details of the property from the Property Registry, the costs of the transaction and which party will be responsible for them, the down payment provided and the maximum timeframe for formalising the purchase/sale contract.

What happens if one of the parties does not fulfil the agreement?

Although both parties may withdraw from the contract, it should be remembered that, despite being a provisional contract, it still has to be honoured. Therefore, if the buyer regrets the decision or is not granted the mortgage, they will lose the down payment. If the seller withdraws from the transaction, they must return the deposit and make an additional payment to the buyer equal to that deposit.

What sum should be given as down payment to reserve a house?

Current laws do not establish a specific sum that must be provided as a deposit in the reservation contract and therefore the sum should be agreed by both parties. In most cases, the sum is established at 3,000 Euros or 10% of the property’s value. However, this does not mean that you cannot agree a smaller sum as down payment, provided the seller agrees.

Ideally, we would hand over the lowest sum possible so as to minimise any loss we might suffer if the bank does not approve the mortgage. But if we are confident that the bank will approve the mortgage and that this is the house we want, it is advisable to hand over a larger sum, as this will make it harder for the seller to withdraw from the transaction.

An earnest money contract is a private document in which the buyer and seller of a property agree to reserve the transaction, handing over a sum of money as a down payment. The purpose is to contract the obligation of signing the sales contract in the future. This document will contain the details of the agreement, the total sum that will be paid, the payment method, the maximum timeframe for formalising the operation before a notary and how the costs of the sale shall be shared.

What timeframe is usually stipulated between the formalisation of the earnest money contract and the purchase/sale contract?

Generally, the maximum timeframe for formalising the purchase/sale contract is two months, which is normally more than twice the time it takes to obtain a mortgage.

Is it necessary to sign an earnest money contract to buy a property?

No. You can carry out the purchase/sale transaction by simply formalising the public deed directly. However, the earnest money contract is useful if we need a formal contract earlier, for example if we need to carry out certain procedures or use it to obtain certain financing conditions, for legalisation, registration, etc.

Is the earnest money contract legally valid?

Although this contract is private, once it is signed it must be honoured. It has full legal validity and thus a series of rights and obligations will apply to each of the parties from the moment it is signed. The seller will be obliged to transfer ownership of the property and the buyer will be obliged to pay for it. Normally, the agreement will be configured as a “double-rate cancellation” contract, meaning that either of the parties may withdraw, but only by incurring the penalty of losing money. If the buyer rescinds the contract, they will lose the down payment; if the seller does, they must pay a penalty equal to double the sum paid as down payment.

The energy classification is related to the efficiency of your property in terms of the energy consumption. This addresses the fact that certain factors, like the insulation on windows or the energy classification of the domestic appliances used in the kitchen, for example, directly influence the energy classification of your home.

On 1 June 2013, regulations came into force obliging the owners of homes to obtain the energy classification of the property before proceeding with the sale. However, many buyers do not know how to interpret this classification or how it can influence the cost of electricity, which is a very important factor that should be taken into account before making a final decision. Especially if we take into account the increasing electricity prices over the latest few years. And the fact of the matter is, even if a home has a very attractive price, it may not be so attractive when we see how quickly the costs of utilities can increase.

How do we interpret the energy classification of a house?

A house may receive an energy classification ranging from classification “A” to classification “G”; the average home is somewhere between classifications “D” and “E”. This means that if the home we want to buy has a “D” or “E” classification, the energy classification is considered “passable” or “acceptable”. Higher classifications, such as “A”, “B” and “C” mean the property consumes less energy. On the other end of the scale, we have classifications “F” and “G”, which indicate higher energy consumption.

How can I find out the cost of electricity based on the energy classification?

To give you a clearer idea of the costs of electricity of a house you want to buy, we will look at the example of a house that pays an average of 60 Euros per month for electricity, with the following classifications:

• A, B and C – you would spend less than average. Approximately 35, 45 and 54 Euros, respectively.
• D and E – you would spend the average. Approximately 60 and 66 Euros, respectively.
• F and G – you would spend more than average. Approximately 75 and 80 Euros, respectively.

If you want to calculate the energy classification of your house, you can do it using our calculator.

The First Occupancy License is an administrative deed issued by the local council of the area where the property is located accrediting that the works have been duly completed and are in keeping with the issued works license; that it fulfils the requirements established in the urban planning project or works license and those established for a property that will be used as a residence; that it fulfils the technical health and safety conditions and public habitability and decorative requirements; and that it can be connected to the different utility services and supplies. This document is essential when registering the deed for a completed new-build, to ensure that any buyer will be protected in case of any problems that may arise afterwards.

The certificate of occupancy and First Occupancy License are complementary to each other, given that the first certifies that the property fulfils the health and safety, hygiene and minimum equipment requirements.

What happens if you buy a home without a First Occupancy License?

On several occasions, jurisprudence has established that homes built without a license can obtain them provided the following requirements are met:

• Expiry of the period for re-establishing or reinstating the legality of the works. This means that the License can be obtained once the period established in the regulations of the corresponding Autonomous Community, from the completion of the works, has elapsed; this period is usually between 4 and 6 years.
• That the way in which the property will be used and as planned is permissible under the regulations.
• That the technical health and safety conditions are fulfilled. This also means accrediting the fact that the building is safe for its occupants.

What action can I take if I am not given the First Occupancy License?

If you do not receive the license, the utility companies cannot offer their services to the property and the property cannot be sold or registered. This is a clear mechanism designed to protect consumers to ensure they can live in or sell the properties that do not fulfil the minimum requirements. Furthermore, if you have purchased a property that does not have the First Occupancy License, you have the right to annul the purchase/sale contract and receive an indemnity for damage and loss. Consequently, apart from receiving a refund equivalent to the cost of the property, you will also receive the transaction costs, including any mortgage interest, notarial costs, management/agency fees, Registry taxes, etc.

The First Occupancy License is an administrative deed issued by the local council of the area where the property is located accrediting that the works have been duly completed and are in keeping with the issued works license; that it fulfils the requirements established in the urban planning project or works license and those established for a property that will be used as a residence; that it fulfils the technical health and safety conditions and public habitability and decorative requirements; and that it can be connected to the different utility services and supplies. This document is essential when registering the deed for a completed new-build, to ensure that any buyer will be protected in case of any problems that may arise afterwards.

The certificate of occupancy and First Occupancy License are complementary to each other, given that the first certifies that the property fulfils the health and safety, hygiene and minimum equipment requirements.

What happens if you buy a home without a First Occupancy License?

On several occasions, jurisprudence has established that homes built without a license can obtain them provided the following requirements are met:

• Expiry of the period for re-establishing or reinstating the legality of the works. This means that the License can be obtained once the period established in the regulations of the corresponding Autonomous Community, from the completion of the works, has elapsed; this period is usually between 4 and 6 years.
• That the way in which the property will be used and as planned is permissible under the regulations.
• That the technical health and safety conditions are fulfilled. This also means accrediting the fact that the building is safe for its occupants.

What action can I take if I am not given the First Occupancy License?

If you do not receive the license, the utility companies cannot offer their services to the property and the property cannot be sold or registered. This is a clear mechanism designed to protect consumers to ensure they can live in or sell the properties that do not fulfil the minimum requirements. Furthermore, if you have purchased a property that does not have the First Occupancy License, you have the right to annul the purchase/sale contract and receive an indemnity for damage and loss. Consequently, apart from receiving a refund equivalent to the cost of the property, you will also receive the transaction costs, including any mortgage interest, notarial costs, management/agency fees, Registry taxes, etc.

Home insurance is the kind of insurance that covers all kinds of damage and unexpected events that may affect not only the structure of a building, but also, depending on the type of contracted covers, all the people and items in the property. This often includes theft or breakage of all kinds of objects, domestic accidents and any breakdowns.

Types of home insurance

There are several different types of home insurance based on the covers provided:

• Basic. This covers only a limited number of incidents and does not cover all the contents of a home. It is usually the cheapest option and is chosen by people who do not have or do not want to insure valuable objects.
• Extended. Your cover will be much greater. In this case, the insurance contract will define what kinds of incidents are covered or not. These are usually the more significant ones such as: fire, glass breakage, flooding, theft and household assistance.
• Full. This type of insurance normally covers all possible incidents and the objects and people inside a property, including all kinds of accidents that may occur in the premises. This is the most expensive insurance but it also offers the greatest number of guarantees.

Whether you own the property you live in or rent it, it is essential to have home insurance that will cover any incident. If you are renting, you must make sure that the owner has insurance and is up to date with the premium payments, as the owner is liable and obliged to have this insurance.

If you have bought a property, you must compare and analyse the types of insurance that will be most suitable for you. This will depend to a large extent on the valuables you have in the house, but especially the characteristics of the property: size, types of materials and construction, number of people normally living in the house, etc.

All of this will affect the type of cover, the premium and the indemnity. A house that has a higher risk of fire will result in a higher premium for this cover. A house in an area that is subject to flooding, will mean that the owner has to pay a higher premium for this and the owners of a home with children may have to pay more to cover domestic accidents or breakage. It all depends on how the home will be used.

A bank loan or credit is a financial transaction in which the entity (creditor) lends a sum to another person or company (debtor). After signing a contract, the latter has the obligation of returning this sum within the agreed period and under the agreed conditions. The sum the debtor has to return will be the sum initially loaned (principal) plus the interest established for the transaction and any other costs/fees that may apply.

Who can apply for a loan?

Any person or company can ask for a loan from a bank; however, in this kind of financial transaction, the bank is taking on the risk of default, which is why before granting the loan, the Bank will ask the party applying for the loan to fulfil a series of requirements and characteristics:

• Credit history: a report on any debts and credits that the person has previously contracted.
• Guarantees: goods or assets that are offered as collateral/security and that the bank may keep or sell if the debt is not repaid.
• Ability to pay: the level of income and financial stability of solvency of the party applying for the loan.
• Assets: assets and real property that the party applying for the loan possesses.
• Personal circumstances: the circumstances of that person (whether they are married or not, have children, have a job, etc.).

What kinds of loans are available?

The most well known type of loan is a mortgage loan. The bank, after a survey has been carried out of the property that the client wishes to purchase, will provide a percentage of the total value (normally about 80%), which will have to be returned over a number of years. However, there are also many other kinds of loans available to almost all users:

• Personal loan: a loan that is given directly to the applicant without the applicant having to specify any particular asset they want to purchase.
• Fast cash loans: the conditions for receiving such a loan are normally not very strict, but the interest rate will be very high, the sums loaned very low, and the period for returning the loan will be short (usually less than one year).
• Commercial loan: this is designed for companies and is usually used to refinance debts, meet payments or purchase assets.

There is often a suitable type of loan for each particular case; therefore, it is best to explain what we need to several banks and allow them to advise us as to the best options available to us.

A payment on account occurs when a payment in kind is made between two parties. When it comes to paying taxes, as there has been no monetary exchange in the transaction, it is necessary to calculate the value of the payment in kind so that the corresponding sum can be paid into the Public Treasury. Payments in kind are considerations provided in exchange for any good or service that are not cash, whether they be movables, immovables or other types of asset. For example, providing accommodation or a home for an employee, lending a vehicle so the work can be done, computers or other IT devices, restaurant vouchers, transport vouchers or even training courses.

How is the payment on account calculated?

The sum of the payment on account is determined by law. For salaried employees it is calculated on a progressive scale, where a sum will be paid based on the employee’s income. For self-employed workers, this percentage is fixed and does not change: it is always 21%.

Why is the payment on account made?

The main purpose of the payment on account is to try to determine as accurately as possible the sum that the taxpayer must finally pay when making their Tax Declaration, with the ultimate objective of reducing as much as possible the sum and number of tax returns that the Tax Agency has to make. In many cases, the sums withheld throughout the year will exceed the amount that is finally payable and therefore the Tax Agency will have to return the corresponding sum. Even when a worker is not obliged to submit a tax statement (as occurs when their annual income is less than € 22,000 a year), they may submit it voluntarily so as to obtain tax returns if any tax exemptions or deductions apply.

A bank cheque is a payment method whereby the holder of an account authorises another person to withdraw the sum written on the cheque. For the cheque to be valid it must state the sum that has to be paid to the bearer, the name of the bank where it can be exchanged for the sum and the signature of the person that issued the cheque.

What types of bank cheques are there?

The traditional cheque allows the bearer to exchange it at the bank for cash as soon as it has been handed over. But there are other equally valid types:

• Account deposit cheque: the cash is transferred directly to the bearer’s account. No cash is exchanged physically.
• Traveller’s cheque: a cheque usually issued so that it can be exchanged for cash at a bank in a foreign country. Even if the cheque is lost or stolen, the cash won’t be lost, as only the bearer/accountholder can cash it.
• Post dated cheque: the payment order is executed on a specific date at which point the issuer of the cheque must have sufficient funds to cover it.
• Guarantee cheque: the bank guarantees that the cheque issuer has sufficient funds to pay it. This is the most secure.
• Bearer cheque: in this case, there is no name stated on the cheque and the person who holds it (the “bearer”) can submit it and exchange it for cash.

When is a bank cheque used?

Cheques were traditionally used as a replacement for cash. Although credit cards and instalment payments are now much more prevalent in these kinds of transactions, cheques are still used quite often. For example, you may use a cheque if you wish to pay someone but you don’t have the necessary funds right at that moment. It can also be used to make an immediate payment when you don’t have any cash or credit/debit card on you, as it can be issued at any moment and for any sum. Traveller’s cheques have become very popular in recent years because you avoid the risk of losing the money or having it stolen but it still guarantee cash liquidity in any place where there is a bank.

The Euribor is an index, a numerical value that indicates the average reference interest rate at which financial entities lend money on the European market. Every time a bank asks for money from another, they establish an interest rate, using the Euribor as a benchmark. In this way, all the banks can calculate the ‘price’ of their loans in a simpler manner, more in keeping with the current market.

Mortgages and the Euribor

People who have a variable mortgage linked to the Euribor need to take into account rises and falls in this index, as their mortgage will vary depending on its value. If the Euribor rises, the mortgage payments will as well. If on the contrary, the value of the Euribor falls, the mortgage payments will drop. For example, if you were granted a mortgage at Euribor + 1% and at the time of calculating the interest the value of the Euribor is at 2%, the total interest will be 3%. If the Euribor rises to 4%, then you will have to pay an interest rate of 5%.

These upward or downward changes can be positive or negative for people with mortgages. To avoid this uncertainty, there are fixed rate mortgages, which will not vary in accordance with the Euribor, as the interest rate paid each month is always the same. This is a good option for people who prefer something more stable, but is not necessarily more economical.

The value of the Euribor is dependent on numerous factors, such as country debt levels, economic growth, inflation, solvency of the banks and even consumer confidence. To establish the value, the rates offered by twenty-four of the main European banks for their transactions are taken as benchmarks and averaged out.

There are eight different Euribor interest rates, such as weekly, monthly or annual. The latter is especially important because it is used to calculate the rate on variable mortgage loans based on this index.

Damage insurance is the policy you would contract to protect a property along with the things inside it. The cost will vary depending on what guarantees are contracted and the terms and conditions of the policy itself.

Types of damage insurance

Property damage and liability insurance covers the liability that may be incurred by the people living in the property as well as financial losses. It is also an insurance against damage to possessions, covering material objects; in other words, the insurance may cover specific and determined elements such as:

• Fire insurance: the insurance firm is obliged, within the limits established in legislation and in the policy, to cover the damage deriving from a fire affecting the insured belongings.
• Theft insurance: as with fire insurance, the insurers indemnity the contracting party for any damage caused by unlawful appropriation of the insured items by third parties.
• Water damage/flooding insurance: the policy covers damage affecting the insured belongings due to causes related to water, such as flooding.
• Multi-risk home insurance: this kind of insurance is the most comprehensive as it covers any damage caused to the home, to the belongings contained inside and the risks that could affect the owner. It includes fire, water damage, theft, pecuniary losses, general liability, legal defence, etc.

These kinds of policy are divided into “building”, “contents” and general liability. “Building” refers to the structural elements of the home, in other words, walls, electrical installations, floors, windows, storage rooms, etc. “Contents” refers to the furniture, fittings and belongings that are inside the home.

When we ask for a mortgage for our house, by law we must insure it, although we are not obliged to contract that insurance through our bank. The value of the Building that we must provide to the insurers with which we formalise our home insurance policy, will be equal to what it would cost us to rebuild it, in the event of a complete write-off.

The price of rebuilding the house is not the same as the purchase price (the latter includes the value of the land, which does not have to be taken into consideration if rebuilding). It is calculated by multiplying the number of square metres by what it would cost to rebuild each one. The sum varies depending on parameters such as:

• Whether it is an apartment or a terraced house.
• The materials used in the construction.
• The age of the building.

A real estate firm is a business that acts as an intermediary between the person who is selling a property (such as an apartment, house, land or premises) and possible buyers. The agency acts as the representative of the property’s owner, the seller, the buyer or the tenant, depending on the service required by the client. In exchange for this service, the real estate firm may charge a percentage of the total sale or rent or a pre-agreed commission established by both parties. Generally, the real estate firm will not receive any payment of any kind until the sale has been completed.

These types of companies have always been necessary because of the difficulty of matching up buyers with sellers.

Advantages of real estate firms

These firms guarantee that the transaction will take place in controlled circumstances and with reliable information from both parties; they provide advice to the seller and buyer on the type of home they need, the most suitable market prices, or what they should consider before carrying out the transaction.

The responsibilities of an estate agent are not limited exclusively to negotiating a sale or purchase price, but go much further, such as finding possible buyers, attracting clients, creating marketing strategies to improve sales or organising visits.

The internet has caused a revolution in the property market in Spain. Traditional estate agents have given way to new exchanges, which work online alongside physical offices. However, it is important to distinguish between real estate firms and a simple website on which information is exchanged. On the latter, the user will post an advert so that they can be contacted by possible buyers, but their services go no further than simply creating the contact.

A real estate agent, whether working physically or online, will always provide additional services (such as showing the property to the buyers) and therefore it is important to know the difference and know which option is more suitable. It is very common for buyers and sellers to carry out the sale or purchase directly, but the role of real estate agents is still fundamental, not only because of the assistance they offer when carrying out the transaction, but because of their services and advice.

A cooperative, in property terms, is a group of people who come together to take on the costs of purchasing a home, so they can obtain the best qualities and prices possible without depending on an intermediary. In this way, instead of waiting for an independent contractor to build apartments and put them on sale so that the buyers can later pay for them, these cooperatives take on the costs of purchasing the land at their own initiative, paying for the construction and insurance, thus making savings on the margin applicable to a traditional construction firm, and obtaining a much lower final price than they would obtain on the market.

Characteristics of cooperatives

• Cooperatives must be registered with the National Cooperatives Registry, a national body that ensures they work in due form.
• The contributions must be made to a bank account that is in the name of the cooperative and they must be insured by an insurance firm or bank.
• To be a member of a cooperative, you have to contribute share capital and a series of fees for the cooperative’s daily maintenance and functions. Contributions to the share capital are always refundable, but there may be conditions involved.
• The average time it takes to develop properties through this method is usually two to three years, depending on the estimated timeframes for executing the works.
• Each of the members will have rights and obligations, and thus it is obligatory for the cooperative to deliver a copy of the bylaws and regulations to each member.

Before joining a cooperative, it is important to know the characteristics of the association, how it works and what kind of obligations and rights you will be taking on. Having all of the information on each step taken by the group is essential to control the timeframes and prices and ensure everything goes according to plan.

A construction firm is in charge of the whole process of building a house or building. Strictly speaking, the construction firm does not have to own the land or be the company that will sell the buildings once they are completed. Its role is limited exclusively to erecting the building.

What is the construction firm in charge of exactly?

The first step is drawing up the project plans, which is what the architect does. The architect usually works independently from the construction firm, but must nevertheless be in direct contact with the firm. The latter must manage the timeframes and contract, where necessary, the professionals in charge of executing the work: masons, bricklayers, plumbers, electricians, etc. Coordinating their work and the raw materials provided by the suppliers falls under the responsibility of the construction firm.

Process of building a home

1. Preparation of the terrain and foundations. The terrain has to be flattened or levelled; then wooden formwork is placed to serve as a template for the foundations and holes and trenches are dug.
2. Full structural work: First the structure of the floors, walls and ceilings are built (skeleton of the building). After this comes the structural plumbing, electrical systems and HVAC, as well as all the insulation.
3. Beginning of external finishes: bricks, stuccos, stones or claddings. Likewise, access roads and external paths are built.
4. Completion of internal details. Internal doors, baseboards, window frames. The final paint coat is applied to the walls.
5. Installation of cladding for floors and counters. Completion and flattening/levelling of exteriors. Ceramic tiles, vinyl claddings or wooden floorings are installed, along with counters or tops.
6. Completion of mechanical adjustments. Installation of bathroom and electrical accessories.
7. Final inspection. The construction firm will take the client on a final walk through the house so that the client can inspect the characteristics and see how the different systems work.

Common areas and elements are those that are necessary and useful for the correct usage and enjoyment of the building by the residents. These are garden areas, the entrance, the caretaker’s premises, the room containing cleaning tools, etc. There may be more or less of these areas depending on the needs of each owners’ association and they must be recorded in the Foundational Deed of the condominium.

What are the common areas and elements of a condominium?

• Floor/land: the floor and land on which the building has been built, covering both the surface occupied by the building itself and the area of the whole plot, including gardens, swimming pools, sport facilities, car parks, etc., as applicable.
• Foundations: formed by the lower part of the building and everything that comprises the building’s structure, such as pillars, beams, floor slabs, load-bearing walls, girders, etc.
• Flights: the parts of the building not attached to the ground, in other words, the flights of stairs and different floors that have been built in accordance with building regulations.
• Roofs: unless otherwise specified in the Foundational Deed, all roofs shall be considered common areas.
• Access elements: all the areas through which the residents can access the private areas, such as their homes or premises, or other common areas, such as stairs, entrances, corridors and gateways.
• External elements: these include the facades, the terraces, balconies, windows and external cladding.
• Patios: the inner courtyards are also considered common areas in theory. However, in practice they are included as private elements for the premises and homes that have access to them.
• Ducts, conduits and channels: apart from the drains and downpipes, these include the supply installations of all kinds up until they reach the point where they are channelled off in to each owner’s home, from which point they are considered private elements, rather than common.
• General installations: these include lifts, tanks, meter rooms and cisterns, among others.

The useful metres of a house are those that can be put to a real use, which usually coincide with the space that can be walked on. They include the interior parts of the home (including wardrobes). To find out the exact value it is necessary to measure these areas very thoroughly or ask an architect for help.

When it comes to valuing the size of a house, it is important to know what scale is being used, given that the number of square metres varies and these figures have a significant effect on the final price of the purchase, the taxes that have to be paid and even the owners’ association fees.

Difference between useful metres and built-up metres.

These data are different and the value is practically never the same: normally the useful metres are less than the built-up metres. The built-up metres include all the elements that are within the home’s perimeter including partition walls, ventilation ducts or the installations required for their use. The useful metres are those that can be put to real use, in other words, those that match the entire surface on which you can walk. This measurement is very important when it comes to calculating whether the space that we are buying will really be able to satisfy our needs. It is important to remember the built-up metres in common areas are those including the corridors and the rest of the spaces that form the communal premises and that are used by all residents.

Which types of metre are used to calculate the value of a house?

When an appraisal or survey is made, it is usually based on the built-up metres including the common areas, not the useful metres or just the built-up metres. To have a faithful reference of the square metres in a determined area, this scale is always used because if they are calculated by, for example, only taking into account the useful metres, the measurement cannot be compared with other properties and we won’t be able to obtain a relevant estimate of the real price.

What elements are included in the useful metres?

Normally only 50% of balconies is included within the useful metres, unless the balcony is closed on three of its four sides, in which case 100% is included.

The storage rooms and car park areas are not included in useful metres.

The surface of the built-in wardrobes and cupboards is included in useful metres, but not the space occupied by walls, partitions, pillars or false ceilings/surfaces, etc.

When buying a house, it is normal to ask how many square metres it has in total. This is one of the most important factors that influence the decision to buy or not. There is no “ideal size” for a home, as it will depend to a large extent on the buyer’s preferences, the number of people who will live in it and the distribution of the home itself. However, it is true that most people start from a minimum number of built-up metres that they want as a requirement before they will move.

What is the difference between built-up metres and useful metres?

It is common to make mistakes when making these calculations. One of the most frequent is to confuse the built-up metres with the useful metres. The built-up metres account for the space that is inside the perimeter of the home, including partitions, walls, pillars and false ceilings/surfaces. If the walls are shared with a neighbour, the perimeter is measured from half the wall and usually the partitions, galleries and ventilation ducts are also taken into account. On the other hand, the useful metres only count from the space inside the house, including the wardrobes/cupboards.

Do common elements and external areas count in the built-up metres?

If it is specified that the built-up metres include common areas then the common areas are included, but not if the built-up metres are stated alone. The built-up metres including common areas will be the surface recorded in the cadastre. This is why it is normal for the useful surface, or simply the built-up surface in buildings and residential complexes to be very different from the value recorded in the cadastre. This is because the concept includes the corridors and common areas proportionally for each house. The terraces and covered balconies are calculated at half their size, unless the balcony is closed off on three of its four sides, in which case it is calculated at its total size.

What about car parks and storage rooms?

The square metres of the car parks and storage rooms should not be included in the home’s built-up metres, because, as occurs with the balconies, the dimensions of these spaces, in which one cannot “live” as such, can end up inflating the amount of metres of the property artificially.

An apartment is a home that, generally, is smaller than a normal flat and is usually located in urban city centres. As a general rule, an apartment will have less equipment than a standard flat and it is designed to take advantage of the common areas of the building, both vertical and horizontal, so that they can be offered at a more economic price.

In real estate property classification, it is normal to come across terms such as duplex, attic, shared apartment, etc. On such a list, by value and size, an apartment is usually toward the bottom of the list, being bigger only than a “studio”, often used as an office. Knowing exactly what type of property we want is essential when trying to find it. As they are easy to maintain and due to their dimensions, apartments are ideal for the rental market, especially for single people or young students. It is true that the definition of “apartment” is not defined in absolute terms and its meaning may vary depending on the country or area that we are looking at.

Types of apartment

There are several types of apartment and they have changed over the years, as the needs of buyers and renters have changed. The division of traditional space that included a bedroom, bathroom, lounge/dining area and kitchen, have disappeared to integrate the kitchen and lounge together (open kitchen or kitchenette), to give the common spaces a bigger role and with the bathroom moved to a secondary location within the apartment. Apartments are no longer stigmatised for being “small” or “uncomfortable” flats, and they have changed from an option for people with low purchasing power to become a fashionable place for young people with medium-high purchasing power, who want independence but also want access to the best parts of a city, even if it means sacrificing some space.

Rooms with water in them are the parts of the house in which water is directly or indirectly present and that must therefore be especially adapted. They include bathrooms but also spaces used to wash and dry clothes, or the boiler room or laundry room for instance.

How should a room with water be conditioned?

Rooms with water in them need to be especially conditioned for ventilation and the construction materials must be suitable.

There should be an air duct connected directly to the exterior, whether in the form of a pipe or grille or an automatic air extractor. These devices help to direct the air outside, whereas a fan may work all the time or only under pre-establishing circumstances, depending on needs. As it is important to maintain certain humidity and temperature levels for the building’s health and safety conditions, it may be necessary to install detectors so that the space can be adapted in the best way possible.

These rooms often have exposed pipes, as well as valves and stopcocks. These types of installations can cause very drastic changes in the temperature and humidity levels, which is why it is appropriate to install the devices mentioned above or to isolate the installations so the humidity/water does not affect the walls, the paint or other elements in home.

What should I take into account in terms of bathrooms?

In bathrooms, all the elements are hidden from sight, which is why it is necessary, on the one hand, to have materials adapted to this environment (tiles, metal or glass) and on the other, to have easy access to stopcocks and shut-off valves. Most of the time, humidity is due to excessive insulation, which allows the water to condense and create humidity. To avoid this, it is important to have sufficient ventilation.

The building specifications report is considered one of the main instruments that serve as a guarantee to people who are buying a home that has not yet been built. The act of buying a house based only on the plans can carry certain risks, as we won’t know what the final result of the works will be.

For this reason, the law obliges the seller to deliver a free copy of the building specifications report, which must contain a description of all the materials that will be used in the construction. If any modifications are made, they must be notified to the owner of the house. This includes the thermal and acoustic insulation of the building and common areas.

The objective is to ensure that the buyer has all the details and information required on the house they are going to purchase and that it is delivered in good condition and with all the guarantees, in terms of both the visible finishes and in terms of possible latent defects that we may encounter from day to day.

It is important to read the report very carefully, especially the matters related to the building’s structure. The decoration or distribution of the house may be modified, but the structure of the building and its characteristics cannot.

It is not uncommon to find homes that are supposedly luxury homes that have excellent visual finishes but hide deficient executions of the structural elements. The insulation, waterproofing, the roof and covering and façade systems, the carpentry, the ducts of the utilities and the type of concrete used are factors that need to be taken into account, very carefully, before buying an off-plan property.