Legal Requirements for Foreign Luxury Property Buyers in Spain

Spain has proved to have enduring appeal for luxury real estate buyers from abroad, and there’s growing demand in hot spots like Barcelona, Ibiza, Mallorca and Marbella. In this article, we’ll provide guidance regarding both practical and legal requirements for foreign nationals – both in the EU and outside the EU – for purchasing high-end Spanish property.

Can Foreigners Buy Property in Spain?

The short answer to this question is “yes” – EU and non-EU foreigners are able to buy property in Spain. There’s no special residency required to buy real estate here.

What Documents Are Required to Buy Property in Spain?

Here’s what’s required in order to buy property in Spain:

• Número de Identidad de Extranjero (NIE): This is mandatory for any financial transaction, including the purchase of property. You can apply for your NIE from within Spain or abroad.
• Passport: You’ll need a passport to provide valid identification at every stage of buying real estate in Spain.
• Proof of Funds: Due to laws that prevent money laundering, buyers must demonstrate legal proof of funds in order to buy property in Spain.
• Spanish Bank Account: While this is not legally required for property buyers, it’s highly recommended that you open a Spanish bank account. You’ll use it to pay utilities, taxes and other fees related to property buying and ownership.

What Is the Step-by-Step Buying Process?

Before you commit to buying property in Spain, it’s important to understand how the process actually works. From the initial steps of finding a legal representative to signing the final contract at the notary’s office, the path to ownership follows a clear structure. Here’s what to expect along the way.

Engage a Local Legal Representative

Foreigners buying luxury property in Spain are strongly advised to work with a local legal representative. The representative will conduct due diligence, carefully review documents, explain tax requirements, attend notary meetings, and more.

Conduct Legal Due Diligence

There are multiple due diligence steps when buying Spanish property, such as:

• Checking the condition of fixtures, fittings, security systems, etc.
• Checking for and clearing up debts and other encumbrances
• Complying with Spanish Historical Heritage and zoning laws
• Getting urban planning permissions
• Verifying the property title

Sign the Preliminary Contract

Along with signing the preliminary contract, called the Contrato de Arras, you’ll put down a deposit on the property. This contract shows that you’re committed to the purchase, and there will be legal penalties if you withdrawal from the deal after signing it. The penalties will also be outlined in the contract.

Notarization of the Sale and Land Registry

When it’s time to sign the final deed, called the Escritura Pública, you’ll do so before a Spanish notary. The notary’s role is to verify the identities of the parties involved in the sale and ensure legal compliance when signing.

The notary with also register the property with the land registry, which is a mandatory step for full legal ownership. Moreover, registering the property protects the new owner against third-party claims.

Are There Specific Legal Considerations for Luxury Property Buyers?

When buying a luxury property in Spain, there are additional considerations regarding documentation, gated communities, environmental compliance and more.

Additional Documentation

Buying a luxury property can be especially complex because the assets involved are so valuable. Documentation that may be required or helpful includes:

• Architectural Blueprints and Plans: These detailed documents will show the design, modifications and structure of the property, and they’re important for confirming compliance.
• Finishes and Fixtures: High-end properties typically have premium finishes and fixtures, such as built-in tech, designer lighting and imported tiles. It’s important to verify the value of these elements and confirm that they’re included in the sale of the property.
• Licenses and Permits: The seller must provide legal permits for additional aspects of the property aside from the main home, like the guest house, pool or wine cellar. An unauthorised structure could lead to fines or even demolition orders for the new owner.

Gated or Shared Communities

If the property is located in a gated community or a shared Comunidad de Propietarios community, there are additional considerations.

• Community Bylaws and Rules: You may have to abide by Residents’ Association laws that control how you modify and use the property.
• Additional Fees: There may be monthly maintenance fees that you’re required to pay, plus one-time charges for communal amenities or upgrades.
• Shared Amenities: Confirm which amenities you’re able to use, such as golf courses, private beaches and spas.

Environmental Compliance

It’s common for luxury homebuyers to look for sustainable properties, but there are additional legal aspects to consider with this type of home.

• Eco-Friendly Features: Certain types of sustainable building materials and features, like rainwater systems and solar panels, may require special permits. They also may make you eligible for related tax credits.
• Energy Performance Certificate (EPC): An EPC indicates the home’s energy efficiency level and can help buyers to assess future energy costs.
• Protected Land: Check that the property is not in a protected natural area, which could require you to comply with restrictions that may impact expansions, renovations or how you use your land.

Off-Plan and New-Build Homes

There’s special legal framework to consider when investing in a pre-construction property or newly built home.

• Phased Payments: It’s common for payments to be made in stages, like upon signing the contract, after the foundation is laid, and when construction is completed. The purchase contract should clearly lay out the details of the stages and payments required.
• Escrow Accounts: It’s important to hold funds in an escrow account so that they’re only released as building milestones are reached. This setup protects the buyer if the developer doesn’t meet deliverables.
• Refund Guarantees: In some instances, the developer will provide a financial guarantee so that your payments will be refunded if the project is abandoned or delayed.
• Occupancy Permits: The developer must obtain certificates that show the home is habitable.

Can Foreigners Get a Mortgage in Spain?

Yes, foreigners are allowed to take out a mortgage in Spain. Here’s what you should know:

• Non-residents are able to obtain mortgages for up to 70% LTV, which stands for Loan-to-Value ratio.
• If you take out a loan for 70% of the purchase price, your deposit will make up the remaining amount of the price, which is 30% in this example.
• Spanish residents may qualify for higher rates, giving them the option to put down a lower deposit.

Plan to pay another 15% on top of the purchase price on miscellaneous taxes and fees.

What Taxes and Fees Should You Expect?

Here are the taxes and fees you should plan to pay when buying property in Spain:

• New-Build Properties: Stamp Duty of 0.5-2.5% and VAT of 10%
• Resale Properties: Property Transfer Tax of 6-11%, with the exact amount based on the region
• Additional Costs: Fees for the notary, land registry, legal costs (approximately 1% of the purchase price), and valuation fees if you’re financing the purchase

What Are the Ongoing Obligations After Buying?

After buying luxury property in Spain, you can expect to pay the following:

• Annual property tax (IBI)
• Community fees
• Home insurance
• Non-resident income tax on the deemed rental value
• Utility costs
• Wealth tax, which applies to certain thresholds

What Are the Residency Options After Purchase?

While you don’t have to become a Spanish resident to own property in Spain, remaining a non-resident will impact taxation and stay duration.

Previously, the Golden Visa program offered residency for an investment of €500,000, but it has since been phased out.

Digital Nomad Visa

The Digital Nomad Visa is for foreigners who plan to live in Spain as a resident while being self-employed or working remotely for an employer outside of Spain. For self-employed residents, no more than 20% of their workload can consist of clients located within Spain.

The applicant must also meet background requirements regarding their educational degrees or work history.

Non-Lucrative Residency Visa

Also referred to as a “Non-Working Residency Visa,” the Non-Lucrative Residency Visa requires applicants to show documentation of financial means, such as a certificate from their bank.

This visa is for applicants who won’t be working while residing in Spain and have other means of supporting themselves. Residents with this type of visa are not allowed to work in Spain, including remote work.

Wrapping Up

While foreigners are able to buy property in Spain, you’ll need to ensure you have the necessary documentation and proof of funds, along with a Spanish bank account, which will make transacting much easier.

It’s also wise to hire a bilingual property agent and legal professionals who can help you through each step of the process. While the notary will handle much of the process, including conducting due diligence and filing paperwork, it’s important to understand what’s happening at each phase.

Working with a trusted property agent, like our experts at HomeHunts, will help you decide on the best location and home to meet your needs. We’ll also be with you throughout the entire process, answering questions and guiding you along the way.

Owning luxury property in Spain is more attainable than most people realise. And with the right preparation and expert guidance, it can be a highly rewarding endeavor as well.