Re-Sale Properties In Ibiza

The normal procedure, once you have found a property you want to buy, is that a Contract of Sale and Purchase is drawn up by your lawyer and a deposit is paid - normally 10% of the sale price. The Contract is signed by both the Seller and the Purchaser. Once this Contract is signed and the deposit paid, this commits both parties to the price and the conditions of the Contract.

Your Spanish Lawyer (English speaking - essential if you wish to avoid pitfalls) should check out the following on your behalf, before paying over the deposit to the vendor.

A copy of the escritura (Title Deeds)

This confirms that the people who claim to be the owners are the people named on the Escritura.

Nota simple

This is a document from the Land Registry office showing who is the legally registered owner of the property. It also shows if there are any mortgages or other encumbrances registered against the same. The name/s on the Nota Simple should match the name/s on the Escritura (Title Deed).

Once your Lawyer has seen these documents, is satisfied that the property belongs to the person who claims to be the owner, and has confirmed that there are no mortgages or other encumbrances, he will ask you to proceed with the Contract. However, before signing and paying the deposit he should ensure that the following are included in the Contract:

• That the purchase price and conditions of payment are clearly written.

• All charges on the property, ie community fees, electricity, water (which may be included in the community fees), telephone bills and rates, are paid. These items are the responsibility of the vendor up until the day of the signing of the Escritura (Title Deed) by the new purchaser. This is most important, as many debts in Ibiza are on the property and not the person.

The purchaser should only be responsible for any debts on the property from the day of the signing of the Escritura (Title Deed) and the handing over of the keys. It is most important that your Lawyer has proof that any outstanding debts, are up-to-date before signing the Escritura and handing over the final payment.

The Contract should also contain:

• A complete description of the property - ie lounge, dining room, kitchen, number of bedrooms and bathrooms, terraces, etc. The total square metres of the plot and of the apartment or house.

• 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 seller, this should be stated in the Conditions of Payment section of the Contract.

Mortgages in Ibiza are usually assumable, ie if there is an existing mortgage on a property and a purchaser wishes to take it over and carry on the remaining payments, then this often possible. Under normal circumstances the lender (usually a Spanish Bank) requires little or no proof of income from the new purchaser.

• There should be a clause in the Contract concerning vacant possession on completion. This should read ‘Free of Sitting Tenants’.

• If the property is being sold furnished - which is often the case when buying a resale property in Ibiza - a complete inventory should be drawn up and signed by both parties. This document should be annexed to the Contract.

• Under recent Spanish legislation, the purchaser is obliged to retain 5% of the value declared on the Escritura. This sum will be paid over to the Notary by your Lawyer. It is most important that this is also mentioned in the Contract of Sale and Purchase. The 5% retention only applies if the vendor is non-resident in Ibiza (in other words, if the vendor does not have residential status in Ibiza at the time of selling).

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 is not paid by the agreed date (specified in the Contract), the purchaser will lose the amount paid and the vendor is free to offer the property for sale again. A potential purchaser has no call against the property, therefore, before you sign the Contract and pay the deposit you must be absolutely sure that you can pay the balance on the agreed date.

• Although it is unlikely that the vendor will back out of the sale at the last minute - after signing the Contract - this is always a possibility. Therefore, it is a good idea to have a further Penalty Clause inserted in the Contract stating that if (for any reason) the vendor does not complete on the Contract and wishes to withdraw, he must pay the purchaser an indemnity of double the amount paid as a deposit for the purchase of the property.

• If the property you intend to buy was built within the last 5/6 years your Lawyer should ask to see proof that a Building Licence was obtained and that a certificate of the termination of the building (Certificado de Fin de Obra) and the licence of the first occupation (Licencia de Primer Ocupation) have been issued. Your Lawyer can obtain copies of these documents from the local Town Hall.

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.

It is an obligation that your Lawyer should check on the day of signing the Escritura that no debts or mortgages have been registered against the property since he made the first search, when the purchaser signed the Contract of Sale.

Extras to the purchase price

These will amount to approximately 10% of the total being paid for the property.

Made up as Follows:

• RESALE PROPERTY - Transfer tax 6%
  

• NEW PROPERTY - IVA (vat) at 7% + 0.5% Stamp Duty
  

• LAND REGISTRY CHARGES
  

• NOTARIAL FEES
  

• LAWYERS FEES

There may also be a charge for Plus Valia, which is a type of Capital Gains Tax. Your Lawyer will normally ask you for the full 10% when he requests you to provide him with the amount of the purchase price.

As the Lawyer is never quite sure exactly what the total of the ‘extras’ will be, the 10% is an estimate and at a later date, after you have purchased the property, he will provide you with a statement of his disbursements and fees listing everything that has been paid on your behalf. Often there will be a surplus in your favour which he will return to you.

Declared price

It was often the case that purchasers under declared the value of a property when registering an Escritura. The obvious benefit was a saving on the 6% transfer tax. However, these days the Spanish Authorities take a sterner attitude and substantial under-declaration is likely to be discovered and fines levied. Take your Lawyer’s advice on this ‘touchy’ subject.

N.I.E.

This is the Numero de Identificacion de Extranjeros (or Foreigners Identification number). Your Lawyer will obtain this for you prior to signing the Escritura, as it is an essential for all non-residents buying property in Ibiza.

Certificado de divisas

This is a certificate provided by the Bank, stating that the funds for purchase were imported from outside of Ibiza. If you have used your Lawyer’s Clients’ Account to import the money for the purchase of your new home, he will arrange the certificate from his Bank. The certificate is recorded on the Escritura (Title Deed).

Making the final payment

If you do not propose to be in Ibiza to attend the Notary’s Office in person, then your Lawyer can take a Power of Attorney from you and act on your behalf. He will need funds transferring from your UK bank account to his Clients’ Account, to make the final payment.

Your Lawyer will sign the Escritura (Title Deed) for you - you can countersign yourself the next time you are in Ibiza.

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 home from the Notary. The original Escritura is sent - by the Notary - to the Land Registry Office, so that he 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 to 3 months. Normally your Lawyer would collect this for you and advise you that he is holding it on your behalf ready for collection