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10 easy steps to sell property in Spain

Raymundo Larraín Nesbitt, June, 25. 2024

Raymundo Larrain gives a sweeping overview on how to sell property in Spain safely.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 21 years of experience at your service. We offer a wide range of 60 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record of successfully assisting expats all over Spain.

You can review here our client’s testimonials.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of July 2024

Introduction

Today’s article mirrors last month’s Ten easy steps to buy property in Spain.

The following article aims to be a basic checklist covering what I reckon are the ten basic points, nothing more.

There are two taxes involved on selling Spanish property: Capital Gains Tax and Plusvalia Tax.

I’ve divided my article into five points pre-completion and five points post-completion.

As a word of caution, never hand over your house keys before completion (at the notary). As explained in our article: POSSESSION: why you should never hand over your house keys BEFORE completion.

Ten easy steps to sell property in Spain

I. Pre-completion

1. Hire an estate agent

Estate agents in Spain, for the most part, remain unregulated. This means that anyone can be an agent, but few stand the test of time

Good estate agents are proactive, they prove invaluable as they help to fetch a fair sales price in a short span of time (months). By contrast, bad agents are passive, and your house will be on sale for years.

A seasoned agent will decide on what’s the best market strategy to sell your property giving you all kinds of useful tips. Make sure you take to heart these tips, as they greatly impact on positive property viewings. Always ask your agent for feedback after each viewing, taking action where necessary to turn around negative feedback.

On selling, you need to list your property with a property platform such as IDEALISTA (Spain’s number one) or with one, or more, agents. Be mindful of giving an agent exclusivity on your property unless you are sure of what you are doing.

Hallmarks of reputable agencies:

The estate agency has been around for a long time (years, even decades)
Ask around for referrals from people you trust
Member of RICS, which works to (high) British standards
Member of LPA (Leading Property Agents), or similar
Glowing reviews and stats across multiple platforms (Trustpilot, Google reviews, etc)
Excellent contact network
Superb local market knowledge

Do not trust estate agencies that flaunt shady ’real estate awards’. Every week I'm emailed three of these ‘international awards’ in exchange for money.
Remember, unlike in other countries, estate agents work only for the seller.
Agent’s fees are 100% tax-deductible on selling your property in Spain.

2. Hire a lawyer

Hiring an independent lawyer is the best advice I can give you. If you are a non-resident in Spain (particularly a foreigner), you are strongly advised to instruct a lawyer to assist you through the conveyance procedure. Lawyers are regulated by professional bodies, subject to disciplinary action. Lawyers have professional indemnity insurance in place in the event of malpractice or negligence. Your appointed lawyer can do all the following, and more:

Line up all the required documents
Avoid payment scams
Avoid abusive sales commissions
Avoid possession issues
File a 3% tax rebate
If selling at a loss, filing a tax rebate on the Plusvalia Tax
Dealing with other lawyers, tax office, agents, banks, notary, community of owners, town hall, etc.
Dealing with utility companies (water, electricity, gas, landline, etc)
Discharge a pre-existing mortgage on the property. Buyers demand a clean title, they don’t buy with a mortgage against it
(Greatly) mitigate the seller’s Capital Gains Tax liability (on average reduce your tax bill by 70% or more)
Negate the CGT on reinvesting the sales proceeds on a new main home (even outside the EU i.e. in the United Kingdom).

Lawyer’s fees are 100% tax-deductible on selling your property in Spain.

3. Price to sell

It’s of critical importance a seller adjusts the asking price to match market expectations.

I understand - and it is perfectly human - that owners have a penchant towards overpricing their property, all the while overlooking its flaws. However, if you want a smooth sale within a reasonable timeframe (3 months), you must pick an asking price that matches a realistic valuation. Otherwise, you can be waiting for years on end until the property is sold. It is not uncommon to hear people have waited over a decade to sell in Spain (because they did not price the property correctly).

In my professional experience, properties that have been on the market for too long (6 months plus) become a stale listing which acts as poison; would-be buyers start wondering if there is something wrong with the property which drives the sales price in a downward spiral. Unrealistic pricing leads to long sales times.

Remember, be smart, price to sell.

4. Tax compliance

It is strongly advised that sellers are up to date with their tax and maintenance expenses. If you are in arrears with your taxes, this may impact adversely your tax rebates post-completion (see below).

Buyers, on running a due diligence on the title, will get a poor impression when a seller has fallen in arrears. Moreover, in some cases, falling in arrears may even jeopardise a house sale i.e. when a buyer needs a mortgage loan to complete (lenders do not borrow against properties with debts).

5. Documents to sell

As mentioned in the first point above, your lawyer can (greatly) assist you in collating all the necessary paperwork to sell.
The following list is not exhaustive:

Full scanned copy of your title deed
Copies of your national ID, passport, NIE number
Copy of recent utility invoices
Copy of IBI tax invoices
Copy of Refuse Charge (Basura, in Spanish)
Energy Performance Certificate
Licence of First Occupation
Scanned copies of the minutes of the last three General Assemblies
Community of Owner’s Certificate stating the property being sold is not in arrears
Spanish fiscal residency certificate (to avoid a 3% retention on the sales proceeds)
Etc.

If all the above points check out, you are ready to roll. A property sale follows three stages in Spain:

Sign a reservation contract: in exchange for getting paid €3,000 or €6,000 (dependent on the sales value) you reserve the property over the next 30 days, during which the sales contract must be signed. This is a simple one-page document drafted by the listing estate agency.
Sign an arras contract (sales contract): the buyer makes a non-refundable 10% deposit. This detailed contract stipulates a day and time to sign at a notary plus all the sales conditions. This contract is drafted by the buyer’s lawyer.
Completion at a notary office. The balance of the asking price is paid and the keys are handed over (possession).

II. Post-completion

6. Capital Gains Tax mitigation

CGT for non-residents is 19%. Again, your lawyer will assist you in gathering all the necessary paperwork to bring down your CGT liability on selling, within the law. Your lawyer can reduce your tax bill by 70%, or more. This is explained in detail in our article Capital Gains Tax mitigation on selling (or gifting) property in Spain.

7. Plusvalia Tax rebate

If you are selling at a loss, you can file a tax rebate on the Plusvalia Tax you’ve paid.

8. 3% tax rebate

By law, buyers withhold 3% of the sales proceeds if a seller is a non-resident. A lawyer can file a tax rebate on the seller’s behalf on all, or part, of the 3%. If a seller is in arrears with his property taxes, this precludes a tax rebate. This is explained in our taxation article: How to file a 3% tax rebate on the sales proceeds of your Spanish property.

9. Serve legal notice to your community on the house sale

Your lawyer can notify them on your behalf. The reason on why this is necessary is so that all the new invoices they raise are against the buyer, not against the seller. This ringfences your liability.

10. Closing your Spanish bank account & dealing with transfer of utilities

Your lawyer can advise you on this. If you close your account too early, you will jeopardise the tax rebates from the Spanish Tax Office (meaning you lose all your tax refunds!).

Again, your lawyer can ensure the utilitie's contract transfer is smooth, avoiding payment issues or supply disruption.

Conclusion

If you plan to sell property in Spain, and are a non-resident, contact us to assist you in the legal procedure. We act nationwide.

At LNA we make it all easy, so you just have to sit back and relax. We take care of everything removing all the associated stress.

Not to mention our fees are 100% tax-deductible on selling!

21 years of experience at your service.

Related services available from LNA:

“Même s'il me faut lâcher ta main / Sans pouvoir te dire à demain / Rien ne défera jamais nos liens (...) L'amour est plus fort que le chagrin.” – Françoise Hardy

Françoise Madeleine Hardy (1944 – 2024). Born in Paris, was a gifted French singer-songwriter and actress. Mainly known for singing melancholic sentimental ballads (Tous les garçons et les filles), Hardy rose to prominence in the early 1960s as a leading figure of the yé-yé wave, and went on to become a cultural icon both in France and internationally. In addition to her native French, she also sang in multiple languages. Aussi belle que douée.

At Larrain Nesbitt Abogados (LNA) we have over 21 years of experience specializing in immigration & residency visas. We also assist clients in buying, selling, or renting properties in Spain. You can contact us by e-mail at info@larrainnesbitt.com, by telephone at our UK line (+44) 0754 3838 218 or Spanish line (+34) 952 19 22 88, or by completing our contact form.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Ní neart go cur le chéile. VOV. Soyez réalistes, demandez l'impossible.

Larraín Nesbitt Abogados, small on fees, BIG on service.
2024 © Raymundo Larraín Nesbitt. All Rights Reserved.

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10 easy steps to buy property in Spain

Raymundo Larraín Nesbitt, May, 30. 2024

Raymundo Larrain gives a sweeping overview on how to buy property in Spain safely.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 21 years of experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of June 2024

Introduction

The following article aims to be a basic checklist covering what I reckon are the ten basic points, nothing more.

I have greatly abridged it, not going into detail on whether you are buying resale or a new build property, or between commercial, urban, or rural land.

If you fancy a more in-depth and fleshed out guide on how to buy property in Spain safely, I refer you to our detailed Homebuyer’s Guide in Spain.

Ten easy steps to buy property in Spain

1. Hire a lawyer

If you are a non-resident in Spain (particularly a foreigner), you are strongly advised to instruct a lawyer to guide you through the procedure. Your appointed lawyer will run a due diligence on the property ensuring you acquire a clean title with no outstanding debts or taxes.

Your lawyer requires a Power of Attorney. A PoA enables a lawyer to act on the buyer’s behalf:

opening a bank account
applying for a NIE number
apply for a mortgage loan (in Spain, by law, a borrower is required to pass a multiple choice test to qualify, your lawyer can take the test for you)
drafting & signing legal documents on behalf of the principal
filing property taxes
connecting utilities
dealing with a community of owners

Beware of anyone telling you that hiring a lawyer is unnecessary, you can be sure they have vested interests of their own.

2. Apply for a NIE number

A NIE number is a tax identification number for foreigners which identifies you before the Spanish Tax Office and allows you to file and pay taxes in Spain. A NIE number is an essential admin document that everyone in Spain will be asking for: banks, schools, town halls, healthcare etc. It’s a must-have; the sooner you get it, the better. We can get you a NIE in 2 weeks.

3. Open a bank account

Opening a bank account in Spain is required on buying property (or when you apply for a visa). Utility companies and Spanish health providers only accept Spanish accounts to domicile payments. You will be required to attend the bank in person to open an account.

4. Do you need a visa?

If you are an EU national, as a general rule, you do not need a visa to stay in Spain. However, if you plan to spend more than 90 consecutive days in Spain, you must apply for a residency permit. This is fast-tracked for all EU nationals, attained by us in under one month.

If you are a non-EU national, as a general rule, you are required to attain a visa to remain in Spain for more than 90 consecutive days. Some visas must be applied for from your home country (before travelling to Spain), yet others can be applied for from Spain. You can read our comprehensive Spanish visa overview for more details.

5. Reservation contract

Once you’ve decided on a property, you need to commit.

Typically, an estate agent listing the property will ask you to pay €3,000 (or €6,000 for more expensive properties). This is normal, don’t worry. Unlike in other countries, such as in the United Kingdom, there is no 14-day cooling-off period. Reservation deposits are non-refundable (unless expressly agreed and worded otherwise in the contract).

A reservation contract is a simple one-page document whereby the seller reserves a property for you over the next 30 days in exchange for a deposit. If you go ahead and complete, the deposit will be part of the sales price. If you decide to pull out, you lose the deposit.

6. Hire a surveyor

We strongly advise buyers to hire a property surveyor, particularly on buying rural property or on buying off-plan property. Surveyors draft a comprehensive report with a detailed snagging list. This report is very useful and can be used to detect build flaws and re-negotiate the sales price. We advise surveyors to be registered with RICS, which works to high professional standards.

7. Exchanges - signing an arras contract

Signing an arras contract requires you to pay 10% of the asking price. This amount is non-refundable once signed and paid.

If the buyer pulls out of the contract – for whatever reason – they lose the 10%.

If a seller pulls out of the contract – for whatever reason – they pay 20% of the asking price (as a penalty).

Signing an arras contract is a (very) serious matter. Under no circumstances should a buyer sign it without a lawyer. Depending on how they are worded, some of these contracts actually force buyers to pay the full property price! Even if they do not want to. You can be taken to court over this contract.

8. Completion

Normally, 30 to 45 days after signing an arras contract, depending on whether the buyer requires a mortgage loan or not, the parties need to attend a notary chosen by the buyer to sign a Title deed (escritura, in Spanish) witnessed by a notary public. The buyer will now pay the balance of the asking price and possession will be his (keys hand over).

9. Property registration

After you sign at a notary, you need to pay the associated Property Transfer Tax. The Title deed must then be lodged at a land registry by your lawyer. This usually takes 1 to 2 months, depending on how busy the registrar is at the time.

It is important to understand that if a property is not registered under a buyer’s name, he does not legally own the property, even if he signed a Title deed.

The main reason is because Spain follows a two-tier system of transfer of ownership (notary and land registry). For peace of mind, ownership of a property can be verified in under 24 hours on commanding a nota simple service from us. A nota simple is a land registry report.

10. Post-completion

Post-completion, a buyer still has to deal with a long to-do list.

Your lawyer can (greatly) assist you in cutting through all the below red tape saving you money, time, and aggravation:

Utilities: Your lawyer can connect you to the mains (water & electricity). Also, to internet, gas, and landline. We offer this utility connection service.
Taxes: on owning a property in Spain you will be required to pay for a series of taxes, both local and national. As local taxes, you have to pay IBI and garbage collection tax. As a national tax, non-resident property owners need to pay once a year what is known as imputed rental income tax (even if you do not rent out the property, it’s a notional income tax). Failure to pay some of these taxes will lead to embargoes (legal charges placed against your property) which may result in your home being impounded and sold off in a public auction. We offer this tax service.
Padron: If you plan to live in Spain, you must enrol in the town hall census (padron). This is known as empadronarse or empadronamiento in Spanish. This is required to access public healthcare, vote on local elections, apply for a mortgage loan, schools, etc. We offer this padron service.
Community of Owners or EUC: If you buy a property within an urbanizacion, or development, you will need to join the community and pay your fees. These are normally paid quarterly. Non-payment may lead to the community suing you.
Making a Spanish will. On owning property in Spain, it is strongly advised you make a Spanish will. A Spanish will safes your beneficiary's time, money, and aggravation at a time of bereavement. A Spanish will does not preclude one made in your home country, it only affects your Spanish estate. Ideally, foreigners should make two wills; one in their home country and one in Spain disposing of their Spanish estate. We offer this will-writing service.

Conclusion

If you plan to buy property in Spain, and are a non-resident, contact us to assist you in the legal procedure.

At LNA we make it all easy, so you just have to sit back and relax. We take care of everything removing all the associated stress.

Not to mention our fees are 100% tax-deductible on selling!

Related services available from LNA:

At Larrain Nesbitt Abogados (LNA) we have over 21 years’ experience specializing in immigration & residency visas. We also assist clients buying, selling, or renting properties in Spain. You can contact us by e-mail at info@larrainnesbitt.com, by telephone at our UK line (+44) 0754 3838 218 or Spanish line (+34) 952 19 22 88, or by completing our contact form.

Larraín Nesbitt Abogados, small on fees, BIG on service.
2024 © Raymundo Larraín Nesbitt. All Rights Reserved.

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8 reasons to buy property on the Costa del Sol

Raymundo Larraín Nesbitt, February, 7. 2024

Marbella-based Larraín Nesbitt Abogados (LNA) has over 21 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Featured: Marbella, Andalusia’s tourist flagship.

Article copyrighted © 2024. Plagiarism will be criminally prosecuted

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
21^st of February 2024

The Costa del Sol (Málaga) remains a prime location for the foreign worldwide community, attracting millions of visitors every year for a host of reasons collated below. Marbella, Málaga, Benahavís, Benalmádena, Mijas, Estepona, and more, are all household names in the real estate market.

Although a hike in interest rates has indeed taken a toll on the real estate market, the Costa del Sol’s unique advantages, listed below, contribute to making it a resilient market where properties stand to lose little, and gain much, with the turn of each economic cycle. The underlying reason for this is mainly the always high demand for accommodation in this sought-after area which in turn piles pressure on property prices, increasing year on year.

The Costa del Sol is an ideal place for Digital Nomads or Golden Visa applicants to settle in, alone, or with their families.

Eight reasons to buy property on the Costa del Sol

(Still) affordable property prices. When you compare property prices, they are still far cheaper by rapport to the United Kingdom. For the same amount of money that buys you a semi-detached in the UK in a poor location with no views, you get to buy a gorgeous villa on the Costa del Sol with commanding views over the sea, a mature garden, and still have money to spare on a property makeover! Then there is also the little fact that property prices are appreciating by two digits on the Costa del Sol. Life is all about choice.
A pleasant all-year-round climate. Whilst in Nordic countries, like the UK, you can expect 200 days of miserable rain, the Costa del Sol boasts 300 days on average of sunshine a year. This gorgeous weather is precisely what gives it its namesake. Light and warmth are never too far away!
Ultra-low taxation. As explained in our taxation articles, Andalusia’s new regional government is hell-bent on pro-low taxation. They have introduced significant tax breaks on buying property (almost) turning it into a tax haven. This political agenda translates into the lowest taxes in all of Spain, on Inheritance and Gift Tax, on Wealth Tax (was suppressed in 2022), on Property Transfer Tax, and Stamp Duty which were both slashed. So much so, that most taxpayers pay nil on IHT (including non-resident and non-EU taxpayers). Inherited estates under one million euros (per taxpayer) are tax-free for next-of-kin which includes both descendants (children) and ascendants (parents, grandparents). Over one million is taxed at only 1% on the excess. If you invest on a buy-to-let, landlords can save 70%, or more, on their tax bill. On long-term rentals, you can expect a net annual yield of 5%, on tourist rentals you can expect a net yield of 10%. Spain approved this month, besides a generous 5% increase to the minimum wage which applies nationwide, a personal allowance of €15,876 per taxpayer on income tax. In plain English, the first €16k you earn in Spain is tax-free. Yay!
A privileged lifestyle. The Costa del Sol spoils you for choice, as it caters to all tastes: whether you enjoy taking in its beautiful unspoiled scenery, wandering through its pristine mountains and Mediterranean pine forests, going out on a fancy dinner, practising sports, sunbathing on the beach, night-time clubbing for party owls, skiing (Granada is only a two-hour drive), or feeling the flutter of placing a wager (Marbella’s Casino), or simply chilling out al fresco sipping a glass of a fine Rioja while you watch a dramatic sky dusk against a dashing blue sea in good company. The Costa del Sol simply has it all!
Excellent modern connections. Malaga’s airport, Gibraltar’s airport, a modern rail network, modern highways, Malaga’s upgraded port, all help to connect Malaga to the modern world.
First-class amenities. Lavish restaurants, luxury shops, trendy designer boutiques, refined theatres, glam discotheques, 18 and 9-hole golf courses, international private schools, and exclusive yacht-filled marinas (Puerto Banus, Cabopino, La Duquesa, Sotogrande). Your problem is that won’t have enough time to enjoy it all!
Quality healthcare. Malaga offers several state-of-the-art hospitals that will cover your every health need. There are also specialised beauty medical facilities that assist enhancing your physique, because everyone deserves a little nip and tuck. For those in the know!
A vibrant cultural life. Malaga’s vast cultural offering spans from the Picasso Museum, Pompidou Museum, Carmen Thyssen Museum, Saint Petersburg’s Russian Museum, the bullring, to a slew of glam theatres, such as the trendy Teatro del Soho. Music concerts and refined classical music galas featuring world-renowned artists are all organized by Starlite during the long summer season. All these contribute to giving the Costa del Sol the lustre of a cosmopolitan venue. But if we dig deeper into its historical roots, history buffs will get lost in Malaga’s Roman and Carthaginian ruins, Augustus’ two-millennia-old amphitheatre and the imposing one thousand-year-old Moorish Citadel await to capture your imagination!

Are you ready to be spoiled? Invest and live on the Costa del Sol, live the dream!

Conclusion

Larrain Nesbitt Abogados (LNA) offers a competitive conveyance service. Our English-spoken lawyers and economists handhold you throughout the entire purchase procedure. We also assist you filing taxes and applying for visa or residency permits.

You can read here our free property guide kindly hosted by SPI.

You only live once, make the most of it.

“Action is the key to success.” – Pablo Picasso.

“La acción es la clave fundamental de todo éxito.”

Pablo Ruiz Picasso (1881 – 1973). Málaga-born, he was a Spanish painter, sculptor, printmaker, ceramicist, stage designer, poet, and playwright who spent most of his adult life self-exiled in France. Regarded as one of the most influential artists of the 20th Century, he is credited for co-founding the Cubist movement. A child prodigy, Picasso achieved universal renown and immense fortune for his revolutionary artistic accomplishments, becoming one of the best-known figures in 20th-century art. He was a prolific artist who left behind thousands of works of art. Perhaps his most iconic piece was the 1937 Guernica painting which depicts the horrors of war and foreshadowed the dark days of WWII (exhibited in Madrid, Centro de Arte Reina Sofía). Picasso was one-of-a-kind, une force de la nature, a towering artistic figure who casts a long shadow over every other artist that has followed in his wake.

Related conveyance services available from LNA:

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Ní neart go cur le chéile. Voluntas omnia vincit.

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How to discharge a mortgage loan in Spain

Raymundo Larraín Nesbitt, September, 11. 2023

Lawyer Raymundo Larraín outlines the procedure to cancel your mortgage loan in Spain attracting little to no tax.

How to discharge a mortgage loan in Spain

Marbella-based Larraín Nesbitt Abogados (LNA) has over 20 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of Septermber 2023

Introduction

The sharp rise of interest rates over the last 12 months, has prompted scores of borrowers to look into cancelling their Spanish mortgage loans. This is done to avoid servicing large monthly repayments.

Mortgages, besides their obvious purpose of financing a house purchase, have long been used by lawyers and accountants as a useful tool to reduce clients’ tax burden. With careful forward tax planning they prove extremely helpful to mitigate client’s overall taxes. It is for this very reason that even wealthy individuals (that do not really need them) actually apply for them to benefit from the lenient tax breaks available.

However, when an inflection point is reached of high interest rates – such as the one we are now in – clients are inclined to re-assess their tax planning strategy and lean to discharge them.

Additionally, on selling a property, a buyer, or his lawyer, will demand from the seller they cancel the existing mortgage loan. Properties need to be sold with a clean title.

With this in mind, in today’s article we give a brief overview on the procedure to fully discharge a mortgage loan in Spain. Unlike other countries, the conveyance procedure involved is not automatic and requires the input of a seasoned lawyer. You will need to instruct a lawyer to carry it out on your behalf (with a specific power of attorney, or POA). This is not a legal procedure that can be followed by laymen.

Preliminaries

Your lawyer, in use of a specific POA will contact your lender and start the procedure.

The bank needs to agree to it. The borrower is free to choose a notary of his choice to formalize the procedure. The legal representative will sign several documents with the lender. Almost every mortgage loan applies a small penalty for early redemption.

The borrower will finish paying off the balance presented by his lender, with penalty interests rolled on top.

Signing the deed

A bank’s representative will then attend the notary of choice and sign a deed fully discharging the mortgage loan.

In plain English, the property is now legally ‘freed’ from the encumbrance. But it doesn’t stop here.

Land registry

The notary deed then needs to be lodged. Once done, the property will appear as free of charges and encumbrances.

How long does it take?

Overall, you are looking at 2 to 3 months on average, always dependant on how fast a lender accommodates you.

Conclusion

Mortgage loans in Spain are not cancelled automatically when you finish paying them off.

Moreover, banks are perfectly content leaving a mortgage charge against a property indefinitely (as it improves their ratios in investor’s eyes), even when the mortgage was paid off long ago. Lenders are in no rush whatsoever to discharge them, and it takes the proactivity of a lawyer to gently nudge them time and again to cancel them over the course of several months. Without a shadow of a doubt, one of the most aggravating tasks that falls on lawyers, is precisely this; assisting borrowers to cancel them as there is a huge amount of red tape involved.

On paying off a mortgage loan, you ought to cancel your mortgage loan. Banks do not do this automatically.

On selling property in Spain, you need to cancel a mortgage loan. No buyer will acquire a property with an existing mortgage against it. A buyer cannot get a new mortgage on the property if there is already one showing up in the title, that is why it must be cancelled.

In a context of high interest rates, most financial advisors will recommend you to cancel them, avoiding hefty monthly repayments which in fact negate the tax benefit sought on the mid to long run.

Bottom line, whatever the reason for cancelling a mortgage loan, you need to hire a lawyer.

Larrain Nesbitt Abogados offers a competitively-priced conveyance service: Discharging a mortgage loan.

At Larrain Nesbitt Abogados (LNA) we have over 20 years’ experience assisting clients buying, selling, or renting properties. We can also offer you a competitively priced accounting service to file your landlord taxes every tax quarter nationwide. We are also specialized in taxation, immigration & residency visas. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88, or by completing our contact form to book an appointment.

Larraín Nesbitt Abogados, small on fees, BIG on service.

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10 reasons to invest in Spanish real estate

Raymundo Larraín Nesbitt, May, 2. 2023

Lawyer Raymundo Larrain gives ten reasons to invest in Spanish real estate.

You can review here our client’s testimonials.

Article copyrighted © 2023. Plagiarism will be criminally prosecuted

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of May 2023

10 reasons to invest in Spanish real estate

Store of value. In times of political and economic instability (war, stock market crash, global pandemic, bank runs, high inflation, etc), gold and real estate are king as traditionally they act as safe havens where savers shelter their money to weather the storm.
Staves off inflation. At a time when central banks have (irresponsibly) printed money to no end, vastly increasing the monetary mass which in turn has led to inflation spiralling out of control worldwide, real estate offers by contrast a placid solace to deposit your life savings. Savings sitting idly at a bank are devoured by rising inflation, losing value every year.
Tangible asset. Real estate is a tangible asset that you can touch, feel, and see any time of the day. This acts in sharp contrast to ethereal investments, such as cryptocurrencies and other intangible assets, which are really never under your control, hard to understand, and even harder to monitor.
Security. The laws in Spain offer property owners a solid legal framework which protects and upholds their rights as behoves a modern European democracy. In several regions of Spain (i.e. Madrid, Andalusia, Galicia, etc) inheritance tax and wealth tax have been suppressed. These regions have also slashed property transfer tax and stamp duty on buying property.
Capital growth. It’s no secret that real estate always appreciates in the long run. Unlike other volatile investments (such as stocks, bonds, and mutual funds) which undergo huge fluctuations, real estate offers a constant and gradual increase of value over time. Property prices in Spain have risen by 16% over the last five years (and even by two digits year-on-year in some sought-after areas, such as large cities (i.e. Madrid, over 40%) and coastal areas (i.e. Marbella, 40%). You really don’t need to invest in Bitcoin to strike it rich, just stick to the basics.
Generates passive income. Rental yields in Spain have soared by two digits over the span of three years. Spain is the world’s second tourist destination creating a huge pent-up demand for holiday accommodation. Investing in property, and collecting the rent, is indeed a (very) profitable business in Spain. For long-term rentals, you can expect a net yield of 5% per annum; for holiday accommodations it’s over 10%. They don’t call them ‘landed’ gentry for nothing!
Equity leverage. Investing in real estate allows you to leverage your equity over time. In plain English, this means that if you finance a property with an investment loan, the amount of money you borrow will eventually be less than the value of the property once it appreciates over time. After some years, you can refinance and use some of the additional equity to invest further in other properties. This strategy is ideal for investors who want to play it safe and adopt a long-term investment strategy, building up a healthy property portfolio over time.
Source of cash flow. Rented properties generate a constant revenue stream for their owners. Landlords may use the collected rent to pay overheads and other property maintenance expenses - including monthly mortgage repayments! In a nutshell, a well-chosen property pays for itself!
Generous tax deductions. Unbeknownst to most people, Spain offers lenient tax allowances which in effect reduce a landlord’s tax bill by 70%, or more (applies only to EU residents). You can offset all property maintenance expenses, including your lawyer’s fees (to calculate the rental tax) and mortgage interests! Once deducted, property offers great returns on investment.
Strong dollar vs. weak euro. This advantage is unique to those investors holding US Dollars. Due to the lacklustre and reactive performance of the ECB, the US Dollar has strongly appreciated against the Euro over the last months creating unique buying opportunities. In plain English, never before has Spanish property been cheaper and more appealing to savvy US Dollar holders. Not to mention that buying property opens the door to a coveted Golden Visa, which allows unfettered access to the Schengen Area (27 countries).

When you combine soaring rental yields and capital growth, you reach the conclusion that Spanish real estate is delivering a safe two-digit return year on year.

Be smart, don’t work for your money, make your money work for you.

If you take care of your money, it will take care of you.

Invest in real estate.

“One generation plants the trees in whose shade the next generation rests.” – Ancient Chinese proverb.

LNA offers the following tax & legal services:

“Los políticos no son necesarios, pero ellos nos convencen de que los necesitamos para resolver los problemas que, sin ellos, no existirían.”– Sanchez Dragó

Loosely translated as: “We don’t need politicians, but they go to great lengths to convince us we need them to solve all the problems that, without them, wouldn’t exist.”

Fernando Sánchez Dragó (1936 –2023). Was a Spanish writer and journalist. In his idealistic youth, he was an active member of Spain's Communist party; he was imprisoned a few times for his fierce opposition against Franco’s dictatorship. Later on in life, he would gradually gravitate towards a conservative line of thinking. He was a prolific writer who published over 40 books, and wrote thousands of articles. During his lifetime he received numerous literary accolades. A polemic figure, whose private life would fill multiple libraries, that never left anyone indifferent. It is challenging to label such a unique man, greater-than-life.

Sanchez Dragó died last April aged 87. He leaves behind a vast fortune, mainly in real estate.

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Eight pointers on buying property in Spain

Raymundo Larraín Nesbitt, April, 3. 2023

Lawyer Raymundo Larrain delivers useful pointers on buying property in Spain.

You can review here our client’s testimonials.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
1^st of April 2023

Introduction

You would never buy a property in your home country without instructing a solicitor or conveyancer, and yet a surprising number of people choose not to instruct a lawyer or legal representative when buying abroad. If anything, it is even more important to obtain good legal advice when buying overseas as it is highly likely that you will be unfamiliar with many of the key processes.

While it is possible to buy a property in some overseas jurisdictions, including Spain, without having to appoint a lawyer, it would be very unwise to do so. Buying a house is one of the biggest investments most people make in their lifetime. So why take the risk by not obtaining proper legal advice?

Eight pointers on buying property in Spain

Tenants. Unbeknownst to a buyer, on buying property, there could be tenants inside. The new owner takes on the legal position of landlord and must respect - by law - the duration and terms of any pre-existing rental agreement. You should know some rental agreements in Spain lock you in for ten years… and you cannot update the rental. Your lawyer can safeguard your interests in this event.
Utility invoices (water, electricity, etc). Outstanding utility invoices are a nuisance as utility companies may shut down the supplies. Reconnecting the electric supply, for example, can set you back 500 euros and you need to wait at least 4 weeks to top it off!
Community of Owners. Properties within a community can be in arrears. The new owner takes on all the debts dating back five years, which can be fairly substantial. Likewise, a new owner also becomes liable for all the pending community improvements (known in Spanish as derramas). In old buildings, that require much work and maintenance, these hidden debts are in the thousands i.e. replacing the lifts.
Local taxes. The property can be in arrears with taxes levied by the local town hall. In a worst-case scenario, the property can be impounded and sold off in a public auction to recoup the debt. The new owner is held liable for all taxes going back four years.
Report on Title. It is important to acquire a clean title. Mortgages, embargoes, liens, etc can weigh down on a property’s value. Nobody wants to buy a property with a charge against it, as it can be seized by creditors.
Community of owners that ban holiday rentals. A new trend is emerging in community of owners, whereby they agree to ban holiday rentals outright. There is no point investing in a fancy beach pad if you are not allowed to rent it out. It goes without saying that a property which cannot be leased legally has a substantially reduced market value as opposed to other ones which can.
Licence of First Occupation (LFO). Strictly speaking, a LFO should only be requested on buying off-plan property. However, nowadays it is being required even for resales. Buying a property without a LFO brings its owner serious problems that we collate in our article: Licence of First Occupation. For example, a property which lacks a LFO cannot get a mortgage loan against it. Meaning any potential buyer of said property must be a cash-buyer (it goes without saying they are few), which would greatly reduce the pool of prospective buyers, pushing back years the sales date.
Tourist licence. Most regions in Spain have passed stringent laws if you want to offer your property as a holiday accommodation. By law, it is mandatory you attain a tourist licence to offer your property in holiday platforms, estate agencies or private websites. Failure to comply leads to eye-watering fines. There is also the point that some regions in Spain (i.e. Balearics) go to great lengths to restrict and ban holiday rentals. Meaning not all properties can attain a tourist licence as some are located within areas which are zoned out for holiday rentals; that is banned outright by local authorities. It goes without saying that a property which cannot be leased legally has a substantially reduced market value as opposed to other similar ones which can.

In conclusion

I have only listed the basic eight, but you should be aware there are far more points to look out for (in the dozens). A seasoned conveyance lawyer will quickly pick on all the flaws listed above and advice his client on running a due diligence on the title. For reference, we offer a free in-depth buyer’s guide to buy property in Spain: Lawyer guide to buying property in Spain.

On buying property in Spain, you should be mindful the title is clean. It is fairly common the previous owner has fallen in arrears (maybe that’s exactly why they are selling!). In Spain, the golden rule is that debts follow the property, not the debtor. Meaning, when a buyer takes over a property, they also take on all existing debts from the previous owner! And this is not limited only to owed money, if a buyer, for example, acquires an illegally built rustic property on green belt land, the may be held criminally liable for the previous owner’s planning infractions. Planning infractions follow the property; whoever becomes the new owner, ‘inherits’ any outstanding planning problems and will be held liable for them.

Whilst it is true there is no legal obligation to hire a lawyer on buying property in Spain, it would be very foolish (and costly) not to do so. This is why we advise you to hire a reputed and independent conveyance law firm to carry out a thorough due diligence on the property ensuring everything is above board.

We assist clients all over Spain. Our friendly staff will be more than happy to have a chat with you.

LNA offers the following related tax & legal services:

“Eyes up Guardian.” – Lance Reddick

Lance Solomon Reddick (1962 – 2023). Was an American actor and musician. He was best known for playing Cedric Daniels in The Wire (2002–2008), Phillip Broyles in Fringe (2008–2013), and Chief Irvin Irving in Bosch (2014–2020). In film, he was best known for starring as Charon in the John Wick franchise (2014–2023) and David Gentry in Angel Has Fallen (2019). He was also known for portraying Detective Johnny Basil on Oz (1997–2003), Matthew Abaddon in Lost (2004–2010), and Albert Wesker in the Netflix series Resident Evil (2022). He provided the voice and likeness for video game characters Martin Hatch in Quantum Break, Sylens in Horizon Zero Dawn and Horizon Forbidden West, and Commander Zavala in the much-acclaimed Destiny franchise. He will be sorely missed.

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Buying property in Spain

Raymundo Larraín Nesbitt, September, 9. 2022

Lawyer Raymundo Larrain gives us a brief overview on buying property in Spain.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 19 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of September 2022

Introduction

September marks the end of the summer and the start of autumn. Autumn is the high season for property purchases. Traditionally the best months for property sales are September, October, and November.

As we have highlighted in multiple articles over the last two years, there is a property boom ongoing in Spain. Property prices have strongly rebounded post-pandemic.

Capital appreciation has risen by 8.5% for resale property across the board and over 10% for new builds (off-plan). In coastal areas, and large Spanish cities, it’s actually a two-digit property rise! Bottom line, property prices have risen in Spain reaching all-new highs!
Rental yields are also growing by two digits year-on-year. Long term lets offer a net yield of 4.5% per annum, whereas short-term rentals (holiday homes) are far more profitable, delivering a two-digit return.

Pro-tip: The combination of both capital appreciation and soaring rental yields translate into a combined yield of over 10% per annum! No other safe investment offers such high returns.

In some regions of Spain, regional authorities have (dramatically) lowered the taxes associated to buying property in a bid to foster an economic recovery post-pandemic. For example, Andalusia slashed by 20% its tax on off plan and from 13% to 30% in resales (contingent on the asking price; the higher the price, the more tax you save). Indeed, it’s a great moment to seize the opportunity and save dozens of thousands in tax money!

Our law firm, Larraín Nesbitt Abogados, published a detailed (free) guide to buy property in Spain. Simply follow the link supplied: Guide to buy property in Spain

Conclusion

Spanish real estate is poised for combined two-digit gains over the next year, interest rate fluctuations notwithstanding, easily trumping alternative investments (bonds, commodities, cryptocurrencies, gold, etc) and paltry fixed returns in a context of historic ultra-low interest rates.

If you are thinking of buying (or selling), please contact us. We have 20 years’ experience buying & selling property. Our friendly staff can guide you safely through the procedure.

We offer this service:

Conveyancing in Spain – Buying

Larraín Nesbitt Lawyers, small on fees, BIG on service.

Larraín Nesbitt Lawyers is a law firm specialized in conveyance, taxation, inheritance, residency, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.

Article also published at Larraín Nesbitt Abogados: Buying property in Spain

“If you are not moving forward, you are moving backward.” – Mikhail Gorbachev

Mikhail Sergeyevich Gorbachev (1931 – 2022). Was a Russian statesman who served as the last leader of the Soviet Union from 1985 to the country's dissolution in 1991. Domestically, his policy of glasnost ("openness") allowed for enhanced freedom of speech and press, while his perestroika ("restructuring") sought to decentralize economic decision-making to improve its efficiency. Internationally, he avoided WWIII and nuclear armageddon, in tandem with US President Ronald Reagan, on kickstarting the most ambitious denuclearization treaty to date (START). Despite being broadly scorned in his home country (because he proved instrumental in dismantling the dreaded U.S.S.R. empire and the collapse of the Iron Curtain), the West, and most of the free world, widely regards him as one of the greatest Russian president ever. Gorbachev was a peacemaker who brought freedom and democracy to one of the greatest countries in our planet. In 1990 he was bestowed the Peace Nobel Prize. He left our world a better place.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal and/or financial advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

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Sotogrande, the pearl of Cadiz

Raymundo Larraín Nesbitt, June, 6. 2022

Lawyer Raymundo Larrain sheds some light on what makes Sotogrande special and why you should buy property there.

You can review here our client’s testimonials.

Inset photo: The 40th anniversary of Sotogrande’s Gold Cup where team Las Monjitas defeated team Ellerston 11-9. Rider: Fran Elizalde

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8th of June 2022

Introduction

Continuing on last month’s trend (Where to buy property on the Costa del Sol), I thought it would be appropriate to write on this ‘hidden’ gem. Sotogrande doesn’t really need an introduction - much less from me - but I need to begin my article somewhere, and the beginning is always a good place to start.

Sotogrande, to many of us this word evokes images of unspoiled sandy white beaches, unending forested areas, superb views at dusk against a dashing blue sea, free roaming horses on green fields, and luxury secluded villas. To be honest, every time I’m there, it strongly echoes the Marbella of the 70’s I once knew, unblemished and blissfully underdeveloped.

Sotogrande has a very low building density by rapport to neighbouring towns, with very few constructions actually reaching two stories high. The plots of land are huge, allowing nature to take over. It belongs to the Andalusian province of Cadiz. Meaning all the lenient tax breaks and allowances I have collated in previous taxation articles apply, making Sotogrande an area of ultra-low taxation.

Sotogrande, by Spanish standards, is a very unusual place and that is good! If you take a moment to drive through its wide avenues, you can’t help but notice it bears an uncanny resemblance to a US leafy suburb; you would be forgiven if you thought you were in the US, and you would in fact be right. Col. Joseph Ralph McMicking, a retired US serviceman, bought in the 60’s several adjacent plots of land and set about developing them devising a huge housing estate reminiscent of Boston.

As a result of his ambitious overarching vision, through sheer force of will, this forerunner developed a very exclusive estate that stretches lazily from the coast all the way up to the gentle mountain slopes, adjacent to land earmarked by the Spanish Army where building is banned. This results in a huge estate that is cleverly surrounded by green belt land. This sprawling estate is dotted with lakes, lush forested areas, 18-hole golf courses (such as the Real Club Valderrama, which hosted the Ryder Cup in 1997), and a top private school. Sotogrande is renowned for its beautiful and elegant polo matches during the elegant summer soirees.

If you are the kind of person that shies away from the bling and glitz of sister upcoast resorts, and rather place value in discretion, choice, and exclusive gated communities that keep to themselves, Sotogrande is right up your alley. Sotogrande’s game, unlike other tacky neighbouring coastal resorts, is not about distasteful antics showing ostentatiously what you have, but rather, about enjoying what you have. It is home to discreet affluent individuals from all over the world.

Sotogrande is split broadly into three distinct areas, which I’ll gloss over.

Sotogrande Bajo

This is the part of the estate that borders the coastline. You will find lavish mansions built in huge independent plots of land. Its wide sprawling avenues, with green sidewalks that make them distinctive, are dotted with impossibly tall palm trees that look taken straight out of a postcard from Miami Beach. What they lack in views is compensated by vast plots of land.

Sotogrande Alto

This is the part of the estate that sprawls over the gently rolling green hills with commanding views over the Atlantic coastline and Gibraltar. Impressive views are guaranteed at dawn & dusk. No palm trees here, it’s a leafy suburb. A mantle of evergreen lush vegetation covers the ground whilst a mature canopy, that belongs to the Atlantic climate, provides a welcome respite of shade. You will find multiple impressive gated estates within, such as La Reserva, where discretion is cherished, mum’s the word.

La Marina de Sotogrande

Strictly speaking, it’s located within Sotogrande Bajo. But it has such a distinctive personality, that it warrants being featured as its own space. This is where the port is located, Sotogrande’s main social hub and its vibrant heart. Its unusual bright pastel colours, Moustique like, catch visitors’ eyes. Most homes boast their own private moorings, door-to-door, much like in Venice! The marina is lively and vibrant, dotted with glam cafes and trendy restaurants that cater to all tastes where one can mercifully rest his weary bones basking in the warm sunlight, sipping a coffee, whilst watching life gently passing by; with younglings amorously courting each other, against a backdrop of sailboats and luxury yachts, in a never ending cycle that only gets interrupted, from time to time, by the bickering of seagulls flying overhead.

Sotogrande International School (SIS)

To close, I need to mention a school that was our feared sports rival when I studied in Marbella a long, long time ago.

Nestled high atop the mountains, surrounded by tall pine trees, lays a school with commanding views of the coastline (you’ve got to see the view at the crack of dawn, simply gorgeous) that is one of the finest private schools in all of Spain, directed by Mr. James Kearney.

Once again, I don’t really need to introduce what in time – and by its own merits – has become a renowned academic institution. The syllabus followed is the International Baccalaureate. The school attracts students from all over the coast, not only from Sotogrande, that flock to receive a privileged education from a passionate and dedicated faculty. They have recently built dorms so students can reside on campus during the academic year.

A special shout-out to teacher Mr. Carmelo (Tino) Sanchez, Head of IT, whose indelible passion for teaching his students cutting-edge ‘engineering’ courses, designing and developing all types of ingenious aquatic devices in tandem with local companies, is so advanced that it borders a university course.

Because of its superb sports facilities and installations, which they continuously expand upon through the approval of its ever-watchful Board, it generously hosts every year sports events that gather schools from the area, and beyond. I myself attended several as a kid, representing first Swans School, and later on Aloha College. But we, the underdogs, held our own, and even managed to beat’em at some events, heh!

Did I mention the school’s beautiful views? Simply breathtaking!

Sotogrande, heaven on earth. Sans soucis.

“My main language was music, and my teacher was nature.” – Vangelis

Evángelos Odysséas Papathanassíou (1943 – 2022). Was a Greek musician, composer, songwriter, and producer of electronic orchestral music. He was best known for his Academy Award-winning score to the spiritual Chariots of Fire (1981), sci-fi noir films such as the mythical Blade Runner (1982), Missing (1982), Antarctica (1983), 1492: Conquest of Paradise (1992), and Alexander the Great (2004). He also left a mark for his masterful use of music in the 1980 documentary series Cosmos: A Personal Voyage by Carl Sagan. Vangelis was one of the greatest modern composers of our time whose magic music will echo down the ages, standing the test of time; a hallmark reserved only for a handful of artists.

Larraín Nesbitt Lawyers, small on fees, BIG on service.

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Guide to buy property in Spain

Raymundo Larraín Nesbitt, May, 3. 2022

Larrain Nesbitt Abogados publish a brief guide on how to buy property in Spain.

You can review here our client’s testimonials.

8^th of May 2022

Having bought and sold hundreds of properties, and with over 450 articles published over the last twenty years, it was long overdue Larrain Nesbitt Abogados published an in-depth guide on How to Buy Property in Spain. This has been a long-standing request from clients and SPI readers that we needed to fulfil.

Our practical guide will take you step-by-step through the process of finding and buying your dream home, with particular focus on the region of Andalusia. Whilst we have strived to help you to get the best result at every stage of the buying process, please understand this guide is only an approximation to the procedure and should not be construed, or taken, as a substitute for professional legal advice.

You can download our guide on PDF format from this link: Guide to Buy Property in Spain

Larraín Nesbitt Abogados, small on fees, BIG on service. At Larrain Nesbitt Abogados we have over 19 years’ experience buying, selling, and renting properties. We are also specialized in immigration & residency visas. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88, or by completing our contact form to book an appointment.

Related services:

Conveyancing in Spain – Buying
Conveyancing in Spain – Selling

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Tax breaks on buying property in Andalusia extended indefinitely!

Raymundo Larraín Nesbitt, December, 4. 2021

Lawyer Raymundo Larraín briefs us on the landmark tax changes recently approved by Andalusia’s regional government, which have turned the tables, making it the region with the lowest taxation in all of Spain, along with liberal Madrid.

Marbella-based Larraín Nesbitt Abogados (LNA) has over 18 years’ taxation & conveyancing experience at your service. We offer a wide range of over 50 legal and corporate services. Our team of native English-speaking lawyers and economists has a long track record of successfully assisting expats all over Spain.

You can review here our client’s testimonials.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of December 2021

To put it simply, now is the right time to buy (or sell) property in Andalusia, period.

Feel free to skip the rest of my article below.

Introduction

As we’ve been hammering in previous articles, there has never been a better time to buy property in Andalusia than now. A series of factors have coalesced to the point it has created unique buying opportunities. I can only think of 1998 (which kickstarted the longest real estate bull market that Spain has known to date, lasting a full decade) as a comparable situation to the one we are now living.

2021 was poised to be one of the worst years in record in Spanish real estate sales. The virus’ financial aftermath proved devastating, nothing seemed to withstand in its relentless wake.

And that’s when – least expected of all – Andalusian politicians stepped in saving the day.

Andalusia’s regional government took the bull by its horns and approved in April of this year a taxpayer’s aggressive relief package to combat the adverse consequences brought about by Covid-19. These included, amongst many others, drastic tax cuts on buying property, both off-plan and resale. The two most notable tax changes, from a real estate perspective, were a 20% reduction in Stamp Duty (off-plan property) and the simplification of Property Transfer Tax into a single flat rate of 7% on buying resale property (which translates into massive savings ranging from 12.5% to over 30%, contingent on the sale price as this tax followed a sliding scale). In plain English, huge tax savings for property buyers.

But there was a catch. These lenient tax breaks from April 2021, conceived to combat the pernicious effects of Covid-19, were time-gated. Buyers only had until the 31^st of December 2021 to take advantage of them.

That was until the Junta de Andalucia passed its new Law 5/2021 of 20^th October. In effect, what this pivotal law did was to make these tax breaks permanent, indefinite. No longer are these tax breaks subject to an end-of-year deadline. On approving this law, the Junta have in fact extended the tax breaks into 2022, and beyond.

But the significance of this new regional law doesn’t only stop at Stamp Duty and Property Transfer Tax cuts. That’s just scratching the surface. It also extends to drastic cuts in Inheritance Tax (yes, again!), IRPF (personal income tax), Wealth tax, and a long etcetera.

Frankly, I would need to publish a couple of taxation articles every month only to keep abreast with all the taxes they keep tweaking, lowering or downright suppressing in a trend which remains unabated since 2019. Kudos to them.

I normally criticize Spanish politicians a lot in my articles, for which I make no apologies, but on this occasion, I take off my hat to what they are doing in Andalusia, because they are doing what’s right for the economy, and ultimately what’s best for the people.

What do these tax changes spell out for the real estate market?

Basically, it’s a win-win.

On the one hand, the Junta de Andalucia, and by extension all the inhabitants in this region, benefit from lowering taxes as this, paradoxically, increases the tax revenue. Hang on, you may be wondering, how on earth can they increase the revenue flow if they are cutting down taxes drastically left, right and centre? Well, the previous administration, which had been in power for almost 40 consecutive years, had extremely high taxes in place. On drastically lowering taxes – to more reasonable levels in line with fellow European countries – it has now levied an extra 600 million euros a year because of the increase in economic activity! Madrid too lowered its regional taxes, and as a result also raked in billions of euros in additional revenue proving – once more – that lowering taxes is the right path to attract foreign investments, foster job creation, and generate wealth for society at large. In Economic Theory, we know this as the Laffer Curve, after reputed US economist Arthur Laffer. This increase in additional tax revenue translates into the Junta offering better services to all its citizens and reducing public indebtment.

On the other hand, taxpayers and property buyers, likewise reap the rewards of a low-taxation environment. Taxpayers pay significantly less taxes having more purchasing power available to spend, propping up the economy. In a post-vaccination scenario, this is really being noticed as more and more people spend their extra money in amenities, boosting the overall economy. As for property buyers, well, that’s easy, you pay significantly less taxes on buying property in Andalusia! It ain’t rocket science.

One of the winners of this liberal fiscal policy is the real estate market, no doubt, but ultimately society as a whole, as this property bonanza translates into the creation of more jobs, which in turn creates wealth, and attracts even more foreign investments creating an upward spiral.

In effect, these generous tax breaks on buying property from April 2021 have created a property boom in Andalusia, as we wrote here: Andalusia: now is the right time to buy property – 8^th October 2021.

Permanent real estate tax breaks in Andalusia

Off Plan (Stamp Duty): 20% discount on Stamp Duty Tax. Tax rate is now a flat 1.2%.
Resale (Property Transfer Tax): tax savings range from 12.5% to 30% (or more) on Property Transfer Tax, hinging on the sales price. Tax rate is a flat 7% on any sale price.

Of particular interest are the tax cuts in resale property. The gist is that the higher the sales price, the more tax a buyer stands to save. With numbers:

On a €500,000 sale price, the tax savings are 15%.
On a €3,000,000 sale price, the tax savings are 27%, and so forth.

In short, simply spectacular for high-end property. This has prompted a tidal wave of villa sales, the press reports 573 villas are selling a day in Spain!

Yes, but what about Spain’s new Housing Act? Surely that’s a spanner in the works!

Actually no, it is not. Last month I published a scathing article on this new law. On the bright side, as I pointed out in the article itself, this pernicious law will not be implemented in Andalusia because regional governments have devolved competencies on housing matters.

This means that while other regional governments in Spain will gladly embrace the hardships of a planned economy (increasing property taxes, fining landlords, dictating at what price you can, or cannot, rent out your property, extending tenant evictions) in Andalusia we will continue to enjoy economic and personal freedom, which translates into attracting even more foreign investments, spurring job creation and wealth.

Spain’s new housing bill will, unfortunately, fracture and polarize Spain furthermore, into two regional tiers: investment-friendly and those regions which are not. It’s an insidious side effect I cared to point out in the article’s conclusion, but it will not impact Andalusia one iota, nada.

If anything, Spain’s new Housing Act will only contribute to consolidate Andalusia’s status as a tier 1 tax region; an investment-friendly region which boasts an ultra-low taxation that attracts foreign investments and property buyers from the world over.

8 reasons why you should invest in Andalusia

Ultra-low taxation. As we’ve covered in previous articles (Andalusia lowers Property Transfer Tax and Stamp Duty), early on this year Andalusia drastically reduced the taxes on buying property, to the point we have never seen such low taxes in this region. Furthermore, the tax breaks on buying property have now been extended indefinitely, so they are no longer time-gated. The Junta de Andalucia has also approved a batch of measures to also cut down several other taxes (Inheritance Tax, IRPF, Wealth tax etc) turning Andalusia de facto into an ultra-low taxation area, along with Madrid. In plain English, Andalusia and Madrid are now the two areas where you pay fewer taxes in all of Spain. And last I checked, Madrid had no beach, so the choice is easy. To sum up, the continued landmark tax changes implemented by the new regional government since April 2019 (lowering, negating or suppressing them) are so eventful they have ushered in a new era of wealth-planning in Andalusia.
Ultra-low interest rates. Interest rates are sitting now at an all-time low, which enables would-be buyers to secure cheap loans (fixed interest is your best bet if the ECB hikes the interest rate in the future to offset a spike in inflation). Bank loans become ‘cheaper’ as inflation rises, as you actually owe less money to your lender (in real terms).
Pandemic & Brexit induced price reductions. The ongoing pandemic and Brexit have forced sellers to reduce their asking price creating once-in-a-lifetime buying opportunities for savvy investors.
Property boom. Andalusia is in the midst of a property boom, since April’s huge tax cut, that has prompted a rise in property prices, specifically in coastal areas. Property is appreciating an average of 8% p.a. in coastal resorts and gathering pace. In some exclusive locations, such as Marbella, property prices have already risen by over 30% over the last two years. More on this property bull market here: Andalusia leads house price boom triggered by Covid.
Spike in inflation. In a financial context of a sharp rise in inflation, having your money stuck in a bank is a losing proposition. In an inflationary environment, such as the one we are in, money depreciates fast losing its value day-to-day. Finance experts agree that a smart way to hedge your savings against rising inflation is to take on a mortgage loan and invest in real estate to avoid losing purchasing power over the long run as bank deposits devalue over time with high inflation. Although Financial Authorities, the world over, are quick to point out this surge in inflation is merely transitory, and bend over backward to downplay the situation and assuage our fears (or is it really theirs?), the fact is that new virus strains emerge all the time; such as the new South African one from last week which caused worldwide mayhem. Meaning disruptions in the supply chain are here to stay and we need to factor this in over the long run; which implies that inflation is also here to stay, at least for several years. Taking on a mortgage loan and investing in real estate was the key strategy that many savvy investors followed in the 70’s, during a time of high inflation, which in hindsight made them very rich.
Buy-to-rent. Annual rental yields are over 5% net. If you also add on top the capital appreciation (point 4 above), you are looking at a safe investment that is netting you over 10% p.a. risk-free. No other safe investment offers you such yields in a context of an underperforming bond market. In addition to this, the Spanish Tax Office offers lenient tax breaks which on average reduce landlord’s tax bills by 70%, or more (if EU-resident). A landlord can offset most, if not all, of their property-related expenses, vastly reducing their income tax on buy-to-lets (i.e. holiday rentals). More on this topic in my articles: Rental prices soar for 5th consecutive year in Spain! and 8 Tips for Buy-To-Let Success in Spain.
Pound rally vs. Euro. For our UK readers only, following up on point two above, expectations are high the BoE will raise the interest rate to combat the pernicious effects of inflation. In anticipation of this move, the pound rallied, since April this year, appreciating significantly against the Euro. This translates into UK buyers having greater ‘purchasing power’ on buying euro-denominated property. In plain English, any property in euros becomes much cheaper for sterling pound purchasers.
Gorgeous weather. I know, it’s so cliché, but I had to tack it on, soz. Andalusia boasts 330 days of sunshine a year. After having spent years working in the UK, under dull grey skies and non-stop rain, I can only say it’s pure gold.

The point being, is that if you are thinking of buying property in Spain, and you like to pay little to no taxes, think Andalusia.

Can you really afford to miss out on a new property boom?

At Larrain Nesbitt Abogados we can assist you buying & selling property in Spain and deal with its taxation. Ask us.

Larraín Nesbitt Lawyers, _small on fees, BIG on service.

“Yo no voy a bajar impuestos, un socialista no baja impuestos (nunca). Esas recetas del neoliberalismo son ya historia. Está demostrado científicamente que la Curva de Laffer es una falacia.” – Luis Ángel Hierro Recio

Loosely translated as: “I’m not going to lower taxes; socialists don’t lower taxes (ever). These are neoliberalist ideas which are phased out. It is scientifically proven that the Laffer Curve is a fallacy.”

Luis Ángel Hierro Recio (1963). Ph.D. in Economics at the public University of Seville. Teacher of Economic Theory at Seville’s public University. Director of LL.M. in Urban Planning. Board member of the public University Pablo Olavide. Ex-congressman for Andalusia. He bid for the leadership of his political party in Andalusia and attained 5.51% of the ballots.

Mr. Hierro has never worked a day in his life in the private sector, devoting all his professional career to the public sector, paid for with our taxes.

Legal services available from Larraín Nesbitt Abogados:

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Article originally published in Spanish Property Insight: Tax breaks on buying property in Andalusia extended indefinitely! – 8th December 2021

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