Cloudnine Spain Blog

The Buying Process Explained with Alex Radford of My Lawyer in Spain

The Buying Process Explained with Alex Radford of My Lawyer in Spain

Spanish lawyer and property expert Alex Radford of speaks with Sean Woolley, Managing Director of Cloud Nine Spain to offer a run-down of the process of buying a property in Spain and why it is important to hire a lawyer.

Listen to the podcast version here

Link to the youtube video here

Sean: Hello there. My name’s Sean Woolley. I’m the managing director of Cloud Nine Spain. With me, I have Alex Radford from My Lawyer in Spain.

Alex: From My Lawyer in Spain, yeah.

Sean: Very good. Nice to have you along. I thought it was a good opportune time of the year to get Alex on board to have a chat with him about all things legal. So there are various topics we want to cover, and I thought we’d start, Alex, with just running through first of all, the basics. So if I’m with a client and I’ve found the perfect property for them, they’re in love with it. What happens next? They should come and see you, shouldn’t they?

Alex: Really, yeah, I mean we like to see clients before they come to Spain, so we can put in place, we can talk to them about the buying process, find out who’s going to buy it, who’s going to own it, what percentage. If, for example, they’re going to apply for a Golden Visa or not, to have that conversation up front. So it’s always good to kind of have some preparatory talks before they actually find a property. But once they found a property, we’ll have those kind of conversations and arrange to sign a power of attorney. Power of attorney is a document that authorizes us to act for them in Spain. With that, we can apply for their Spanish tax numbers, the NIE numbers. And then at the same time, we would typically, an estate agent wants the client to put a deposit down, reserve the property, take it off the market. So we would negotiate points and clauses in that contract.

Sean: Okay.

Alex: Yeah, for example, is it subject to survey? Do they require finance, et cetera?

Sean: Okay. That’s great. So you are happy to speak to clients and liaise with clients before they even come to Spain then? That’s part of the service that you offer.

Alex: Yeah.

Sean: And I guess it helps you to get to know them, they can get to know you, they can cover any of those issues that maybe would be covered in a normal face-to-face meeting.

Alex: Absolutely.

Sean: So how would you do that? On Zoom or?

Alex: Yeah. So this week, Sean, I met some clients on Zoom. They’re coming out to Spain on Friday and I just talked to them about the buying process. So they’re going to come along, they’re going to visit lots of properties, and I said, you know, “Visit those properties morning, noon, and night. Ask the estate agent why the sellers are selling, how long the property’s been on the market for, if they’ve accepted or rejected any offers”.

Sean: Yeah.

Alex: You know, and also we’ve got a checklist on our website, a buyers’ checklist, I encourage clients to download that and those kind of questions, does it have a licence of first occupation? Is it all registered? Just to kind of filter out some of the properties that might not be squeaky clean. Obviously, there’s always a solution to those properties that might have had a swimming pool added or a garage added, which aren’t on the deeds, but just to kind of home in on exactly what people want.

Sean: Okay. Perfect. And when it comes to a deal being brokered and an agreement is in place and they need to choose a lawyer, how should they choose a lawyer? I mean, obviously I know you are very active in your marketing, but is there a particular thing that they should watch out for? Should they go to the guy in the bar who says he’s a lawyer? Or should they, how would you choose one?

Alex: Well, I’d absolutely not go to the lawyer in the bar, unless it’s me sat there at the end of the bar.

Sean: Of course, with a gin and tonic.

Alex: With a gin and tonic, yeah. So no, basically I would say again, that’s part of research. So just as, this is an important decision. So they’re coming out to Spain, they’re buying a property, choose your estate agent carefully, choose your lawyer carefully. Have a look at testimonials and websites. Make sure that those lawyers are in the area, they specialise in property purchases or sales. So specialists in conveyancing, they speak your language. You know, that’s so important. The amount of times clients have come to us after, “I’m so glad we’ve come to you because our Spanish lawyer didn’t speak great Spanish”.

Sean: Yeah, yeah.

Alex: Yeah. I’m a bilingual English Spanish speaker, English solicitor, Spanish lawyer.

Sean: Right.

Alex: And the lawyers in our office are totally bilingual, English Spanish. So the language is really important. And also, we will confirm costs in writing to the clients. So we’re going to say that this is how much you’re buying for, these are the overall costs of purchasing. So they know how much they’ve got to, because some people are surprised that you’ve got to pay transfer tax on top of the purchase price.

Sean: Yeah, yeah. We’re going to come onto that. Because the other thing, I mean, I’ve recently had dealings with lawyers in London and conveyancing lawyers, and what I always find different to lawyers here is the fact that lawyers here, it feels like they’re representing you and your interests. Whereas in England, it feels like they’re just ticking boxes and it’s more of an admin role to make sure that the transaction is legal.

Alex: Yeah.

Sean: It’s more about compliance sometimes, isn’t it, in the UK?

Alex: But we still do that here, Sean. So we still, when we’re looking at properties for clients, we want to know, is furniture included? Is it all registered? Has it got a licence for first occupation? If not, why not? Asking maybe for a certificate from the town hall confirming there’s no breaches of planning permission. So all those, we still go through our box ticking, but I do feel it’s a more personalised service.

Sean: Yeah, I think it is. I think it is.

Alex: Than other countries, yeah.

Sean: And in terms of what the lawyer actually does here, because you always get a client, “What does the lawyer do? Why can’t I do it myself?” What is the lawyer’s role in all of this?

Alex: Yeah, so the lawyer’s role is actually to look after the buyer’s interests. So one, it can be quite a hassle to apply for the NIE number, that’s kind of a bureaucratic process. We can do that for them. We take that stress out of it. In effect, once the clients have signed the power of attorney in our favour, we can take care of everything. So we can open a bank account for them. We’ll carry out searches on the property. We apply for land searches in English and Spanish. I think that’s an amazing thing that the Spanish land registry allow us to do that. We’ll check the cadastral reference, the description on the cadastral reference to the land registry. We’ll check the value, which has become the taxable value, which has become quite an important point.

Sean: Yeah.

Alex: We just need to make sure the taxable value is underneath the purchase price. Otherwise the clients have to pay the tax at the taxable value. So we carry out the searches on the property, make sure there’s no charges, et cetera. And if there are, then those costs will get deducted from the legal, the overall purchase price.

Sean: Yeah.

Alex: But we’ll prepare a legal report for them in English. So we package all the documents up, send it to them, the clients review that. If we are happy and they’re happy, we would then exchange contracts and the clients, if they’ve paid the reservation fee already, typically they would then pay the balance of 10%, and then we set a date for completion. And so the lawyer carries out all those checks initially, then furnishes the notary with the documents, asks the notary to carry out various checks as well, land searches, and then we all go to the notary, we agree the fees and the costs. So we agree the balance of the purchase price and the money to be paid.

Sean: Yeah.

Alex: So to speak. So if there are debts, that comes off and then we take a check.

Sean: So if money is owed to the mortgage company or the community if they haven’t paid their fees for six months, all that comes off before you have title to the property. So you are effectively getting clean title.

Alex: Exactly. So most properties people buy in Spain, it’s freehold.

Sean: Yeah.

Alex: And then for example, like you said, if they’re buying on a community, then they become a shareholder in the community of owners.

Sean: Okay.

Alex: But yeah, so in effect, we’ll provide all those services. There is quite a lot, and in addition, because most of our clients are international clients, we’ll open a bank account for them, we’ll apply for a quote for home and contents insurance. We’ll put that in place. And after completion, we’ll set up direct debits for water, electric, town hall rates, community fees if applicable, so the whole service. So, once they’ve found a property with yourselves, we can then take over.

Sean: And they don’t actually need to be here for anything more. If they’re giving you power of attorney, you can sign, I mean they can sign the contracts themselves, but in terms of being there at the notary on completion, you can take all the hassle away.

Alex: Exactly.

Sean: Because I know what it’s like you book next Tuesday for the notary, 10 o’clock and yeah, it comes and goes and you’re onto the Wednesday or the Thursday. So we often get clients saying, you know, “Should I come over for completion?” And we’re always like, “No”.

Alex: Yeah, yeah. No exactly. I think it’s great when clients come to completion.

Sean: Yeah.

Alex: But we kind of like going to completion with a power of attorney ’cause we can complete it almost, to a certain extent, in our own leisure without the pressure.

Sean: Yeah, yeah.

Alex: But what I will always say to the clients is, “Come out and aim to collect the keys about an hour or so after the notary”, because you know.

Sean: Go and have a coffee.

Alex: You know when you go in the notary, but you never know when you’re going to come out.

Sean: That’s it. You can often get a lock-in at the notary, which is bad news, but when the door’s shut and you’re still there, then you know you’re in for the long haul.

Alex: Yeah.

Sean: What’s the difference between buying a resale property, so something that’s already been built and been used and occupied before, and on a new development? Does your work change?

Alex: Yeah, it does. It does slightly because when you buy a resale property, you pay transfer tax and depending on the region you buy in Spain, that transfer tax varies. So, Andalucia, it starts at 7%, other regions it is kind of eight, nine, 10%. If you buy a brand new property, you are buying off-plan and what we want to check is that the developer has got planning permission and they’ve got bank guarantees in place, so that if they did not complete the build, you’d be able to get your monies back, that you pay during the build process. So in effect, when you’re buying off-plan, we carry out an initial check to make sure they’ve got those two documents, the planning permission and the bank guarantees, and of course the contract. And then when you get closer to completion, a year or two years later, we then see that the developer’s declared the build, registered all the properties at the land registry, that they’ve built, the architect’s signed off for them, there’s a tenure insurance policy in place. We get the booklets for water, electric, and then we obviously we can connect, once they’ve signed off the build, we can then connect the water and the electric. So there’s two stages of due diligence really, when buying off-plan. And the main difference on buying off-plan is that it’s slightly more expensive because you pay VAT at 10% and stamp duty between one and one and a half percent. In Andalucia, it’s 1.2%.

Sean: Okay. So as a rule of thumb, the total purchase costs when buying a resale, when you include your fees, notary fees, land registry fees and the 7% transfer tax, that would come to what around nine, nine and a half percent 10%?

Alex: Yeah, exactly. So I’d say if you’re buying a secondhand property, 10%, you should have change.

Sean: Yeah.

Alex: If you’re buying a brand new property off-plan where you’re paying that VAT at 10% and stamp duty 1.2, I’d say you’re looking at 13, 14%.

Sean: Okay, okay. So you’re paying VAT instead of the transfer tax, so you’re paying 10% instead of the seven and then you’re paying a little bit of stamp duty as well.

Alex: Yeah.

Sean: Okay. You mentioned at the start about power of attorney.

Alex: Yeah.

Sean: Is that something that you always recommend to your clients? Because I’ve heard people say, “Oh I don’t want to give too wide a power to a lawyer because they can go and do anything, they can go and buy and sell anything”. Do you limit the power you have or is it up to the client?

Alex: It’s up to the client. But typically it’s a general power of attorney, quite wide ranging. So we can open a bank account for them, we can ask for checks and monies to be taken out of their bank account for completion because what we ask the clients to do before completion is for all monies to go into their bank account and then we take the checks out for completion. But remember we’re professional lawyers. We’re regulated by the Law Society here in Spain and we’ve also got professional liability insurance in place and we send letters of instruction to the clients and any monies that we take out, we always ask for authorization to do so. But you’re right, it can be quite wide ranging and if someone’s not quite happy with that, we’re happy to limit it. We have had situations whereby we’ve had a power of attorney just limited to buy this certain property or that the power of attorney expires after a year.

Sean: Okay.

Alex: That sort of thing.

Sean: Okay.

Alex: So we can do that. Generally speaking, I’d say don’t limit it, trust your lawyer and if you don’t trust your lawyer, then maybe reconsider buying property in Spain.

Sean: Well, yeah, there is that. And in terms of the power of attorney, how much does it cost and how easy is it to do?

Alex: Yeah, so basically, so we’ve got someone arrived yesterday, so can we do the power of attorney tomorrow? Great. 24 hours. Literally, people turn up on our office Sean, and say, “Look, can you put a power of attorney in place?” Of course, I say, “We can”. Off the notary. We’re in the centre of Marbella and there’s a selection of notaries that we use and we can have a power of attorney within hour or two.

Sean: Okay. Okay.

Alex: And then that costs, the notary costs are about a hundred euros. And then what we do up upfront is, we would charge 303 euros for that power of attorney and then we would apply, if it’s a couple buying, we’d apply for the NIE numbers.

Sean: Okay.

Alex: And each NIE number is 95 euros. So in effect, our fees for the power of attorney and two NIEs are 495 euros and people then are ready to buy.

Sean: Yeah.

Alex: So I’d always recommend that they put that power of attorney in place, either in their home country, or here in Spain, so they’re ready then to crack on with the purchase. And then notary fees are about 100, 150 euros.

Sean: And worst case scenario is, if they don’t proceed to a purchase on that trip, at least they’ve got the power of attorney there, so.

Alex: Yeah.

Sean: If something comes up on the market in a few weeks’ time or a few months’ time or they come back, at least they’ve done that legwork.

Alex: Exactly.

Sean: And it’s still there.

Alex: If clients can sign the power of attorney in their home country, that makes it easier for everyone concerned and involved in the process because that means they come to Spain and they can concentrate looking for a property.

Sean: Yes.

Alex: And not worry about having to go to a notary because actually for a notary to sign the power of attorney, it can take half an hour, an hour, an hour and a half, it depends. But if they’re here for a short period of time looking for properties.

Sean: That’s four properties.

Alex: That’s four properties, yeah. There you go.

Sean: That’s great. And in terms of your ongoing services, so once somebody’s bought a property, can they ask you to help with filing tax returns and doing whatever they need to do to, to satisfy the local and national?

Alex: Yeah, so much of it depends on if they become a resident and spend more than 183 days in Spain in a calendar year, then obviously we can help them with the residency process. If it’s just a purely a lifestyle purchase, and they’re not going to treat it as their main residence, then the year after purchase, they pay what’s known as the non-residents income tax and we help them with that, yeah. And, generally it’s hundreds of euros, not thousands, yeah.

Sean: Brilliant. Alex, thank you so much. That’s a little overview of what happens when you want to buy a property here. You’ve found the perfect place and then you need the help of this guy.

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