Sale of Real Estate

There is a general belief that the sale of a property does not involve any major complications —it is enough to wait for the right buyer with a serious offer to appear, and then go to the notary´s office to sign the title deed of sale. Likewise, often clients think that they can take care of all the procedures by themselves, and that hiring a real estate agent or a lawyer is not really needed. And, sometimes, such is the case. However, everyday reality is very different from the abovementioned scenario. Most times, sale transactions involve even a higher level of complexity than the purchase of property.

The main reason is that —more often than we would like— the property does not meet specific legal requirements for its transfer, or the seller does not have the necessary documentation to prove that he/she is the rightful owner of the property and, therefore, that he/she is entitled to sell it. Other times, the actual physical reality (that is, the characteristics that define the property, such as surface area, interior partitioning, boundaries, cadastral reference, etc.) does not match the “official” information recorded by the corresponding public bodies (Land Registry, Cadastre Office, Collection Board, etc.).

Many sellers are unaware of those problems until they come to light as a result of the inquiries made by the buyer’s lawyer. Frequently, these irregularities are due to issues that remained unresolved when the original acquisition took place, to changes made to the property at a later point without the appropriate permits being granted, or to changes that were not duly recorded.

Be that as it may, the owner is legally bound to correct any anomalies that may affect the property before a sale can take place.

Should you decide to put the property on the market via a real estate agent, you need to know that in Málaga and Costa del Sol there are excellent professionals, with many years of experience, who will make it easier for you to market the property and find a buyer. They will also help you, for example, to prepare an inventory, in the event the house is sold furnished.

Even more, we highly recommend you to consider advice of a lawyer once a purchase offer is received —a lawyer should check, proofread, and verify any legal document before you sign it, such as the property reservation agreement or the recognition of fees for the real estate agent.

Reservation Agreement

As mentioned in the section Purchase of Real Estate, it is common practice for the person interested in acquiring a property to sign a reservation agreement as a first step. In general, this type of document is signed by the buyer and by the real estate agent on behalf of the seller. Its sole purpose is to formalize the buyer’s intent to purchase the property. Upon signing the reservation agreement, the buyer pays an amount that ranges between €6,000 and €10,000 and that is non-refundable, unless both parties state otherwise.

Once the reservation agreement is signed, the seller must take the property off the market. As a seller, your lawyer will then help you to collect all documents needed by the buying party in order to carry out the relevant inquiries about the property. These documents include copies of the property deeds, an updated extract (“Nota Simple”) from the Land Registry, First Occupation License, recent utilities bills (water, electricity, gas, etc.), certificate of the Homeowners Association, last IBI bill (Local Rates), and the Certificate of Energy Efficiency of the dwelling.

At this point, we provide our selling clients with a breakdown of expenses and taxes associated to the conveyance, so that they can know in advance —and as accurately as possible— what the net profit for the sale of their property will be.

The Private Purchase and Sale Agreement

Between two and four weeks after the reservation of the property is made, the private purchase contract will be signed. This document should already include in detail all essential terms and conditions of the transaction, such as a complete description of the property, its purchase price, a list of payments made and other pending ones, charges and encumbrances (if any), an itemized explanation of expenses derived from the conveyance, the reasons for which the contract may be terminated, the date when the deed will be signed, and the name of notary public selected, among others.

In Málaga, a 10% of the purchase price is usually paid by the buyer upon signing the private contract. The amount paid as initial deposit should be deducted from this total. The remaining amount to complete the agreed price shall be delivered at the time the deed of sale is granted.

Signing the Deed of Sale

On the day agreed by the parties to sign the deeds, both parties shall appear before the selected notary. During this meeting, the buyer shall pay the rest of the agreed sale price, and the seller shall deliver the house keys, a gesture that symbolizes the transfer of ownership from the seller to the buyer.

In most cases, the final payment made by the buyer at the time of signing the deed is via bankers draft. Once the check is deposited, it usually takes about 2-3 days for the funds to be credited to the bank account. After this period, the seller will be able to access his/her funds.

We highly recommend that, prior to this event, our clients grant us a power of attorney, so we can represent them and act on their behalf throughout the transaction. This will allow them not to attend in person the signing of the private contract or the deed, which can be a great relief at times of busy schedules or when their availability to travel is limited. Finally, the signing of the deed at the notary´s office in particular can be a lengthy and extremely tedious process for someone not used to these legal formalities.

Once the title deed is signed, our legal team will take care of paying all the taxes accrued by the sale, and we will also contact the relevant bodies to notify them about the change in ownership.

Regarding water, electricity, and similar services, it is a common courtesy among real estate lawyer offices in the Malaga region to grant the other party a 2-3 week grace period to request a name change in the contract. Once that period is over, our team will make sure that contracts have indeed been modified to reflect the name of the new owner. In the event the name change has not taken place, we will cancel the contract on behalf of our clients to avoid future, unallowed/non-compliant charges.

When all the legal, fiscal, and administrative procedures are completed, Real(i)ty & Law shall provide our clients with a final statement of account. The deeds and other important documentation shall be made available to them, as well as the remaining balance of the initial provision of funds, if applicable.

Taxes and Expenses on the Sale of Real Estate

When it comes to real estate transfers, capital gains are considered a taxable event, that is, subject to taxation. The gain from the sale is an income subject to tax. Its amount is determined by calculating the difference between purchase and sale values, after adjusting expenses related to each of one the transactions.

If the seller is a tax resident in Spain, he/she must declare the profit obtained from the sale of the property in the Income Tax form for the calendar year when the transfer took place.

If the seller is not a tax resident in Spain, a 3% of the sale price will be charged upon signing the deed. The buyer has 30 days from the date of sale to deposit that 3% amount in the Public Treasury. However, this withholding is only an initial payment on account of the Non-Resident Income Tax that is levied on real estate transfers. In fact, this tax actually amounts to 19% of the gain obtained from the sale of the property for owners who reside [for tax purposes] in the European Union, Iceland, Norway, and Liechtenstein. It is 24% of said benefit for all other taxpayers.

If the initial 3% tax withheld is a higher amount than the amount due for Capital Gains Tax —that is, if the 3% of the sale price withheld at the time of signing the deed is more than the Capital Gains Tax amount that the seller is liable to pay for the transaction sale— then he/she may request the return of the overcharged amount.

For example, let’s imagine that the sale price of a property in Málaga is 500,000 euros. As a non-resident, the seller shall have a 3% of that price withheld at the time of signing the deed –that is, 15,000 euros. If the Capital Gains Tax to be paid by the seller is —let´s say— 10,000 euros, then he/she may request a refund of the overpaid 5,000 euros to the Spanish Inland Revenue.

A different tax that must be paid by the property seller in Spain, whether or not he/she is a tax resident, is the Tax on the Increase in Value of Urban Land, also known as “plusvalía”. Plusvalía is a municipal tax adopted on the basis of the increase in value of the land compared to the moment in which the property was acquired. However, in those cases when the taxpayer can prove that the sale of the property has not yielded any profits, the transaction will not be subject to the payment of this tax.

Address:

Calle Lanzarote n.º 2, Edificio Lorca, 2º B

29631 Benalmádena (Málaga)

Spain

Tel.: (+34) 951 409 250

WhatsApp: (+34) 640 089 738

Opening hours:

Monday to Friday, from 8:00 a.m. to 3:00 p.m.

Free initial consultation

We offer all our potential clients a free initial consultation. Understandably, any legal procedure raises doubts. We do not want that a lack of knowledge or inaccurate advice leads to an unwise decision that hurts your interests.

Treat yourself to some peace of mind, and contact us by phone, email, or whatsapp. We look forward to working with you.

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