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The Lawyers Info - The Notary and Registry System

"The Spanish Notarial and Registral System is considered to be one of the most complete and improved in the world."

There are many foreigners interested in purchasing a property in Spain, but it is quite common for certain legal questions to come up at the time of purchasing, such as:

What exactly is the Notary's function, where does one have to go to inscribe the Title Deed, in which Registry Office, and what are the taxes that need to be paid?

We shall try to clarify some of these issues in the simplest possible way.

The Spanish Registry System is based mainly on the principle of "Registral Public Testimony", which means that certain operations (in this case the purchase) must be registered, unfailingly, in a Public Registry in order for the document to be valid before any third party.

In order for this kind of document to be registered, it must have been granted before a Public Officer who testifies to its veracity.

The actual act of purchasing must be undertaken before a Notary Public, who is a highly qualified civil servant who confirms the good faith of the capacity and identity of the contracting parties as well as of the sale itself.
At the same time that the title deed is signed, the purchaser automatically becomes the new owner.

Now, as we mentioned before, in order for the purchase to be valid before third parties, it is necessary to register it in the corresponding Land Registry Office.

As we mentioned in relation to the Notary, the Property Registrar is also a civil servant especially qualified for his function which is to review the Notarial deeds presented to him to register, in order to verify that they comply with all the requisites established by Spanish Legislation, and if so, he shall proceed to register the document.

We have to mention that from the point of view of Comparative Law, the Spanish registry system is considered to be one of the most complete and improved in the world along with, maybe, the Australian system and the system in those countries of German influence for reasons we shall explain.

Every Legal act of transmission, limitation or constitution over the dominium, or any other act pertaining to the right over real estate, which according to our Legislation needs to be effective before third parties, must be registered in the corresponding Public Registry Office.

At the Registry Office we will find all the information we might need pertaining to our future house.

Even though what we have explained herewith might sound quite simple, we must not be fooled, since unfortunately, there is no such thing as a perfect legislation and behind something relatively simple, there might be some hidden information that at the time of taking possession of our new home could produce infinite problems.

It is for this reason that it is always advisable to place ourselves in the hands of experts who can assist in the decision of purchasing or not. In these matters, we will find two kinds of professionals who can make things easier for us.

On one side there are the Real Estate Agents who can inform us of which houses are currently on sale, as well as the sale conditions, price, etc.

On the other side we should consult with a Lawyer in order to study the possibilities of purchasing the property from a Legal and Fiscal point of view, as well as advise us in the steps to take and the necessary documentation to fulfil the purchase.

Regarding the expenses that the purchase of our home will generate, we can classify them in the following manner:

a) Notary and Registry Fees:
normally paid by the purchaser.

b) Taxes:
we will specify which should be paid by the seller and which should be paid by the purchaser.

1b) By Law the seller is responsible for the PlusValia, which is a Municipal Tax.

We have to take into consideration that this Tax is negotiable, as it can be agreed to be paid by the buyer or 50% each.

Due to a recent modification in the Law, it is important to bear in mind that when the seller is a non- resident individual his obligation to pay the PlusValia will revert to the buyer if he doesn't pay, as the buyer will be jointly liable.

2b) Purchaser:
should pay the V.A.T. (7% or 16%) and Stamp Duties (0.5%) or Transmission Tax (6%), depending on the nature of the Purchase.

In the future, the taxes the Purchaser will pay as the owner will be the I.B.I. (Tax over Real Estate), which is an annual Municipal Tax, and any other tax that might be generated by the property itself, such as the Garbage Collection, sewage, etc.

In the same manner, his annual Income and Wealth Tax Declaration should include the value of the property.

Furthermore, we cannot forget the expenses relating to community quotas which are the expenses generated by the fact that our property is on common land such as a building or urbanisation.

It is important to verify at the time of the purchase if the house is up to date in all its payments regarding community fees, taxes previous to the sale, etc. because if not, such debts will encumber our new property.

Finally and to summarise, we can say:

A) The Notary will be the one to legalise a purchase through a Public Title Deed.

B) The Title Deed must be registered as soon as possible at the corresponding Land Registry Office.

C) The purchase will generate certain expenses and taxes that will be distributed in the manner explained above.

D) It is certainly necessary to consult with a Real Estate Agent, Lawyer and Fiscal Advisor before purchasing, in order to avoid any problems which in some cases might be difficult to solve.