Buying a Property in Mallorca

In order to avoid problems, it is very important before buying any property (house, land, business or garage), to verify its existing planning consents and to establish if there are any outstanding debts.
The property should be free of debts. If there are outstanding bills, the owner should pay them before selling or deduct them from the sale price.
If you wish to buy a property in Mallorca that doesn't fulfil all the prerequisites, it is important to have the appropriate information and to have knowledge that possibly, in the future, you may be required to make additional payments.
To fully guarantee your purchase, you should consult the following offices for information:
1. Planning Department of the Town Hall.
2. Land Registry.
3. Tax Office.
4. Community of Owners (if the property is part of a community).
This information can be requested by yourself, your advisor or your representative. It could take one or two days to verify all of the necessary details.
The following is an explanation of the requirements of each of these departments
1. Planning Department of the town Hall ( Urbanismo)
Before buying a house or land it is essential to consult with the Planning Department about the planning consents of the property. This will avoid problems such as: buying a house under construction and later being fined for not having a Building Licence; having to pay for infrastructure (streets, drains etc.); no electricity connected to the house; no connection to the municipal water system, etc.
Consultations regarding houses or land require an appointment and you will need to be accompanied by someone who speaks fluent Spanish. To obtain precise information, it is preferable to take a plan, photographs of the area and of the house and the name of the owner or builder.
The information provided by the Town Hall always prevails over any information given by an agency or third party.
Requisites for house purchase:
It is necessary that there is a First Occupation Licence issued for your house. This means that it is legal and has complied with all the conditions necessary to classify it as a habitable dwelling. This licence is granted by the Town Hall to the promoter only when the house fulfils the construction regulations as well as those of infrastructure; i.e. paved streets, water and drains connected to the municipal services, street lights, green areas...
The Planning Department will advise you if the property has a First Occupation Licence. You can buy the property if it doesn't have this licence, but you must understand that it is possible, in the future you will have to pay to the Town Hall your share to complete the necessary infrastructure.
Requisites for land purchase:
The Planning Department will advise whether or not you can build, as well as the size and number of levels that are permitted. The construction regulations always depend on where the land is situated.
2.Land Registry Office (Registro de la Propiedad)
This office will inform you of the name of the owner and if the property has an embargo, mortgage or outstanding debts. You must apply for a Nota Simple to check that the property is free of charges. For this you need to indicate the complete address of the house or the name of the owner if it refers to land. The Nota Simple costs about 4 € and can be obtained on the same day.
3. Tax Office (Oficina de la Recaudación)
This office will inform you if there are any outstanding municipal debts such as IBI- Urbana Rates, Land Value Tax (Plusvalía) etc. Before buying you should confirm that there are no outstanding debts, as the debts go against the property and not against the previous owner. If debts are not paid within a determined time period you could receive notice of an embargo.
4. Community of owners
A building will have a community when there are common areas for the individual owners e.g. gardens, pool, exterior lighting, lifts, stairs, generators... If the building belongs to a community, you should find out who the Administrator of the Community is and verify that the house, apartment, business premises, garage or land does not have any outstanding debts.
Drawing up the Title Deeds ( Escritura)
The title deed (escritura) is the document that you sign when buying a property. It is formalised in front of a Notary and the purchaser and the seller should be present to sign the terms of the purchase. If you cannot be present, another person can represent you with a notarial power of attorney in Spanish.
In order for a title deed to have complete validity it must be registered in the land Registry, which is the public body where all purchase-sales are registered in this area. It isn't sufficient to simply sign the deeds, it is essential to register it in the Land Registry.
The title deed is formalised in a Notary Office.
After the signing of the title deed, the Notary will supply you with a Copia Simple, a provisional copy of the deed. You will receive the formal deeds at a later date once it has been inscribed in the Land Registry.
The inscription in the Land Registry of Torrox can be carried out either by yourself, your representative or the Notary, who will charge about 78 € for this service.
Purchase Expenses
Apart from the price of the property, you will pay approximately an additional 10% for the following purchase expenses:
1. Notary ExpensesThese expenses depend on the selling price that appears in the title deed. The Notary expenses are paid according to the agreement between purchaser and seller, however, it is the custom that the purchaser pays all the expenses. A Foreign Non-resident has one month to present the NIE number (identification number for foreigners) in the Notary Office.
2. Value Added Tax (IVA) Only for New Property
You must pay the builder 7% IVA of the price that is declared in the title deed when purchasing:
o A home.
o A garage with a home in the same building.
You must pay the builder 16% IVA when purchasing:
o A business premises.
o A garage without a home.
It will show in the title deed that you have paid this tax to the builder.
3. Stamp Duty (Oficina Liquidadora)
New Buildings:
If you have bought a newly constructed property and have already paid the IVA, you must pay 1% tax based on the price that appears in the title deed to the Oficina
Liquidadora.
Resale’s and Land:
If you have bought a resale property or a land, you must pay 7% tax based on the price that appears in the title deed to the Oficina Liquidadora.
4. Land Registry (Registro de la Propiedad)
After the purchase of a property, and to ensure that the sale has total validity, you must inscribe the title deed in the Land Registry of Torrox. The amount you pay will depend on the declared price in the title deed.
5. Land Value Tax (Plusvalía)
The Plusvalía is a Town Hall tax and it is paid only once at the time of purchasing a property. It depends on the rateable value of the property and on the number of years which have elapsed since the last sale. To obtain the exact amount payable, you can consult the Rentas Department
6. Public Treasury Tax (Hacienda) 5%
This tax applies only if the seller is a Foreign Non-resident and if the title deed is dated after 1987. The purchaser must discount 5% from the declared sale price and deposit it with the Hacienda Office in the name of the seller.
Example:
The sale price of a property is 100,000 €
The purchaser will discount 5% -5,000 €
The final price the purchaser gives to the seller is 95,000 €
After Purchasing a Property
After completing your purchase, it is essential to change the seller's name to your name on al! of the following receipts:
1. Land Value Tax (Plusvalía).
2. IBI-Urbana Property Rates.
3. Water.
4. Electricity.
5. Community of Owners (if your property belongs to a community).
In order to effect the change of name, you must present your new title deed in the following offices:
1. Land Value Tax (Plusvalía): Town Hall
2. IBI- Urbana Rates: Tax Office (Oficina de Recaudación). Besides the title deed, you must present your NIE number and the last receipt of IBI-Urbana Rates.
3. Water:
The change of name is free. If there are any outstanding debts you must pay them before the contract can be put in your name. If your property is on the outskirts of Nerja and does not receive water from the municipality, you should find out which company supplies your water.
4. Electricity: Company Endesa in Palma.
The change of name will cost approximately 35 €. If there are outstanding debts from the last owner, you need to make a new contract that will cost you from 90 € to 110 € depending on the level of power.
5. Community of Owners:
If your property belongs to a community, you should find out who the Administrator is in order to notify the change of name.