A GUIDE TO SELLING PROPERTY IN SPAIN

It usual practice in that the seller of the property pays the real estate agent's commission, which may vary depending on the agency and the price of the property.

Unless agreed otherwise, notary fees are paid by the seller, except for the cost of the first copy which is paid by the purchaser. Notary fees are fixed by the law on the basis of a scale. Another tax to be paid by the seller, unless agreed otherwise, is "plusvalia", a municipal tax on the increase in value of the land alone.

COSTS OF SELLING

A non-resident seller is subject to a 3% tax withholding on account of any possible capital gains. Capital gains tax is 18% of the profit of the sale. This profit is the difference between the selling price and the purchase price plus all purchasing costs and costs on improvements of the property. If the seller's liability is less than the 3% withheld at the time of the sale, the seller can claim it back from the tax office. If higher, the seller will have to pay the difference to the tax office. One exception to this is when the property has been owned by the vendor, at the date of 31st of December 1996, for more than 10 years and when the vendor is an individual (not a non-resident company). Also there is no retention when the vendor is subject to the normal income tax for residents or to companies' tax.

All property taxes such as I.B.I, garbage collection tax, community fees if any as well as normal running costs such as electricity, telephone, water, etc. should be paid up to the date the property is transferred to the new owner. If these cannot be calculated exactly on that date, it is usual for money to be left in deposit to guarantee these payments by the buyer or their legal representative.

VALUES

There are certain technical means by which a property is valued and it is important to follow them and to take advice from your lawyer. Formal property valuations are governed by the Ministerial Order of 30/11/94, in which it is established that sound judgment and factual data are used in all valuations. These may be based on one of the following:

1) Maximum legal value - the maximum sales price of a property, which is subject to the controls of subsidised housing.

2) Replacement cost - the total required investment to reconstruct the property with the same characteristics. The physical and functional depreciation of the property are variable and must be taken into account in the calculation.

3) Market value - the net value that could be expected to be achieved by a seller for the sale of the property at the time of the valuation, by means of proper marketing and assuming that there is a ready, willing and able purchaser. It also assumes that both the seller and purchaser are acting of their own free will.

The legislation also defines the distinctive methods that can be used to calculate the market value:

a) Comparative market analysis based on the principle of substitution, in which the value is calculated from the recent sales of six properties with similar characteristics;

b) Fixed residual yield based on the principle of greatest and best use, taking into account that the property will have to adapt to changing conditions to obtain the optimum use possible in its specific sector of the market in accordance with the location;

c) Capitalisation of the current income yield is the price that an average investor would pay for the acquisition of a property in function of the expectations of the yield derived from its exploitation.

The life span is determined by the type of property and residential property has an estimated life span of 100 years. The valuations are normally made on the constructed area of the properties which is why it is important to have the right measurements. Frequently, the built area indicated in the title deed does not reflect the actual area, either because it originally failed to include all the construction, or because there have been extensions made at a later date.

This is a guide ONLY. You should consult your appointed lawyer for advice on all legal matters relating to the sale of a property.