EDITION: April - June 2018

The acquisition of property in Ibiza

By Armin Gutschick y Anja Sämann-Gutschick
A buyer faces several questions when dealing with a real estate transaction: has the property been regularised? Is the building in keeping with the granted construction permits? Have all the taxes been paid? Is the property of good quality or does it have defects? This is the initial information that should be looked into by the buyer of a property in Ibiza.

If the buyer is foreign, they will first need to obtain a Foreigner Identification Number known as NIE (“Número de Identificación de Extranjeros“). Every foreigner who works or carries out any economical transaction in Spain needs a NIE. For some time now, lawyers have been able to obtain this number for their clients easily and quickly through the Bar Association. In addition, it is advisable to open an account in a branch of a Spanish bank in Ibiza in good time. It is also recommended to enquire beforehand about the costs of transferring the purchase funds from abroad as the commission charged by the banks for this type of operation tends to considerable.

Once the desired property has been found, an expert should be hired to verify all the legal and tax aspects. According to the case, a technical architect or a structural engineer can also be hired to verify that the property is well built and that the facilities are without defects. The buyer should also ask the seller for the following documents: the deed of sale (“escritura de compraventa”), a land registry certificate (“nota simple Registro”), an extract from the cadastre (“extracto del catastro”), receipts for IBI and waste collection (“recibo de IBI y basura”), an energy performance certificate (“certificado de eficiencia energética”), a certificate of occupancy (“cédula de habitabilidad vigente”), a no infraction certificate (“certificado de no-infracción urbanística”), the last electricity, water and gas bills (“últimas facturas de luz, agua y gas”), the calculation of the tax on the value increase of urban land (“cálculo de la plusvalía municipal”), a deed for new construction (“escritura de obra nueva”) and the building permit (“licencia de obra nueva”). According to the case, additional documents may need to be added to this list such as, for example, a certification of non-invasion of maritime-terrestrial public domain when the property is located on the sea front.

In Spain, private purchase contracts do not hold the same legal validity as they do, for example, in Germany. In practice, a contract is usually signed between both parties before the sales is formalised by a notary. The conditions of sale to appear in the deed should be stipulated beforehand in these private agreements as once in front of the notary there will be little room for negotiation. By means of the private contract the seller agrees not to sell the property to anybody other than the buyer during a determined period of time. In return he will receive a deposit from the buyer to be discounted from the total sale price. In the contract, the seller guarantees, among other things, that the building does not have any defects, that it has all the legal permits in place and that it is up to date with all the taxes and duties, for which all supporting documents much be presented. If the seller sells the property to a third party before the end of the agreed time period, he will have to reimburse to the buyer double the amount given as a deposit. If, on the other hand, the buyer fails to pay the balance within the allotted time, the seller has the right to keep the deposit.

Typically, the deposit is 10% of the final price and is usually paid directly to the seller, which carries a considerable risk for the buyer. It is therefore advisable to make the payment directly into the trust account of the notary or the lawyer. It can then be recorded in the private contract that the trustee will deliver the deposit only when all the stipulated conditions have been met.

The public deed is an essential requirement for the buyer to be able to register the property in his name in the land registry. On signing the notarial deed the transfer of title and property ownership will become official and the buyer will be given the keys in exchange for full payment. In Spain, the purchase price is usually paid by means of a bank cheque whilst payments by bank transfer are more of an exception. The buyer should verify that the property in the deed of sale matches the description in the land registry. As standard, the property is acquired ad-corpus or as seen. After authorizing the deed, the notary will make a note of the change of ownership in the land registry. This concludes the notary’s work.

On top of the sale price, the buyer is also in charge of paying the taxes and costs resulting from the transaction. He will have a 30 day period from signing the deed in which to do this. Fines will apply if payments are not made in time. The private contract should indicate who will be in charge of paying the expenses and the taxes. Normally it is the buyer who pays the notary fee, the land registry tax and the inheritance tax. Payment of the local property tax for that year is usually split between the parties. The seller will have to pay the municipal capital gains (“plusvalia”). Entry into the land registry will only be possible once the capital gains tax has been paid. It will also be necessary to register the change of ownership in the cadastre and any contracts with the utility companies (electricity, water, telephone, etc.) will have to be put in the name of the new owner.