RENT TO BUY
Rent-to-buy, in some cases called let-to-own, means that you can rent a property either new or second hand and to buy it within a given deadline of normally 1 to 5 years. The sale price is fixed beforehand as part of the original agreement and the amount given in rent as well as the deposit paid is deducted from the final price. THERE IS A DEPOSIT REQUIRED of usually between 10 and 20% of the sales price!
Advantages for the seller
For sellers, rent to buy is a far better alternative than leaving a property empty. You have a potential buyer and are collecting rent in the meantime.
There are benefits in having someone who is ultimately interested in buying the property as the tenant. With the best will in the world, tenants do not always take care of the properties they rent. Someone with a vested interest in it is more likely to maintain it well and keep up with payments.
In the current market offering this option is likely to attract more interest as possible purchasers can dip their toe in before taking the plunge. However, be aware that if house prices continue to fall you could find that your prospective purchaser decides to opt out and secure something cheaper.
Advantages for the buyer
One advantage for those wishing to rent to buy properties in Spain is that the money you have paid whilst you are renting the property is not lost but is deducted from the agreed price.
As the potential buyer of the property you are more likely to feel that it is worthwhile investing your time and energy in settling in, getting to know the neighbourhood and really being a part of the community.
Also, you don’t have to go to a mortgage company. The seller finances it for you with no extra cost.
Some websites have set up specific pages dedicated to rent-to-buy properties in Spain. Others indicate if the owner would be willing to consider offering a rent-to-buy option alongside that of a direct sale.
When looking on rent-to-buy websites just be aware that there are a number of variations in exactly how it works. Some arrangements take on the form of the ‘tenant’ paying a ‘mortgage’ to the landlord. The buyer/ renter pays a substantial deposit and then pays a monthly payment in a similar way to a mortgage payment.
In other cases the arrangement simply takes the form of a deferred sale. A sales contract is drawn up with an extended period for completion of say 12 months or more. It includes a fixed sales price, a completion date, a deposit and monthly rental payment. This rental payment will be higher than normal.
When the completion date arrives all the payments that have been made are deducted from the agreed sale price and the balance is paid as usual with the sale completed at the Spanish Notary.
Points to consider
However, as with all legal and financial arrangements, you should be cautious if you wish to rent to buy properties in Spain. Here is a list of things for you to consider:
Just because you are renting and there is a longer period of time during which you can raise your Spanish mortgage – don’t get carried away with the size or value of the property you have in mind – it will still need paying for in the long run.
Be absolutely sure about the terms and conditions of the arrangements – they do vary enormously and you will need to engage a good solicitor who can explain the arrangements to you
Make sure you are clear about what happens if you should change your mind.
Do keep in mind that you will have an agreed sale price that will hold over the period of the let but that mortgage interest rates, currency exchange rates (if your income comes from abroad) and even house prices are imponderables over that period of time. You might find the economic environment less favourable when it comes to buy than when you first moved in.
The rent premium might be revised annually by your landlord to bring it in line with inflation. If you are committed to buying the property you might be tied into the arrangements and less able to swap to a more competitive rental price.
An additional deposit might be required by the seller as well as the usual deposit requested when renting a property in Spain. This is in order to demonstrate the real commitment of the purchaser
Over a long-term arrangement you are vulnerable to the financial viability of the landlord. For example, if the landlord has a mortgage and is not able to meet the payment, the property might be repossessed. This may not affect your right to let but would remove the right to buy.
From the seller’s point of view, once the contract is entered into then it must be followed through even if a cash buyer suddenly emerged, anxious to buy the property.
Please note that there are several different options regarding rent to buy. Some are with an OPTION to buy and some are rent with an OBLIGATION to buy after the rental contract expires.
Rent to buy properties in Spain is a good alternative in the current economic climate. Just make sure you take the same precautions when entering into this type of contract as you would with a more conventional purchase.
ENERGY PERFORMANCE CERTIFICATES (EPC)
If you are looking to sell or rent your property in Spain you are obliged to have an Energy Performance Certificate (EPC).
The Energy Performance Certificate is a report that describes how efficient a home is in terms of energy consumption. It assigns an energy rating to each home on a scale which ranges from “A” (the most efficient) to “G” (the least efficient).
The certificate is then valid for 10 years unless any renovation or changes to the property are carried out.
If you do not hold an EPC and you are selling or renting your property then you can be fined.
N.I.E. is an abbreviation for Número de Identidad de Extranjero, which translates as Identification Number for Foreigners, or Foreigners’ Identification Number if you prefer.
The NIE is your all-purpose identification and tax number in Spain. You need it for everything that involves a tramite or official process in Spain. For example, you will need an NIE number to buy a property, buy a car, get connected to the utilities and, most importantly as far as the Spanish state is concerned, pay your taxes. Without an NIE number, the Spanish tax authorities are unable to assess or process annual tax payments such as income tax (IRPF), and the annual wealth tax (Patrimonio), both of which are declared by resident and non-resident property owners.
NIE number certificates were being issued with a 3-month validity from the time of issue, after which you were expected to apply for residency, or register as a non-resident. So after three months the certificate was no longer valid, at least in principle. However, in mid-2016 the regulation was changed to eliminate the three-month expiry deadline, so NIE numbers are now valid indefinitely. But this is Spain and the bureaucracy is a bit of a mess, and regulations are not uniformly implemented or even understood. You may find that some notaries refuse to accept a certificate that is older than three months, which could cause problems for property buyers trying to sign deeds more than three months after obtaining their NIE certificate. In principle you can get your NIE number anytime before you buy, but to be on the safe side you might want to sort out your NIE number on your last trip to Spain, when you find a property you want to buy and can complete within three months.
If you are an EU citizen and spend longer than 3 months in Spain after getting your NIE number, you are required to register and get a government certificate that shows your NIE number.
Registry certificate instructions (in Spanish)
Who needs an NIE in Spain?
1. Any foreigner who becomes resident for tax purposes in Spain needs an NIE number in Spain.
2. Any non-resident foreigner who buys property in Spain. If a couple buys a property in Spain together, and they register the property in both their names, then both of them must obtain an NIE number in Spain.
3. Anyone who wants to work in Spain, or start a business in Spain.
When do you need to have an NIE number?
If you are buying property in Spain, then you need to have an NIE number by the time you sign the deeds of purchase before notary, an event known in Spanish as the escritura.
Getting your NIE number in time for escritura means applying at least 1 month before hand if you are applying in Spain, and at least 2 months before hand if you are applying via a consulate abroad. The actual time it takes depends upon where you apply, and the time of the year. You might be able to get an NIE number in person in Spain in a couple of days, but it could also take weeks, so best allow yourself plenty of time.
How do you apply for an NIE number?
The first thing to understand is that dealing with the Spanish bureaucracy is often a perplexing, not to mention frustrating affair. The way they interpret the regulations in Andalusia might differ from the way they interpret the same rules in Catalonia. In one area, for example Barcelona, you need to book an appointment online in advance to request your NIE number, then spend hours waiting in a queue, whilst in other areas you can just turn up and get everything done in half an hour. I have confirmed for myself that the rules are inconsistently applied, which makes it difficult to prepare a guide to NIE numbers.
So keeping in mind that the process and interpretation of requirements might be different depending on how and where you apply for an NIE number, here is a general guide that explains the official requirements and the process as it should work (but might not)
There are three ways to apply for a Spanish NIE number:
1. Apply in person in Spain.
2. Apply in person via a Spanish Consulate abroad.
3. Apply through a representative in Spain
1. Applying for NIE number in person in Spain
Spanish N.I.E form
NIE form example – click to enlarge
Applying in person for an NIE number whilst in Spain is a relatively straightforward procedure. The only inconvenience is that you may have to wait for several hours in a queue in order to submit your application at a Spanish police station. It does depend upon the police station where you apply, and the time of day (early is better). With a bit of luck you will be in and out in half an hour or less.
The process is as follows:
1) Prepare the necessary documentation:
All applicants: Two copies of the Ex-15 application form filled out and signed . The Spanish name for the NIE form is Solicitud de Número de Identidad de Extranjero (NIE) y Certificados (EX-15), and you can download this NIE application form by clicking on the link below.
All applicants: An original document (plus a photocopy) that justifies your reason for applying for an NIE number, such as a private purchase contract for a property, deposit contract, or a mortgage approval.
EU nationals: Your passport and a photocopy of the main page of your passport (the page that includes your photo, name, passport number, address, etc.).
Non-EU nationals: Your passport and a photocopy of your entire passport (all pages), plus proof of your legal entry into Spain (for instance a landing card, known in Spanish as a declaración de entrada or a título de viaje or cédula de inscripción). Some Oficinas de Extranjeros might accept a valid entry stamp in your passport as proof of legal entry. To be on the safe side non-EU nationals might also want to take along two recent passport size colour photographs with a plain coloured background.
To download the form go to the Government’s Extranjería page and look for Solicitud de Número de Identidad de Extranjero (NIE) y Certificados (EX-15)
2) Take all documentation in person to the appropriate place of submission.
You have to go to one of the immigration offices (oficinas de extranjeros) that are usually found in designated police stations (comisaría de policía), preferably in the area where you are buying your property. If there is no immigration office in your area then it should be possible to make your application through a local police station. In any event the local police station will be able to tell you the best place to go to apply for an NIE in your area.
In Barcelona, and some other places, you have to request an appointment online using the “Certificados EU” (for EU nationals) option at the Public Administration website. You might have to book an appointment a month in advance – you can’t just turn up. (More information from the Public Administration website in Spanish)
You will have to pay a tax of around €10.00 at the nearest bank branch after making your application, then take proof of this payment (the stamped receipt from the bank) back to the Oficina de Extranjeros. That completes the application process.
For more information on the procedures and where to find your closest immigration office go to the Public Administration website.
3) Collect NIE number immediately or after a few days
After you have submitted your NIE application you will be given an official receipt (resguardo) and a time / date after which you can return to collect your NIE document. In some places you can collect your NIE number immediately, in other places it might be a couple of days later, or a couple of weeks – the police station will tell you. The time it takes varies by region and time of the year. Generally speaking it seems that places where there are not many foreigners requesting NIE numbers deliver quicker, in some cases immediately (for example the city of Segovia).
You do not have to collect your NIE in person – anyone can collect it for you if they have the official receipt or resguardo you were given when you submitted your application.
The time it takes to get an NIE varies greatly by region. Whilst it is still common in most areas to wait 15 days or more before collecting an NIE, in some areas, for instance Oviedo, in Asturias, (North Spain), you can apply for, and collect, an NIE in one single visit, which might not take longer than half an hour.
2. Applying for an NIE number in person via a Spanish Consulate abroad
You can also apply for an NIE from Spanish consulates around the world if you do not have the time to apply whilst you are in Spain.
More information from the Spanish Consulate in London
The process is as follows:
1) Prepare the necessary documentation:
EU nationals: Your passport and a photocopy of the main page of your passport (the page that includes your photo, name, passport number, address, etc.). Non-EU nationals: Your passport and a photocopy of your entire passport.
2 copies of the appropriate application form duly completed but NOT SIGNED as you will need to sign in the presence of a consular official. The Spanish consulate will not be able to provide you with this form so you must obtain it beforehand. I strongly recommend you ring the consulate beforehand to check the latest situation as the procedures do change and these instructions may already be out of date.
In the UK it appears you now have to pay a fee of £8.05 in fees (December 2016), so make sure you have the means on you to pay this small sum. (For a while there was no fee to pay, and before that there was a fee of £22 so it keeps changing, for which reason always best to ring or check the Embassy website in advance for the latest requirments).
You might also have to produce an original document (plus a photocopy) that justifies your reason for applying for an NIE number. This documentation might not be necessary, but best have it with you just in case. If you don’t have it, then don’t worry too much, as both London and Manchester consulates say they don’t require it.
It also used to be necessary to take the following:
A self-addressed envelope (no stamp)
An envelope addressed to: Comisaría General de Extranjería y Documentación
Dirección General de Policia
C/ General Pardiñas, 90
However, the latest feedback in the forum (December 2016) says this is no longer necessary as they now send you your NIE document in pdf format by email after two or three weeks.
2) Take all documentation in person to your nearest Spanish Consulate.
You have to go in person with all the relevant documentation to your nearest Spanish consulate. The Spanish Consulate cannot issue NIE numbers; it only acts as a “postal box” between the applicant and the competent authorities in Spain. Once you have submitted your application through the Consulate they will not be able to provide you with any further information on the status of your application. For any further information or enquires as to the status of your application you should write to the address given above for the Comisaría General de Extranjería y Documentación.
For contact details of Spanish Consulates in the United Kingdom see below:
3) Await notification from the Spanish authorities
If all goes well you should receive your NIE number in pdf format by email within 2/3 weeks.
Spanish Embassy in the United Kingdom:
Get contact details from the embassy website
Spanish Embassy in the UK (London)
There is also a Spanish Consulate in Edinburgh and Northern Ireland – ring the Embassy for more information.
3. Authorise a third party to obtain you NIE number on your behalf
The Spanish Government now permits foreigners to authorise a third party to obtain an NIE number on their behalf, as I reported in this article The Spanish Government now allows foreigners to get an NIE number through a legal representative. There was a period of time when this was not possible.
As a result, you can now authorise someone to get your NIE number for you in Spain. Once authorised they take care of the whole process for you. There are numerous companies now offering this service. To do this you need to:
Grant them a poder, or power of attorney signed before notary, expressly granting permission to request an NIE number on your behalf.
Let them have your passport, or send them a notarised copy of your passport (copia legitimada). Getting a copy of your passport in Spain is easy and cheap to do with a quick visit to a notary. If you get it from a notary outside of Spain you will also need the Hague Apostille. Be warned that some oficinas de extranjería do not accept passport copies that have been notarised outside of Spain – they only accept copies done by a Spanish notary.
If you go to a notary outside of Spain, the documentation will also need the Hague Apostille (but not if you go to the Spanish embassy or consulate).
British Notary Publics are generally solicitors and practise in solicitors’ firms. I recommend you telephone one or two solicitors’ firms in your area and enquire as to whether they have a Notary Public or, advise you as to where the nearest one practises.
+ Find a Notary Public in the UK
Be sure to take your original passports to the Notary appointment.
For more information (mainly in Spanish) on the Spanish NIE number application process and Spanish consulates worldwide check out:
SPI forum discussions on NIE numbers
Spanish Foreign Ministry – check out the section on embassies and consulates.
Foreigners’ Identity Number (N.I.E.)
The Ministry of Employment and Social Security
BUYING A PROPERTY IN SPAIN
Once you have decided on the property you wish to purchase it is normal procedure in Spain to place a reservation deposit. This can be anything from 3.000 – 10.000 euros, depending on the purchase price. This deposit is accompanied by a reservation contract which states the names and identification numbers of the buyer and seller, the agreed sale price and any conditions that have been agreed concerning the purchase.
At this point your lawyer will begin carrying out the necessary checks on the property with the local land registry to ensure that all the property’s documents are in correct order, that there are no embargos or debts on the property and that the person selling the property is actually the owner.
Once the lawyer is satisfied that everything is in correct order then the buyer and seller will sign a private purchase contract (a compraventa) and the buyer will pay a 10% deposit (minus the original reservation deposit). In this contract, the buyer and seller’s details and identities are stated, along with the agreed sales price and the date for the final transfer of the property from seller to buyer. At this stage, if the buyer decides to withdraw from the purchase they will forfeit their deposit and if the seller withdraws they will be obliged to repay double the deposit amount to the buyer, unless otherwise agreed.
After signing the Escritura you will receive the keys of your new house. All services/utilities will need to be registered in your name.
A short summary of the costs, besides the price of the house:
Transfer Tax – 10%
Notary Costs – 1-1,5%
Costs for transferring utility services (for example Iberdrola) to your name.
Other Paperwork required for purchasing a property.
Spanish nationals only need their identification (for all persons whose name is going to appear on the title deed).
If you are a non-resident the Spanish Ministry of Interior requires you to obtain a certificate of non-residency, which in turn determines your fiscal number, so that you can sign the title deed. It will also be required later in order to pay taxes. This document is known as a NIE number.
As from 1st January 2012 local police stations are not accepting NIE applications through a power of Attorney; clients must now apply for their NIE personally at the police station or at Spanish Consulates / Embassies.
When buying in Spain each region is different, Tax varies from area to area.
– Murcia and Costa Blanca Tax and Fees total 13% of the price of the property.
– Andalucia is 15% of the total price.
The most important thing to know is that in Alicante province buying tax is 10% and in Murcia province it is 8% of the purchase price.
There is also Notary fees of between 850 – 1,000, this figure depends on which Notary office you choose, it is the buyers choice because the buyer pays. Also there are Land Registry fees which can be 650 – 1000, again depending on which office you choose.
Finally there are your lawyer’s fees, a reasonable fee is between 1,500 – 2,500.
For example a property in Alicante with a 100,000e Purchase Price
650e Land Registry
= 113,000e Total Cost
For example a property in Murcia with a 100,000e Purchase Price
650e Land Registry
= 111,000e Total Cost
Should we use a lawyer?
We always recommend that our clients appoint a Spanish solicitor or Asesoria to act on their behalf, to give you peace of mind with your purchase. If you do not have a Spanish solicitor or Asesoria, we can recommend reputable local ones for you, who speak English and in some cases multiple languages.
Do we need a new Spanish Bank Account?
It is legally required to have a bank account in Spain in order to purchase a property. Although there are 2 large UK banks owned by Spanish banks (TSB is part of Sabadell and Abbey National is part of Santander) there are few benefits of using either bank in both countries. We can help you decide which is the best for you based on your preferences.
Should we use a Currency Broker?
Sending money from GBP to Euros can be an expensive business using your bank.
How much is the Deposit?
When we have found your new dream home, the next step is to reserve the property by paying a deposit, usually this is 10% of the purchase price. Once your appointed lawyer confirms that all the paperwork relating to the property is acceptable and legal we can book a date for signing and completing the purchase of your new dream home.
Please note that the deposit is refundable if there are any problems with the property which cannot be resolved before the mutually agreed sale date.
Why do we sign a Purchase Contract?
A purchase contract/agreement will be drafted by your lawyer and includes the agreed deposit amount, a purchase price, a completion date, any financial penalties if the purchase date is not met and any other relevant information that both parties may want to include.
Once a deposit is taken and the agreement/contract is signed it is legally binding for both parties.
When do I become the Legal Owner?
On the agreed day of completion both parties (buyer and seller) or their appointed lawyers meet at the chosen Notary to sign and exchange funds. Once this is done and notarised you will become the legal owner.
Do we need a new Spanish Will?
Most of the lawyers we recommend will include this in their service because it is a legal requirement for Spanish home owners. If it’s not included with your lawyer it is worth asking them to do this with you around the time of purchase.
How do I transfer over all the Bills into my name?
Your appointed lawyer should include this service to change the names with local providers and help you set up a direct debit to ensure your bills are paid on time.
Should we insure our new home?
Insurance is recommended for all homeowners, just like in the UK and other countries in the EU, we can help you find the best policy for you. If the property is not occupied full time we would also recommend installing an alarm system.
TOURIST LICENCE COSTA BLANCA
It is now a legal requirement to have a licence to rent your property to holiday makers on the Costa Blanca.
Advertising portals such as TripAdvisor, AirBnB, and Owners Direct are now demanding that every property advertised in the Costa Blanca area have a licence in order to rent out the property to holiday makers, this means without a valid Tourist Licence home owners who rent properties around the Costa Blanca are now doing so illigaly and face fines in some cases in excess of €15,000
What is an AFO?
The acronym AFO – Asimilado Fuera de ordenación – has now become a part of the selling process for rural properties.
But why has this come about?
Well the AFO by means of an administrative certificate confirms the legal status of the property as officially recognised out of planning.
This means that although the construction of the property does not comply with the legal planning, the statute of limitation for the Local Council to initiate legal proceedings to reinstate the legal order has elapsed and therefore the property cannot be pulled down.
It also helps the contracting of the services and supplies to the property.
The Junta de Andalucía has made a law that all town halls must have a list of all properties and their legal status as per the Decree 2/2012, of January 10.
This is in the light of the corruption unearthed within the Town Halls illegally granting building permission on land that clearly should not be built on.
Please note this does not make a property legal.
The AFO Certificate does not change the legal situation of the property. It is a legal recognition of the illegal situation of the property with the advantage that the property can have access to the basic services.
However, this document (AFO) will provide written confirmation by the town hall to the Junta de Andalucía in relation to the status of properties on rustic land in their area.
Furthermore, utility companies (water and electricity) are requesting this AFO document when receiving an application for connection.
Likewise, should a license to carry out renovation work on an existing property be applied for, the town halls are also requesting to see the AFO certificate before they can issue the renovation license.
The amended Andalusia land regulations of 2012 say that a house built before 1975 and with its original building permit does not need an AFO.
However they also grant power to the individual Town Halls to administrate their urban planning, which means if they insist on an AFO it has to be done.
Please note this certificate is only applicable to properties situated on rustic land.
Further to the passing of the above Decree, all the different town halls have drawn up their own regulations for the issuing of this AFO certificate and the tax to pay to obtain the AFO.
So this means that the cost of an AFO will vary from one area to the next depending on that Town Hall’s own regulations.
How to apply for an AFO
Owners of the property need to apply for the certificate at their local Town Hall either in person or through a lawyer.
For houses already on the market, the application process needs to be started as soon as possible.
Alternatively the process can be started once a buyer has been found however this may delay completion of the sale quite significantly and the speed with which certificates are issued depends on the area in which the seller lives.
The first step involves employing an architect to visit the property to:
Produce comprehensive plans of the property.
Confirm that the property is habitable with a functioning bathroom and kitchen.
Confirm that the property has legal electricity and water connections.
Confirm that the property has proper waste disposal for sewage – a septic tank not a ‘black hole’ or ‘pozo negro’.
This information is then submitted to the Town Hall along with documents including a copy of the:
latest IBI bill (paid)
So what does the AFO confirm?
Confirmation that there are no administrative files on the part of the town hall against the construction (or any sanctions or demolition requests for that matter)
Confirmation that any possible town planning irregularities that may have been incurred have already prescribed.
Confirmation that the construction complies with the minimum requirements established as far as habitability and health conditions are concerned.
Confirmation on the kind of works that can be carried out at the property: Only renovation works. (In no case extension or structural works)
Confirmation that the land is not protected.
Once you have been granted the certificate you then have a Declaración de Asimilado a Fuera de Ordenación (DAFO).
Before applying for the AFO, a property owner must be sure that everything that has been built on their land has been in place for more than 6 years – this even includes pergolas.
The Town Hall will check on the overhead plans produced by the Junta de Andalucía to make sure this is the case and if something has not been in place for the requisite 6 years then the Town Hall may require it to be removed.
This does vary from Town Hall to Town Hall so each property owner needs to check with their particular Town Hall.