The local town hall charge IBI which is an annual real estate tax. The previous owner is obliged to give you copies of previous bills.

Community charges when you buy a property on a community development. These cover things like maintenance, swimming pools, gardens etc.

Wealth Tax (impuesto sobre el patrimonio) - This is payable to the regional government in arrears between Jan 1 and June 30 of the following year.

Property owners shall also pay a wealth tax based on the value of the property minus the mortgage and other debts registered against the property. The total amount to be paid is around 0.2%-0.5% depending on whether the buyer is a resident in Spain, the number of owners of the property and the value of the property. The wealth tax applies only to assets with a value above 170,000€. The tax rate starts at 0.2% and rises to 2.5% for estates with a value above 10,700,000.

Non-resident property owners or residents that owns more than 1 property have to pay a special Attribute Tax. This tax is about 0.5% of the official value of the property but is taxed as an income tax and therefore differs for residents and none-residents.

Water rates.

Electricity charges.

Charges Garbage Collection/Mains Drainage Tax (basura y alcantarillado): is an annual tax payable by property owners.

If you mortgage or loan to purchase of a property in Spain you have first of all to decide whether you want finance from a Spanish bank or from a bank in your own country. There are different factors that can influences this option i.e.; where you are going to live and work, where you have your savings, interest rates, exchange rate fluctuations, fiscal advantages of obtaining a loan in different countries, cost of financing a property in different countries, etc.

Banks in Spain will normally lend you between 60% and 80% of the purchase price over 20-30 years. To obtain a mortgage in Spain you need the following documents:-

• A photocopy of your income tax returns
• Three months salary slips
• A bank reference
• A breakdown of assets and liabilities
• Last three months bank statements
• Proof of savings
• If self employed, statements of accounts
• Copies of the title deeds
• NIE or NIF and Passport

If you work or have your savings in a none-Euro country you also have to be aware of exchange rate fluctuations, as the exchange rate can change very quickly both positively and negatively.

For example your property could either cost you more than you had planned if the Euro strengthens or the property could become cheaper if Sterling strengthens. (Recently Sterling has fluctuated more than 10% against the Euro within a matter of months, so this does deserve careful consideration.)

It can be recommended to fix the exchange rate to complete the necessary payments (i.e. buy a spot contract or a forward currency contract). This can be done in your bank or in financial companies specialized in these types of operations.

You have several different mechanisms to pay for property in Spain, whether you are paying in cash or via local borrowing.

Spot transfers - ideal if the exchange rate is in your favour and you can get the money together quickly. Then hold the currency on deposit and send payments when they are due from your Euro account. To do this you need to have full funds available.

Forward transactions – you agree to buy the currency now but pay for it at a later date when you have the funds available. Initial payment is normally a 10% of the currency purchase. The exchange rate that you achieve on a "forward contract" is not quite as good as that for a "spot contract" but it does guarantee that you know the cost of the property.

Limit order - you tell them what exchange rate you are looking for and they will tell you when it comes up so that you can make a quick purchase

Regular currency transfers - transfers on a regular basis at commercial rates to cover loans or mortgages.

We apologise for the tone of this section. We hope that by showing you the risks, problems and tricks that potential buyers are exposed to, you will be fully armed to begin your new home search in a smooth and stress free process, avoiding any problems or expensive mistakes.

The majority of older properties in Spain NOT registered. When you go register the property you may discover that the property was built illegally or that there are outstanding tax liabilities, which you will become responsible for. There may also be fines.

Most of the old village properties have no Title Deeds and many properties are not mortgageable due to building materials.

Older properties can be registered but with under-declared build area to avoid tax. This unpaid tax can become your liability.

In Valencia, the regional government is confiscating and demolishing property built on rural land as the properties were not built on land specified as urban. Furthermore the owners are being charged for infrastructure improvements such as roads, water and electricity as the land into bought into official urban use.

In Andalusia, the regional government is implementing a similar but less draconian policy.

Some builders and developers in Andalusia say that their developments are “agricultural” buildings and tell new owners that can change the registration of the property after 10 years.

Some builders in Andalusia, are building developments without planning permission. Without planning permission, the building is illegal.

Also in Andalusia, developers, government officials, notaries, lawyers and their customers are under investigation in respect of money laundering (Operation White Whale). Potential buyers have had the deposits frozen and some their properties confiscated.

If you are buying on a new development (urbanización), check that the urbanización is in an area zoned for building, and that the necessary planning permission has been given. If the builder has failed to obtain the necessary planning permission, the local government have the power to order the complete demolition of the development.

Try to avoid inspection trips where you pay a reduced fee for going to Spain to view various properties. However if you must, get the names of the developer, the company, their other previous developments, their directors and owners and details of the share capital. Any hesitation on their part to give you this information should be a red flag to a bull. Search on the internet with the names and the word “problem” to see other buyers experiences.

If you go on an inspection trip, do not take your cheque book! Do not sign anything. Think whether you have been given time to reflect carefully or have they organised everything including alcohol food and entertainment. No wonder you feel good and want like to sign!

Do not believe rental values as income figures are always overstated. What about the tax you have to pay? What about void periods when you property is empty? Who will manage the rentals? What are their fees?

If you are you are asked to under declare the value of the purchase by the seller, walk away. You will become liable for his undisclosed profit and penalty fines, which become substantially greater if the transaction value stated is less than 80% of the market value.

If the Escritura refers only to a building, the seller needs to register the land in his name with the Town Hall to obtain a Cadastre certificate prior to selling. The procedure requires also 2 witnesses who will swear on oath that to the best of their knowledge the property belongs to the person selling, and once this is done, at the same time, he can sell to you. The drawback is that a third party can claim title within the next two years and that banks will not lend on this property. Also, you will possibly be taxed twice, once for the first registration of the property and secondly for the sale. This has to be thrown into the negotiation process.

The above procedure is commonly known as Acta de Notoriedad, or Procedimiento del artículo 205 de la Ley Hipotecaria, and even though it may sound risky it is not normally the case. This is quite common in small towns, villages and rural areas.

No Proof of Title - A great deal of families have never informed the Town Hall that a senior family member has deceased and therefore many sales take months to proceed to completion. There are many families with complicated backgrounds, most children believe they actually own what is and sometimes what once was their parents, sometimes resulting in an Expediente Dominio.

Un-registered Properties -A great deal of the beautiful villas you see advertised are not registered by the builder and therefore the purchaser pays for the first registration, sometimes no licences have been issued and the seller is required to pay fines to the Town Hall.

There have been cases where a vendor has arrived at the notary’s office to sign, where the property is in joint names, but the spouse has died. They have presented the will, in which the property was left to them, claiming that this is enough. Not so! If one owner has died (and this unfortunately is often the case when a foreigner sells a property) and has willed his/her half to his/her spouse, this is a transfer of ownership, which must also be registered by the notary before it can be sold. So it is important to check that the exact ownership details recorded in the Registro are correct, and match up with the people who are selling.