Sales costs and retentions
Sales costs and retentions Spanish house sale
If you are thinking about selling your Spanish property, it’s wise to take all sales costs and retentions into account to determine your minimum sales price. Your lawyer at C&D Solicitors (Torrox, Malaga) can help you to keep these costs as low as possible and take care of the total sale on a full-service basis. If you like you can sign a Power of Attorney to our law firm so you don´t even have to be in Andalusia during the sales process at all.
Retentions from the sales price
If selling costs aren´t yet proven to be paid at the moment of completion at the notary, these amounts (plus some margin) will usually be retained by the lawyer of the buyer. The vendor will receive his balance for these retentions once all bills are paid. By law it´s not allowed to compensate one retention for another open amount. So, if for example it turns out that the vendor did pay the IBI bill even though it was retained, the buyer cannot ask for this money from the lawyer to compensate to repair a broken lock.
All retentions are specified in the purchase deeds for their purpose and the specific amount and your lawyer will make sure you will get the correct balance money transferred back into your bank account as soon as possible.
Calculating sales costs to determine nett sales price
The exact costs when selling depend on the details of your project and property. Keep in mind that the official sales costs mostly are deductible from the Capital Gain Tax, as well as paid amounts during the purchase or for reforms that added value to the property.
Legal fees of the lawyer (solicitor)
The legal fees of lawyer depend on the sales price of the property and you can read all about his work, responsibilities and added value in this process on the page about selling your Spanish property. Your lawyer or solicitor can also take care of potential additional services as:
- Signing a Power of Attorney
- Arranging mortgage cancellation at the notary
- Fees for the Capital Gain Tax declaration or return
- Administration costs of the IRNR income tax declaration (last 4 years plus the current one)
C&D Solicitors can make you an exact calculation for all legal fees and additional costs in a sales process based on the sales price.
Commission of the real estate agent
There is no fixed fee for the real estate commission as this is a private deal you have with your agent. In the Malaga province (Costa del Sol) sellers normally pay 5% plus VAT and the buyers don´t pay anything. If the buyer and seller both have their own real estate agent, these agents usually share the commission 50-50.
In other provinces, for example in Granada, the commission costs are often shared between buyer and vendor. So, in this case it might be that the seller pays 3% to his agent and the buyer 2% to another real estate agent. However, it´s not illegal for an agent to represent both parties and then he´ll have the full commission.
Capital Gain Tax
The Capital Gain Tax is paid over the profit between your official purchase price and sales price minus certain deductions. If you haven´t obtained the property through purchase, but through an inheritance or donation/gift, then the tax is calculated over the declared value.
If you are a fiscal resident in Spain, you pay -in most cases- pay the Capital Gain Tax through your next IRPF income tax declaration. However, if you are a non-fiscal resident seller, there is a special rule. In this case you already need to pay a down payment of 3% over the sales price during completion through retention. Your lawyer can make you an exact calculation to check whether you should pay extra tax afterward or can ask for a return. You can read more about this subject on the page of Capital Gain Tax.
Plusvalue/Plusvalia Tax (IIVTNV)
The official name for the Plusvalue tax (English) or Plusvalia (Spanish) is I.I.V.T.N.V, or ´Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana´. This local tax of the Town Hall is paid over the increased worth of the terrain during the years of possessing property. The lawyer will calculate (urban properties) the tax amount which will be retained from the purchase price. The sold property can´t be administrated into the new name unless the tax bill is applied for through the Patronato.
Most town halls don’t charge this tax for rural properties as the definition says that the Plusvalue is counted over urban land. However, there are certain Town Halls in Andalusia that do charge Plusvalia tax when selling rustic properties, as for example Alcaucin in the Axarquia.
In the legal opinion of our law firm this isn´t legal but in general, the tax is usually too low to start an objection procedure. C&D Solicitors can make you an estimation of the Plusvalue amount, as this isn´t public information but needs to be calculated by the Town Hall.
Changes in Land Registry or Cadastre
In principle, you should sell your property well inscribed in both the Land Registry and Cadastre. However, both parties through their lawyers can always negotiate otherwise. For this reason it´s wise to contract your own lawyer and have him carry out his legal investigation so he can defend your best interests during the negotiations and take care of the paperwork for the Land Registry and/or the Cadastre. In both cases they should formalize these stipulations in the private purchase contract.
New Build Declaration
Especially in the countryside it´s common for the seller to have a New Build Declaration signed at the notary before the actual sale for any constructions that aren´t correctly inscribed in the Land Registry. This can only be done when the time of the Town Hall´s legal responsibility over this construction has expired for which the risk for a demolition procedure is avoided. The age of the buildings needs to be certified by an architect´s Antiquity Report. Keep in mind that over New Build Declarations you also pay 1,5% AJD tax (Actos Juridicos Documentados) over the official worth. N.B. Until 31/12/2021 the AJD tax is temporally lowered to 1,2%.
Notary deeds for corrections of the land borders
For the terrain the buyer can require the seller to sign a notary deed to change the land borders or have them changed in the Cadastre based on a topographic report of a surveyor. Your neighbors will be informed by the notary or Cadastre and there are five different types of changes: amplification, deduction, separation, aggrupation and border changes. If a neighbor would oppose to the border correction, the procedure at the Cadastre can´t be carried out. The only option left to obtain the desired result would then be to go to court and have a judge rule over the dispute. This procedure however isn´t cheap, takes a long time and you don´t have guarantees over the result.
DAFO costs for rural properties
As you probably already know, most properties in the countryside of Andalusia were once built without a valid license and are therefore considered illegal. To regularize this situation the Junta de Andalucia has introduced the DAFO-certificate. If it´s possible to get this certificate according to the legality of the constructions and service contracts, in most cases the vendor pays for these costs when selling. The DAFO-costs (including tax, architect, legal fees and certified septic tank) easily add up to 6.000 to 12.000 Euros. Therefore, it´s advisable to have a calculation before setting your price as all towns have their own rules and costs.
IBI, basura, electricity, water and Community of Owners
The bills of the yearly IBI property tax, basura (environmental tax), electricity, water and Community of Owners are mostly split between buyer and seller by months or weeks based on the moment of the sales transaction. The transfer of these contracts and their direct debit is arranged by the lawyer of the buyer. The reason for this is that any potential debts would be transferred on to the next owner. In case you can´t prove the payment of non-expired debts, a reasonable amount should be retained from the sales price. If the Community of Owners charges for the ´no-debt certificate´, these costs are for the vendor.
Retentions for mortgage cancellation costs
If the vendor has a paid or unpaid Spanish mortgage inscribed in the Nota Simple (land registry record) of the property, this debt usually is financially and legally canceled at the moment of the sale. This is done by signing the Mortgage Cancellation Deeds at the notary by yourself or your lawyer together with the bank´s representative. If there is still an open amount during the completion, the payment can be paid by bank cheque from the buyer as part of the sales price. The other option is to pay by OMG transfer through the bank of Spain.
Also, all further costs for the mortgage cancellation procedure (notary, Land Registry and administration costs) must be paid by the seller. Usually, the buyer´s lawyer will therefore retain an amount of 700 to 800 euros from the sales price.
You are by Spanish law obliged to provide the buyer with an Energy Certificate -made by an electrician or technical surveyor- of less than 10 years old. The costs are about 100 euros and your lawyer can arrange for a technician to access your property for this certificate if you´re not in Spain.
Which costs are NOT for the vendor during a sale?
The buyer pays the costs of the notary, ITP property tax, his own lawyer, the notary and the costs of the inscription of the Title Deeds in the Land Registry. Usually, also the following costs are paid by the buyer and not the seller, unless else agreed:
- First Occupation License (this is not a legal requirement as for existing houses it is only necessary for RTA rental license)
- RTA rental license or administration costs to transfer it
- Financial valuations/taxations (for a mortgage) or technical surveys for the house or land border measurements
- Administration costs for transferring water or electricity contracts into the new name (f.e. for the Community of Owners of a water deposit in the countryside, Agua de Regantes).
- Updating electrical infrastructure if this is considered too old by the provider and is obliged for the name change.