What to check before you pay a deposit
Buying a home, commercial premises, a building plot or farmland carries risks and obligations for both sides. The most expensive mistake usually happens at the start: handing over money before knowing what you are buying. So before any payment, I check at least these points:
- Ownership and charges. The Land Registry extract (nota simple) from the Registro de la Propiedad shows who owns the property and whether there are mortgages, seizures or easements (rights of a third party over the land, such as a right of way).
- Cadastre. The surface area, use and boundaries recorded in the Catastro must match reality.
- Planning. The home must have its occupation licence (licencia de ocupación) or the sworn statement (declaración responsable) that replaces it, and no open proceedings for unauthorised works.
- Debts that follow the property. Unpaid municipal property tax (IBI) and owners’ association (comunidad de propietarios) fees can end up affecting the buyer. That is why I ask for the owners’ association certificate and check the receipts.
- Energy performance certificate. The seller must have one and hand it over.
If something does not add up, you still have time to negotiate, insist that it is fixed before signing or walk away.
The deposit contract: what you sign when you pay the deposit
The deposit is usually set out in a deposit contract (contrato de arras). Not all deposits are the same. With a penitential deposit (arras penitenciales, article 1454 of the Código Civil) either party can withdraw: if the buyer does, they lose the deposit; if the seller does, they pay it back twice over. With a confirmatory deposit (arras confirmatorias) the deposit is a payment on account of the price and neither party can freely pull out; whoever breaches the contract may be forced to complete or to pay compensation. For the deposit to be penitential, the contract must say so clearly. An ambiguous document is the origin of many lawsuits.
The taxes on the transaction
If you buy a new home from a developer, you pay VAT (IVA) and stamp duty (actos jurídicos documentados, AJD). If it is a resale property, you pay property transfer tax (impuesto de transmisiones patrimoniales, ITP), whose rate is set by the Junta de Andalucía and can change from one year to the next. The minimum taxable base depends on the reference value (valor de referencia) published by the Cadastre, so it does not always match the price you agree.
The seller, for their part, pays Spanish income tax (IRPF) on the gain, with some possible exemptions, and pays the plusvalía municipal (a local tax on the increase in the value of the land), unless there has been no real increase. If the seller is not resident in Spain, the buyer must withhold part of the price and pay it to the Spanish Tax Agency (Hacienda). It is a detail that is often forgotten and should be covered in the contract.
If you are selling, advice pays off too
The seller has fewer formalities, but they are no less important: planning the tax before setting the price, drafting the reservation contract properly and organising payment. If the home is let, the tenant may have a right of first refusal that must be respected; I explain this on the rentals page. And if the property has undeclared extensions or details that do not match, it is best to fix them before putting it on the market, with the Land Registry and Cadastre entries brought up to date.
Every transaction depends on the person, the property and the circumstances. There is no single guide that works for everyone. My job is to manage the transaction from start to finish, warn you in advance about the formalities and the costs, and spare you surprises. If you would like to start with a quick review, you can book your online consultation.
