Buying properties in Spain (I): first steps and important considerations for foreign investors before the purchase

The Spanish property market has been attracting investors from all over the world for years. In 2022, nearly 15% of properties sold in Spain were purchased by foreign entities. The country tempts not only with the promise of sunny weather, but also with its attractive coastline, huge cultural diversity and - still - relatively low prices. Although Spanish regulations are quite friendly to foreign buyers, numerous traps can lurk for the unwary, especially those unfamiliar with the language and local regulations. Fortunately, most can be avoided by becoming thoroughly familiar with the next steps required and by enlisting the help of professionals when buying.

There are three stages in the process of buying a property in Spain: the steps to be taken before the purchase, the purchase itself (signing of the contract and the deed) and the formalities to be completed after the purchase. Thisarticle (first out of three) will describe the steps to be taken before the moment of signing the purchase contract. The next steps will be described in subsequent articles.

Regardless of which property you decide on, in order to buy a flat it is necessary to obtain a NIE (Número de Identidad de Extranjero) number. This is the Spanish equivalent of the Polish NIP (tax id number), which is needed to carry out any tax operations in Spain and which will appear in various documents issued by the Spanish authorities. An application for a NIF number may be submitted either in the applicant's country of residence (at a Spanish diplomatic or consular post) or on Spanish territory (in person or through a representative acting on the basis of a notarised power of attorney confirmed with the Polish Ministry of Foreign Affairs). Regardless of where you apply, you will need an identity document, a copy of it, the appropriate form completed in Spanish and proof of payment of the fee (approximately €10). The time taken to issue a number can vary, it is safe to assume that it will take between 3 and 6 weeks, although of course it does happen that a number is issued more quickly.

As a general rule, prospective buyers are advised to open a Spanish bank account. While this is not necessary for the property purchase itself, it will make it considerably easier and quicker to make all payments and transfers, and later also taxes, energy or other local charges. It will also avoid unnecessary additional costs. A Spanish account may also prove essential if you plan to take out a mortgage in Spain.

When choosing a property, a detailed analysis should be made of both the technical condition of the house and the legal situation of the property. The best solution is, of course, to enlist the help of a person familiar with the language and local regulations, proficient in the use of relevant records for property owners. Undoubtedly, it is necessary to consult the information contained in the Registro de la Propiedad (the equivalent of the Polish land register), but it is also worth looking at the zoning plan, local regulations on coastal protection (if the property is located by the sea), make an enquiry with the representative of the housing association (to determine whether the owner is not in arrears with payments), check whether the property is rented. A lot will depend here on what function the property is to serve - different considerations will be important if you are buying a summer house, and others if it is to be used as an investment for occasional letting. It is also important to carry out a thorough site inspection - either in person or by someone you trust.

Once you have found a property that meets all your requirements and negotiated a mutually acceptable price, most Spanish sellers or agents will expect you to enter into a reservation contract (Contrato de Reserva) or a deposit contract (Contrato de Arras). Essentially, these are fairly similar legal institutions - the parties specify the subject and terms of the sale contract, the price, the date by which the final contract is to be concluded. A certain amount of money is also paid to the seller at this stage towards the price of the property - normally around 10% of the agreed price. The main difference between these contracts is the possibility and consequences of termination. Withdrawal from the Contrato de Arras is possible against payment of the agreed amount. Cancellation of the Contrato de Reserva is only possible in the situations indicated in the contract itself - but at the same time, the reservation contract, unlike the deposit contract, is not regulated by the Spanish Civil Code, thus providing less legal certainty. There is no definitive answer as to which contract is better - this must always be assessed on a case-by-case basis. We strongly recommend consulting a lawyer before signing any contracts.

Garrigues, as the largest law firm on the Iberian Peninsula (18 offices in Spain), which also has a branch in Poland (office in Warsaw), comprehensively guides its Polish clients through the process of buying property in Spain, providing the necessary legal assistance at every stage of the investment also in Polish language. We invite you to contact us in order to learn more about our offer and to read the following articles on this subject, which will be published soon.