Spain: Brief Guide on Buying Real Estate Property

2018-01-05T11:47:09+00:00 6 septiembre, 2017|


When thinking about purchasing real estate property in Spain a top tier legal advice becomes essential. An independent and unbiased service is required so that purchaser´s interests are not overridden by those from agents or developers. 

The following lines include a brief grasp of how real property investment works in Spain. 

Asset Deal (or why you should forget about a Share Deal) 

It´s still surprisingly common to find buyers who have been somehow advised to perform a Share Deal in order to acquire shares in the company owning the target real estate property. In most cases, they were assured that a favourable tax position would result by proceeding in such a manner. 

The above is an example of a poor and utterly unprofessional advice: 

Acquisition of shares in companies whose underlying assets are directly or indirectly mainly made up of real estate located in Spain (at least 50% of its total assets) are subject to Real Estate Transfer Tax provided that: 

  • the buyer acquires more than 50% of the share capital or increases his controlling stake in the company; and 
  • the company does not perform any economic operation on an ongoing basis. 

And yes, Spanish Inheritance Tax is payed upon death of the purchaser provided that the assets hold by the company are based in Spain. 

Further, acquisition of shares does normally imply having to carry out a due diligence. A due diligence is a process that is carried out by a potential buyer prior to private company acquisitions. From the buyer’s perspective, the purpose of due diligence is to audit the target’s affairs and use information obtained as a bargaining tool in negotiating deal terms.  This can be expensive and time-consuming. 

On the other hand, direct investment through an Asset Deal is the recommended and most common way of acquiring property in Spain. In an asset deal, the real estate property is itself the object of the transaction. For the sake of clarity, in this post I will refer solely to Asset Deals. 

Signature of the Deed of Sale and Purchase 

In Spain it is not mandatory for a sale and purchase agreement to be signed before a public notary, although this is strongly recommended for evidential purposes and to allow the purchase to be registered with the Land Registry. Granting the public deed of sale and purchase before the public notary is also referred as completion. 

Before completion, it´s common for the parties involved in the transaction to sign a reservation agreement (contrato de arras), where the purchaser undertakes to purchase and the seller undertakes to sell within a certain period of time. In such cases, an amount up to 10% of the full price is paid by the purchaser.  The mentioned payment is deemed as a payment in advance and shall be deducted from the balance due upon completion. Further, it´s extremely important to notice that, should the purchaser decided to withdraw from the transaction before completion, he would lose any change of reimbursement. On the other hand, in case of the seller being the one withdrawing from the transaction, he will be liable to pay the purchaser twice the amount of the pre-paid amount. 

Land Registry Registration 

Upon completion, the granted deed should be filed in the Land Registry. 

Although registration of ownership is not mandatory, non-registration of the same can seriously jeopardize the buyer´s title in the near future.  This is to say, in case that any third party (acting in good faith) bought the property after completion, his acquisition would be entitled to rely on the information provided by the Land Registry, even if it later turns out that the registered seller was no longer the actual owner of the property. 

Seller´s Liability 

Under Spanish legislation, the seller of real estate property is liable if, after completion: 

  1. it turns out that there are third party preferential rights on the property that may result in the purchaser being deprived of all or part of the same; or 
  1. hidden defects are found in the property. 

To this extent, it can be easily noticed how different the Spanish legal system is from most common law jurisdictions, where the purchaser carries out the weight of risks when buying property due to caveat emptor principle. 

Public Auctions 

In the last few years, public auctions have multiplied and have become a most frequent alternative for acquiring real estate property in Spain. 

These public auctions, which are carried out by acourt or even by a notary, are a consequence of the overwhelming number of foreclosures and insolvency proceedings having place in the country, as the Spanish legislation restraints the creditor from directly appropriating the property granted as security. 

Price certainty is one of the most obvious advantages of public auction sales. On the fall of the hammer the purchaser has a binding contract. 

Celerity is another attractive quality of public auctions in the current market. When acquiring real estate property at auction there is a set time frame between preparing for the auction, the auction itself and then the date of completion. 

The main disadvantage of purchasing a property at auction is that there is often only limited information available on the property and no possibility to carry out comprehensive due diligence prior to completion. It´s important, therefore, to check the Land Registry for information on the existence of any encumbrances before bidding. In case of existing, such encumbrances will obviously tend to drive auction prices down. 

Golden Visa 

Acquisition of real estate property with a minimum value of EUR 500,000 may grant a temporary residence permit to non-EU/EFTA individuals. In order to qualify for a Golden Visa, the relevant property shall be free of liens, at least up to the minimum value of EUR 500,000. 

The purchase of the property could even be carried out through a company, provided that such company is not registered in a tax haven and that the individual applying for the Golden Visa holds, directly or indirectly, a majority of the voting rights in such company. 

As a consequence of the acquisition, the purchaser becomes entitled to obtain a Visa valid for one year. Thenceforth, the foreign investor can then apply for a residence permit which is valid for two years and subsequently renewable for five-year periods. 


At Fitzwilliam we represent all of the various parties involved in real estate transactions, covering residential property and commercial real estate transactions, property management, funding of commercial land and buildings, construction, planning and leaseholds, among others. 

If interested in acquiring real estate property in Spain do not hesitate to contact us. We will help you to ensure that the transaction proceeds as in the most expeditious and advantageous way possible.