Buying a property in Mallorca
Here we outline the key steps in buying a property in Mallorca, including notes on the legal process and details of fees and taxes you should expect to pay. We’ve included some general tips too, to help put you on the front foot in negotiations and managing the process.
Appoint a lawyer
While this doesn’t necessarily need to be the first step, a good lawyer in Mallorca will be more actively involved in your purchase than you might expect in the UK. So having a lawyer alongside at an early stage can be very helpful. They may advise getting further information before an offer is made or raise points that have a bearing on an offer you intend to make. They should also be able to provide advice on tax and financial structuring as it relates to your purchase. Having a lawyer in place also demonstrates to the seller that you are serious and ready to proceed. This will make your offer more tempting.
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Negotiate and agree a price
The manner in which negotiations take place varies according to who is involved. Sellers will usually have appointed an agent to receive and negotiate offers on their behalf. Conventionally, buyers will also deal direct with the seller’s agent. This can make it difficult to judge whether you are getting the best deal.
With MPP onside, you’ll have the full benefit of our experience in judging prices and deciding an offer. We’ll be there to assist throughout, ensuring communications with the seller are carried out as effectively as possible.
Initial legal checks / confirm offer
When a price has been agreed a, your lawyer will complete some initial searches in the Land Register. They will also perform other checks to ensure the property is free of debts or other charges. Following this, the terms of purchase are usually confirmed in writing between your lawyer and the seller’s lawyer.
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We’re here to help at all stages of the process of buying a property in Mallorca.
Legalities and structural surveys
In Mallorca, building surveys are generally not regarded as a standard procedure. New properties are covered by building guarantees which, by law, have to have been taken out by the developer. So, properties bought directly from a developer are indeed unlikely to require a survey. This also applies to resales that are still relatively new and covered by the original building guarantees. With older resale properties, the convention is that they are sold “as seen”. In practice, this means it is down to the buyer to be alert to any potential issues. For this reason, there are some instances when a survey would be advisable. If, for example, there is a question over building permissions, the structure of the building, or if you are intending extending, renovating or re-developing the property. In all such cases, an appropriate survey would certainly be recommended.
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The Private Purchase Contract or Option to Purchase
This is a key legal document in the buying process. The Purchase Contract will detail the property and the terms of the sale. It will also set a date for final completion. Your lawyer will prepare the Purchase Contract. This usually takes a week or two, but may take longer if it is a complex transaction or documentation needs to be obtained. Any terms that have been agreed should also be detailed in the contract. E.g. if the seller is to do any works prior to completion or is required to produce missing documentation.
When the buyer and seller have signed the contract, the buyer usually pays 10% of the purchase price. It is a non-refundable deposit. So, if the buyer does not complete for a reason outside of the terms of the contract, the deposit is lost. If the seller does not complete, the buyer can potentially force the sale (hence the term Option to Purchase), or they can elect that the seller pays back the 10% deposit plus another 10% in compensation. The exact terms of this can vary but the essential principles of this document are that a) both buyer and seller are locked into the sale b) each would each suffer an equal financial penalty if they do not fulfill their side of the contract (this invariably means final payment and completion in front of a Notary).
Checklist of points to covered prior to signing the Private Purchase Contract
- The original copy of the deed of sale (escritura pública) in the property register.
- Extract from the property register showing the situation of the property, charges and encumbrances (Nota Informativa Simple).
- Contracts with the water, electricity and gas companies and confirmation that payments are up-to-date.
- Receipts for payment of land tax (IBI) for the last four years.
- Application for calculation of Municipal Tax of Plusvalia at the local authority offices. Plusvalia is a local property tax normally payable by the vendor.
- If the property is part of a community, statutes of the owners’ association. It should include both a statement of the payment of common costs and proportional payments of the present owner and a statement that the owners’ association has no debts to third parties or extraordinary expenses outstanding.
- If relevant, an inventory of the furniture, equipment, fittings signed by the vendor.
If any of these points have not been finalised at this stage, they should be detailed in the Purchase Contract as being required prior to final completion at the Notary.
Final completion at the Notary
In Spain, a sale is completed when the title deeds of purchase (Escritura) are signed in front of a Notary. At this point, the buyer makes the final payment and takes possession. The Escritura details the name of the owner and gives a description of the property. It also details the price, taxes payable and all other formalities relating to the purchase of the property. The buyer may attend the signing or grant a power of attorney to a representative – usually their lawyer.
Following the final completion the notary will fax a copy of the title deed to the local Land Register. Your lawyer will arrange:
- Payment of the relevant taxes associated with the purchase.
- Registration of your title deeds (which may take up to 3 or 4 months).
- Transfer of accounts with the local utility suppliers and setting up of payments through your local bank account.
You should ensure your budgeting allows for the professional fees and taxes applied when buying a property in Mallorca. These will depend primarily on the price of the property and whether it is a new property from a developer, or a resale. Please click here for a more in-depth summary of purchase costs.
Property purchase taxes,
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Other points to bear in mind
Foreign nationals require an NIE number. This is similar to an NI number in the UK and takes approximately a month to obtain. It can be done more quickly but it is best to process this at an early stage. There is a small administration charge. More about NIE numbers.
Local bank account
You will need a local bank account for payment of utility bills as these are paid by direct debit. Your lawyer can most likely arrange this for you, particularly if they have a gestoria service (administrative service) in their firm.
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