INTRODUCTION

This chapter deals with payment procedures and costs involved in purchasing a property. Perhaps of greater interest, it exposes an unofficial practice called black money and how to respond to it. One almost forgotten decision involves different options for who actually owns a property. With a combination of Spanish and UK inheritance tax systems, getting ownership wrong can be a very expensive mistake.

PAYING THE MONEY

Stage payments for a new property purchased off plan

In all three examples IVA is included in the price and paid at the various stages. The Spanish developer uses the peculiarly Spanish system of letras (see Chapter 4).

Payments for a resale property

5% to 10% on signing a contract

90% to 95% on completion

IVA – paid on completion.

A partly built property

50% on signing a contract (walls, roof, windows and doors completed)

20% stage payment

20% on completion

10% retained for up to one year to cover snagging defects

IVA – paid on completion.

The basic rules

• All payments can be negotiated. Remember a contract is a private agreement between a buyer and a seller and cannot be overruled.
• If the buyer fails to complete, deposits are non-returnable unless there is a clause in the contract to the contrary. If a seller fails to complete the transaction the buyer is recompensed to a value twice the amount of the deposit unless the contract states otherwise.
• If a builder fails to deliver a new property on time penalty charges accrue. These should be stated in the contract.
• Property sales between individuals follow a system of private contract and deposit(s), followed by the notary and final payment. There is nothing binding about this. If everyone agrees it is perfectly possible to go direct to the notary, pay the money and obtain the escritura.