We have outlined the basic procedures and costs for purchasing a property on Mallorca, although we would recommend introducing you to a lawyer on your viewing visit who will explain in more detail. Costs, particularly, are dependent on individual circumstances, such as if the property is new or resale, if a mortgage is required, or if it is to be used for permanent residence or holidays only.
It is also useful to apply for your Spanish Identification Certificate (N.I.E.) at this stage, which a lawyer can do.
When we have found you your perfect property on Mallorca and negotiated a purchase price that is acceptable to both you, the buyer and the vendor, we will instruct your lawyer on the basis of the sale and he/she can proceed with the initial searches on the property.
When the lawyer is satisfied with these initial searches for the property, an Option Contract will be drawn up. This is a legally binding document between the buyer and seller of the property which commits both to the agreed terms of the sale. The buyer pays a deposit of 10% of the purchase price which he forfeits if he withdraws from the sale for any reason other than if the property is found to be illegal in some manner. Equally, the seller has to pay a 10% forfeit in addition to returning the buyers deposit, if he withdraws from the sale for any reason other than the buyer not providing the purchase funds agreed on the stipulated completion date.
The Option or Private Contract can be drawn up quite quickly after the agreement to purchase, so if you are considering making a purchase, it is important to have the deposit monies readily available.
The date for the Final Completion of the sale is agreed and set out in the Option Contract and is usually 4-6 weeks after. The contract to transfer ownership is held in front of the Public Notary, who will go through the contract and ask all parties to sign the deeds (Escritura). The buyer makes the final payment and takes possession of the property, whilst the vendor pays the required taxes, any mortgages, service bills and Estate Agent fees. This ensures there are no outstanding charges against the property.
Your lawyer will subsequently lodge the property deed at the property register.
Costs payable when purchasing a property on Mallorca
We recommend allowing around 13% on top of the purchase price of your property for various costs, although as these vary according to the property involved, the lawyer will confirm in advance in your specific case. An additional 2% should be included if you require a mortgage.
1. The transfer tax (ITP) which varies as follows according to purchase price of property:
Up to 400,000 euros – 8%
400,000 to 600,000 euros – 9%
600,000 to 1,000,000 euros – 10%
1,000,000+ euros – 11%
So, for example, should your property cost 700,000 euros, you pay the following:
Up to 400,000 @ 8% – 32,000
4000,000 to 600,000 @ 9% – 18,000
600,000 to 700,000 @10% – 10,000
TOTAL: 60,000 euros
If the property is brand new bought from a developer, no ITP is paid, but VAT (IVA) is paid instead, currently 10%, although in other circumstances such as buying land, it can be 21%.
Buying new can also attract stamp duty (AJD) currently 1.2%
2. Lawyers’ fees are generally between 1-1.5%, depending on complexity of the purchase plus IVA of 21%.
3. Notary fees of around 1,000 euros.