by Mallorca experts: Dahler & CompanyTips for Property Purchase in Mallorca

Before buying a property in Majorca, buyers should get sufficient advice and information. Therefore, we recommend to consult tax advisors and lawyers before purchasing.

In Spain, unlike Germany, the purchase of a property is possible by means of a private contract. However, it is essential that the purchase is signed at the notary’s office afterwards and that the transfer of ownership is also recorded in the land register to ensure a maximum degree of legal certainty. It is common to sign an option contract or a reservation contract before the notarial deed customary and often advisable.

The Option Contract

The option contract, includes the contracting parties, the property details as well as the purchase price of the property. The option contract includes, the option price (usually 10% of the purchase price) deadlines for payments, the date of the transfer of ownership (notary’s date), and the consequences for fulfillment or non-fulfillment. By signing the option agreement, the vendor or warrant grants the purchase of the property to the buyer or the beneficiary. With the effectiveness of the contract, the deadline for the payment of the option premium as well as the total purchase price becomes due.

NOTE: The total purchase price is payable, taking into account the option warrant paid at the signing of the notarial deed of purchase (Escritura). The amount is usually settled by means of bank-certified, nominative checks.)

ADVICE: The option premium should be paid into a neutral account. Here a notary account can be used. Ask your real estate consultant, which notary in Mallorca offers this service.

ADVICE: In some cases, the banks charge very high fees for the submission of checks. If you have questions, please do not hesitate to contact us. You may easily save several thousand euros.

The Deposit Agreement (contrato de arras)

From a legal point of view, deposit agreement can have a different effect. Depending on the nature of the deposit contract - hereinafter the most common types of contract a distinction is made between:

Arras penitenciales

A deposit agreement with a pencil character. Each party has the right to withdraw from the contract. In this case, either the buyer loses his deposit or the seller must pay the deposit in double amount to the buyer.

 

Arras confirmatorias

This contract form is subject to a binding contract. It is therefore a contract without the possibility of dissolving the obligation again.

The Construction Agreement

The construction contract, is one of the building contracts. A buyer acquires a land and with a building contract he can build a house.

The construction contract will include  among other things

  • a fixed price
  • a payment plan (usually after construction phases)
  • the consequences of non-compliance with the deadlines

agreed.

NOTE: A new building is not yet recorded in the land register. The registration (so-called new construction) costs 1.2% (of the construction value) protocol tax or stamp duty

NOTE: A contract can not be concluded with the utilities (electricity, gas, water, etc.) without a public building permit (final de obra) and habitability certification (cedula de habitabilidad).

ADVICE: Before you buy, please check the condition of the property as well as the regulatory requirements. A plan for the use of the land, a development plan and a cedula urbanistica (certificate of urbanisation) are important sources of information.

The Notary Agreement

Properties, their characteristics as well as ownership, charges and other endorsements are listed in the Spanish land register,Properties, their characteristics as well as ownership, charges and other endorsements are listed in the Spanish land register. Only the registered owner can also transfer or sell the property. This may be done personally or by notarial power of attorney.

In order to obtain changes to the land register, a notarial act must be carried out. The notarial purchase contract contains primarily:

  • the Contracting Parties and, where applicable, Plenipotentiaries
  • the object of the contract, i.e. the property
  • the purchase price and the payment terms
  • possible debts
  • other notes

The notary checks the ownership conditions as well as charges and other notes prior to each sale process by means of binding land register withdrawal.

After the notarial process, the so-called "cancellation notice" (asiento) should be registered. After inscription of the reservation, within a period of 60 days all taxes must be in order to get a final registration and the Land Registry Office has to be paid.
With the aforementioned reservation, the buyer ensures that no third party can make further entries in the land register.

 

 

NOTE: Each individual contract has a different legal and tax effect with its advantages and disadvantages.

NOTE: Sellers and prospective buyers should consult legal advice before signing a contract. This ensures that they have not already concluded an effective sales contract