PURCHASING ADVICE

If you wanted to buy or rent property or take on a business in your home country, you would do it by seeking legal advice and by using reputable companies and professional people.
It seems that many people, when reaching this Island in the sun, forget all that, many, many seek advice from friends, friends of friends or even someone they have just met in a bar. Not true! You would be surprised how often this happens.

When purchasing a property or business in Mallorca, the first step is to take legal advice, whether buying from a reputable firm or a private sale involving the man in the street, go through all the legal channels.

You will certainly need to be involve with an "abogado" (lawyer) and with a "Gestor" who is somewhat similar to as solicitor, but more of a jack of all legal subjects, your Gestor will know what is required and will arrange and carry out the legal side of your transaction. Many employed in the legal professions are multilingual, find one who speaks your language or use a translator you know and trust.

On finding your desired property you will be asked to sign an "Option to Purchase Contract", which provides you with the "right to purchase" the property. This is a private agreement between the "vendor" (seller) and the purchaser. This document contains details of the property, the price and the consequences of not fulfilling the contract.

On the signing of this contract the purchaser must pay the deposit into a neutral bank account for duration of the option time, this deposit is usually 10% of the purchase price.
Now searches with the Land Registry are undertaken and the purchase is made in front of a "Notary" and the balance of the purchase price is paid.

Another option is to buy a plot of land and have your own house built. An abogado or gestor are again the first people to be involved to check that the plot has all the appropriate permissions etc.
A Building Contract will be drawn up showing the fixed price, the building phases and agreed payments for work and time limits for completion. A must to obtain the connection of services, water and electricity etc., is the declaration of completion of the work and the first occupancy certificate "cedula de habitualidad ". On completion of work the 'New building declaration' is issued and 0·5% of the price of works is levied.

From the beginning of a legal purchase Taxes become payable, some are:-

Land Value Tax: This is a local tax applied to the increased value of the property /plot between this and a past sale. In law it is the seller who pays this, but here on Mallorca the purchaser normally pays it.
IBI: Municipal property Tax, paid annually and established by each local town council, increases each year by between 0.4 and 1.1% of rateable value of the property.
7% IVA (VAT.) is payable if the property is new or of first time occupation.
Wealth Transfer Tax: This tax is 7% of the Deed Price and is paid if IVA is not applicable.

Here is an example of some of the extra costs when buying a property
This example is on an estimated purchase price of €175,000

IVA 7% (Spanish VAT) Payable on new properties.
Or
IBI Tax, which is also 7% paid on older properties -- €12,250

Legal Fees
Searches,Title Deeds & Translation for Notary Public -- €900

Notary Public
Preparing Deeds, Registration and Local Stamp Duty -- €600

IAJD
Stamp Duty on declared value of property -- €1,750

Utilities connection -- €300

Plus Valia
Capital Gains Tax on the plot €60

Total -- -- -- €15,860

As can be seen from the above, the purchase price is not the whole price, be sure to have in hand enough money to cover taxes and legal fees plus fees for Lawyer, gestor and the notary.

The above is given as a guideline, purchasing laws and procedures are always changing, therefore -
All this leads to a most the important advice
take legal advice before and during any purchase
Deal with a reputable agent who can provide help and professionalism during the sale and very importantly, after sale advice and help. .