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Inside the best villas in Marbella
Off-plan developments are BACK in Marbella!
Welcome to the New Living... ‘Modern’ ‘Contemporary’ ‘Luxury’ ‘Green’ High -Tech’ - these are just a few of the words that we think of when we talk about new developments on the Costa del Sol. Yes, the builders are back and they’re doing it better than ever before! Not only that, with consumer protection stronger than ever; stricter obligations on quality, delivery and materials coupled with an increased liability for developers—it has brought Spain’s off-plan market into a new era of build quality and buyer-satisfaction.
“The market is definitely moving… Agents in Marbella have had the busiest summer in a long time and we see a clear trend that buyers prefer new modern villas. Land prices have doubled in 18 months and that will be reflected in the future price of new-build homes. We started selling mainly to Scandinavians and have seen increasing interest from French, and English buyers.”
- Torgeir WemmestadHaaland, Solvia CEO
This is money has been spent on roads, bridges, airports and other big ticket infrastructure projects—making the country more attractive to a wider range of foreigners.
Prices have fallen up to 50% in some parts of the Costa del Sol since 2008 with the costper-square-meter is still at a record low. With land values now slowly creeping up, international developers are capitalizing on the opportunities available as the market enters a growth period. For example, Icon ‘The Residences’, a bespoke development in the foothills over The Golden Mile in Marbella, would be a GOOD example of this. The international developer, Urbania is building 15 ‘Signature Villas’ on large plots, with views over Santa Clara Golf and the sea to cater to the most opulent of clients. They plan to build a further 200 villas in the area, dedicating to a project due to last the next 6 years. “The International Monetary Fund forecasts that Spain’s economy will grow 2.7 per cent in 2016 compared with an average of 1.7 per cent for advanced euro zone economies.”
6
months is the average time taken for an apartment to sell off-plan
In hotspots like Marbella, with demand now beginning to outstrip supply, the lack of quality resale properties on offer and the shortage of land available to develop—it is fueling a sharp upturn in interest among foreign buyers wanting well-appointed, cutting-edge properties. We can clearly see property market in Spain finally gaining momentum and the money is seeping back into the country. 2015 alone, saw an increase of 35% in applications for new development projects.
When initiating a purchase off-plan it can be scary, especially if it is abroad! Through our extensive experience with international clients buying in Spain, whether it is off-plan or a resale property, we will ensure you are aware of what exactly is involved with such a purchase; what is necessary to keep an eye on and how to navigate the process! You will find a large choice of off-plan development opportunities on the Costa del Sol. We encourage you to make sure that any project you consider has the following legal documents attached first and foremost:
LEY 57/1968
Building ACT LOE 38/99
Bank Guarantee ‘Aval Bancaria’
License of First Occupation (LFO) ‘Licencia de Primera Occupcaion’
Build Warranty ‘Seguro Decenal’
TAXES AND COSTS WITH BUYING OFF-PLAN IN SPAIN Notary & Land Registry Fee Notary fees can cost up to €1,750 on average although can vary according to the complexity of the title deed. Municipal Value Added Tax
‘PlusValia’ This is the taxation on the increase of the value of the land from the vendor's prior purchase to the present sale. It is typically the responsibility of the vendor unless otherwise negotiated.
VAT Value Added Legal Fees Tax ‘(IVA) Solicitors’ fees should Impuestos el never be any more than Valor Añadido’ 1% of the purchase price. Don’t allow anyone 10% payable on new properties purchased to over-charge you here. off-plan or from a These fees typically developer and being include the following sold for the first time. services; Council Tax
‘(IBI) Bienes Inmeubles Urbana/Rústica’ This is paid between September and December each year. Each area is different so check with the local Town Hall to find out more specifics.
Generally this will be less than €3,000 for most apartments and slightly Take note that it is the higher for villa with land. Developers responsibility for the costs of declaring a New-Build-Property, Stamp Duty Tax known as ‘Escritura de ‘Impuesto de TimObra Nueva y Division bre Fiscal’ Horizontal’ along with the A stamp duty tax of Municipal Value Added approximately 0.5-1% of Tax. the purchase prices is payable when buying a property in Spain
examining the reservation form, requesting and examining all relevant documents regarding the property and the parties involved, prepare or examining the purchase agreement, signing the purchase agreement assisting the purchases on completion, dealing with the post completion formalities.
You must check with your solicitor exactly which services are provided within their fee structure.
DOWN PAYMENT CONTRACT
15% will be required 15 days thereafter. The payment terms here can be negotiated prior to entering into the Down Payments Contract.
As you are aware, opposed to buying the property outright immediately, you can enter what is called a ‘Stage With the remaining sum on Payments Contract’. completion of contracts and In Spain, the Law obligates signing at the Notary. all developers, who accept stage payments for off-plan properties, to take out an insurance policy or a bank guarantee. This is to protect your funds and any interest they earn whilst in the developer’s possession. In an off-plan development purchase, you will typically be required to sign a Reservation Form to take the unit off the market, which comes with a Reservation Fee normally, €5,000—€10,000.
When signing the Down Payments Contract you should also receive a document from the guarantor, specifying that your payments are guaranteed (using your full name). Developers are also required by law to isolate your stage payments in a special account with only one purpose; to pay for building work related to your property.
Here is an example of a typical Down-Payment-Structure. You deposit €6,000 with your solicitor/estate agent, that will take the property of the market.
The money will remain in a client account until approval of due diligence.
Your solicitor/agent will contact the vendor for confirmation of all details and on your behalf do the due diligence.
Within 30 days after the payment of the Reservation, you will sign the contract and pay 30%+VAT. This will be covered by a legal bank guarantee.
The remainder of the purchase price, all costs, and the remaining amount of the VAT will be paid when you are signing the title deed for your property and handover of the keys. €6.000 Reservation 30% + VAT downpayment (reservation) 70% + Purchase costs on completion Purchase price example: 30% down payment VAT on down payment (10%) Total down payment 70% completion payment by mortgage VAT on completion payment (10%) Stamp duty (1.5%) Approximate notary & registration fees (1%) Typical Legal Fees (1.21%)
€ 370,000.00 € 111,000.00 € 11,100.00 € 122,100.00 € 259,000.00 € 25,900.00 € 3,885.00 € 2,590.00 € 3,133.90
Total completion Total purchase price including costs Minus mortgage Total cash investment
€ 294,508.90 € 416,608.90 -€ 259,000.00 € 157,608.90
RESERVATION FORM
‘DOCUMENTO DE RESERVA’ Once you have decided to proceed, the next step is to sign a reservation contract and pay a deposit, usually €5,000 - €10,000. A reservation contract is the only way to reserve a property in a hot market. With the current property market in Spain having been on the rise the past 18 months, reservation contracts are a staple for ensuring you aren't disappointed. As you are likely aware, the main purpose of such reservation is for the purchaser to be sure the property is off the market and for the Developer to ensure the purchaser is really interested in proceeding.
determined period and if that does not happen, the property will be again placed on the market. The Reservation Contract should include the following:
identification of the parties and the property define the amount to be paid upon its signature, the total price, payment conditions the period in which the Purchase Agreement will be signed. consequences of not signing the Purchase Agreement and/or any parties withdrawing from the transaction.
The amount paid on reservation is deducted from the total price paid on completion.
The Reservation Contract must be signed and dated by both parties. However, in most of the cases the reservation is usually signed by the However, the Reservation Contract implies that the 'Purchase Agreement' estate agent on behalf of the vendor. will be signed within the pre-
PURCHASE AGREEMENT Before signing, your solicitor must
'CONTRATO DE COMPRAVENTA DE VIVIENDA EN CONSTRUCCIÓN'
make sure of the following:
After an agreed period, both parties will then enter into a Purchase Agreement identifying the property to be sold and detailing conditions of the transaction. This type of contract is used in almost all sales and purchases in Spain in this case of an off-plan property purchase, the complete translation is 'Contrato de Compraventa de Vivienda en Construccion'. This contract is a legally binding agreement on both sides.
A document has been obtained from the Land Registry, confirming the description, ownership and charges (if any) of the property. This is known as 'La Nota Simple'. All necessary permits have been obtained, i.e. building permits, no construction limitations, no rental prohibitions, etc.
COMPLETION The formal act of sale takes place before a Notary in Spain when all the above has been completed. The Deeds for the property are then taken to the Inland Revenue office to pay all taxes and be registered with the Title Registry Office.
After the contract is signed and you have paid, the plans and specifications are all you have to prove what the developers side of the bargain is—therefore ensure that the details regarding the property plans and build specifications are explicit. The more detail, the less likely anything will go wrong.
Particularly specify the following;
the built area 'Superficie Construida', useable area ‘Superficie Util', total area including communal areas 'Superficie Total', ask to see Technical Plans showing Functional Installations.
In addition to this, you should take note of the Title to the Land. The Land Registry can confirm the following;
the developer owns the land, the development project has been issued and confirmed, (if any) what debts or charges have been secured against this land and/or property.
Your solicitor will point out what issues are important to look out for.
INFRASTRUCTURE & SERVICES You must be crystal-clear in understanding what the developer will be putting in place for this project. If there is a failure to provide infrastructure that satisfies the Town Hall then the development may have problems receiving Municipal Services, such as water, electricity, gas or telephone. Have your solicitor check that the development has been fully approved by the Town Hall, and that the developer has an approved Construction License.
PLANNING PERMISSION & LAND CLASSIFICATION Check the plans you are being shown have been approved and the Planning Permission has been granted by the Town Hall. This is the most important piece of the puzzle and must be emphasized. NEVER BUY OFF-PLAN OR ON A NEW DEVELOPMENT UNLESS PLANNING PERMISSION HAS ALREADY BEEN GRANTED. To avoid getting yourself into any sticky situations, always have your solicitor confirm that Planning Permission has been granted for your specific building. If buying in the Marbella area, you may also need to check that the development complies with the Regional Urban Plan (PGOU-1986). Ensure that the land being built on is classified for Residential use. This can be confirmed with the Town Hall. Never the less, it goes without saying that you should never buy a development where the land is zoned for Commercial or other types of use unless that is your aim.
LANDSCAPING & SURROUNDINGS The landscaping of the gardens will have an enormous impact on the quality of life and delivery of the development.
included in the plan authorized by the Town Hall and are clearly stated in the overall Deeds of the Project.
Consider checking the land surrounding the project. If a building complex can be built in front of your property, you should assume that it will be. Don’t be promised certain Make sure that plans for the views and qualities without surroundings are well first taking care to check the documented and have them ‘Plan Urbanistico’ with the attached as an addendum. Town Hall; this way you can Also, you should confirm that be certain of what could the communal facilities you surround your new home. have been promised are
REVIEW CONTRACT & AGREEMENTS As we have advised throughout this mini-guide, have your solicitor check the contract: ensure it balances in your interests and not only the developers'. A list has been compiled of bits for you to keep track of and any contract you sign should include the following;
description identifying the developer, description detailing the buyer, details of the project and the land; the developers title to the land, any debts attached to it, identities of the Constructor/Builder and Technical Architect, description of the property, including Plans and Specifications the Agreed Price, specifying the VAT (IVA), detailed Stage Payment Calendar; giving specific dates and bank account details to which payments will be made, building progress milestones; details on how these milestones will be validated, i.e. with architects signature, specific Completion Date, an extension period (if any) and the financial penalty for every day of delay beyond this period. The contract should also clearly state that the buyer can withdraw from the contract, receiving a full refund plus interests, if the developer fails to meet the deadlines specified in the contract, details of the Insurance or Bank Guarantee arranged to protect Stage Payments, naming the Financial Institution providing the guarantee and the Policy Number. A clause stating: the percentage of the payments you will loose if you fail to complete. You should try and limit this to 40% OR LESS. what information will be provided in the Specifications Manual (given to you when the build is completed) listing any addendum(s) to the contract stating that the developer will meet all the transaction costs that typically correspond to the developer. stating exactly how the costs related to setting up the utilities will be apportioned. stating the correspondences address and contact details of both parties, to which all communication must be directed during the
KEY WORD DEFINITIONS: SPANISH TO ENGLISH Document de Reserva Reservation Contract Contrato de Compaventa Purchase Agreement Contrato de Compraventa de Vivienda en Construccion Purchase Agreement
for an off-plan property Póliza de Seguro Insurance Policy Aval Bancario Bank Guarantee Escritura Title Deed PlusValia Municipal Value Added Tax Impuesto de Timbre Fiscal Stamp Duty IVA (VAT) Value Added Tax Bienes Inmeubles Urbana/Rústica (IBI) Council Tax Planos Plans (construction) Memoria de calidades Build Specifications Superficie Construida Built Area Superficie Util Usable Area Superficie Total Total Area (including communal) Cédula urbanística Land Title Escritura de la división horizontal Overall Deeds of the Project Plan Urbanistico Urban Planning (with Town Hall) Licencia de construcción Building Permit/License Proyecto técnico aprobabdo Approved Project Licencia de construcción/edificación Planning Permission PGOU Regional Urban Plan Libro del Edificio Building Book (all details re: build and execution)
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COPYRIGHT & DISLCAIMER: I want to… BUY IN SPAIN No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of Sunny View Property. Visit our website at: sunnyviewproperty.com Copyright © Sunny View Property, 2015 The author makes no representation or warranties with respect to the accuracy, applicability, fitness or completeness of the contents of this report. The information contained in this guide is strictly for educational purposes. Therefore, if you wish to apply ideas contained in this report, you are taking full responsibility for your actions. The author disclaims any warranties (expressed or implied), merchantability or fitness for any particular purpose. The author shall in no event be held liable to any party for any direct, indirect, punitive, special, incidental or other consequential damages arising directly or indirectly from any use of this guide, which is provided ‘as is’, and without warranties.