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Buying property in Spain after Brexit

What is a reservation contract and do I need one when buying property in Spain?  

When you put an offer in on a property in Spain and the seller accepts your offer it is common to be asked to sign a reservation contract (Contrato de Reserva) and pay a reservation fee to secure the property. This process may seem unusual to UK buyers as it is not a customary practice in the UK, however it is often a common part of the buying process in Spain.

Here’s everything you need to know about reservation contracts and reservation fees in Spain.

Why should I seek legal advice before signing a reservation contract in Spain? 

It’s crucial that you seek independent legal advice before signing a reservation contract and/or paying a reservation fee to ensure that you are adequately protected. Instructing an independent Spanish lawyer who is not linked to the estate agent, developer or seller will help ensure that your lawyer is solely acting in your best interests to protect your position and your investment.

We strongly advise that you do not sign a reservation contract until:

  • a valuation of the property has been carried out, if necessary
  • you have secured a formal mortgage offer (if you require a Spanish mortgage)
  • the basic property background checks have carried by your Spanish property lawyer

Are reservations contracts in Spain obligatory?

Reservation contracts are customary when buying property in Spain, however they are not mandatory. Estate agents are often keen for buyers to sign a reservation contracts and pay reservation fees as it signifies a firm commitment to the property purchase. You are not obliged to sign a reservation contract though (although some estate agents might suggest you have to) and should not be pressured into doing so.

Are there any benefits to signing a reservation contract in Spain?

Signing a reservation contract with regards to a Spanish property purchase, ordinarily ensures that the property is not actively marketed for an agreed period (usually up to 30 days) which gives your Spanish lawyer time to run all the necessary background checks to ensure there are no issues regarding planning, land registry, debts attached to the property etc.

However, you should be aware that if the property is being marketed by more than one agent it may not be removed from all marketing platforms. It’s worth asking the question before you sign anything!

The reservation contract also outlines the agreed sale price, which means the seller cannot ask for a greater sum once both parties have signed the contract.

If you choose not to sign a reservation contract, the seller can decide to keep the property on the market and may receive a higher offer for the property. So, you need to weigh up the pros and cons carefully. If there is a lot of interest in a property and you’re keen to secure it, a reservation contract can be a good way to ensure you don’t lose out on your dream property in Spain.

Are the terms of the reservation contract fixed? 

In Spain it’s commonplace for estate agents to request that you sign their own reservation contract. However, the reservation contracts drawn up by Spanish estate agents are usually quite vague and focus on protecting the seller, so they offer very little protection to the buyer. The terms of Spanish reservation contracts are negotiable though, which is something your Spanish lawyer can assist with.

How much are reservation fees?

Typically, reservation deposits in Spain are usually between €3,000 and €6,000. Usually, you’ll be expected to pay a lower fee for a low-value property and a higher fee for high-value properties (although this is not always the case). However, you can negotiate the amount of the reservation deposit. The reservation deposit is usually deductible from the agreed purchase price – but don’t assume this, double check and make sure that the agreement is detailed in the reservation contract!  

Are reservation fees refundable?

A Spanish reservation fee is usually non-refundable as the purpose of a reservation fee is to make a buyer commit to the property purchase. So, unless there is a valid legal reason for you to withdraw from the property purchase you will not be able to claim the money back. Therefore, you need to be certain that you want to proceed with the property purchase at this stage and ensure that the full funds for the property purchase are secured. If there are any agreed conditions, make sure that your lawyer sets these out in the reservation contract before you sign it.

In exceptional circumstances, where there is a legitimate legal problem relating to the Spanish property purchase, the reservation deposit may be refunded. However, this will be dependent on what was agreed in the reservation contract, which is why it is wise to ensure you get guidance from an independent Spanish before you sign it.

Can I buy the property if I don’t sign a reservation contract? 

It’s possible to completely bypass the reservation contract step when buying a property in Spain and move straight to signing a purchase contract, providing all the necessary checks have been made and your Spanish lawyer is satisfied that there are no risks regarding the property purchase.

Being prepared and contacting an independent Spanish property lawyer before you go on any viewing trips can be helpful, so that they can advise from the outset.

For more information about buying a property in Spain or for assistance from one of our recommended Spanish lawyers and a no-obligation quote, give us a call on 01244 470 339 or email info@worldwidelawyers.co.uk

You can also download our FREE Buying Property in Spain guide.

rock-of-aphrodite-in-landscape-on-the-coast-in-cyprus_800

The property buying process in Cyprus

Buying a property in Cyprus can be complicated, so it’s advisable to seek the advice of an independent lawyer early in the buying process to guide you through the property buying system in Cyprus.

 

There are four key steps to buying a property in Cyprus:

1. Preliminary Contract in Cyprus

When buying a property in Cyprus initially you will be required to sign a Preliminary Contract (also often referred to as a Reservation), which is a record of the formal offer by the buyer. At this stage you’ll usually be required to pay a deposit of approximately one per cent of the property purchase price, which ordinarily ensures that the property will be taken off the open market. Removing the property from the market allows you the opportunity to instruct your lawyer to in Cyprus to carry out all the relevant checks on the property.

Instructing a reliable Cypriot lawyer who is not linked in any way to the seller (i.e. estate agent, developer etc) is essential before signing any contract or paying any deposit, to ensure that necessary searches are carried out and that the contract is drafted properly and will enable you to pull out and get your money back if it turns out that there is a problem with the property. If there are any issues relating to the property your lawyer can offer advice accordingly to protect your interests.

Your Cypriot lawyer should be a specialist in property law in Cyprus. They will also advise you of the full costs associated with buying a property in Cyprus at this stage.

2. Sale Contract in Cyprus 

When these preliminary checks have been carried out, any potential issues have been ironed out and the buyer’s offer has been accepted, your lawyer will draw up the Sale Contract. This contract details the conditions of the property sale and a deposit of around 10 per cent is payable at this stage. If the property is a new build a deposit of or 20-30 per cent is required, when signing this binding contract. Your lawyer should explain the obligations of each party as a result of entering into this contract before it is signed. 

Once the Sale Contract has been signed by both parties your lawyer in Cyprus will register this with the District Land Registry Office within the timeframe outlined by the law, which means both parties are formally committed to the transaction.

The act of lodging of the Sale Contract at the Land Registry Office protects the buyer’s rights until completion and ensures that the seller is not able dispose of the property prior to the new owner receiving the title deeds.

At this stage the buyer will also need to pay the stamp duty and usually the balance of the purchase price is paid to the seller as well.

3. Application to the Council of Ministers

A non-Cypriot requires permission from the Council of Ministers to complete the transfer of property into their name, with the exception of EU-citizens who live in Cyprus on a permanent basis. The application is a mere formality and legitimate applications are usually approved promptly without any issues.

To make an application to the Council of Ministers the relevant paperwork must be taken to your nearest District Administration Office, which are located in Famagusta, Nicosia, Larnaca, Paphos and Limassol. Your lawyer can make this application on your behalf and they often include this service in the standard charge for legal fees.

4. Receiving title deeds for the property in Cyprus

Finally, receiving the title deeds (known as Certificates of Registration of Immovable Property in Cyprus) formally marks the transfer of ownership of the property in Cyprus.

It is not uncommon for the transfer of title deeds in Cyprus to be a prolonged and complicated procedure, taking several months, or even years in some cases! The reason for this is that the Cypriot legal system requires that every sale of property must go through the tax system, which can be a lengthy process. On the positive side, because of this system the Cypriot government has put safeguards in place to protect buyers, which ensure that the seller is unable to remortgage, charge or resell the property or interfere otherwise with the buyer’s rights to the property, until the new title deed is ready.

Once the title deeds have been drawn up, the final stage involves all parties (or their lawyers) meeting at the District Land Registry Office. Here the buyer must pay the land registration transfer fees which finalises the transfer of the property from the vendor to the buyer.

After that, it’s a case of sitting back and enjoying your property in Cyprus with a meze platter and glass of Cypriot Zivania perhaps?!

 

For more information about buying property in Cyprus check out our guide to Buying Property in Cyprus. You can also call us on 01244 470339 and email us on info@worldwidelawyers.co.uk – our friendly team will be happy to offer FREE initial advice about buying property in Cyprus!

 

We can also put you in touch with a recommended independent English-speaking lawyers in Cyprus, as well as currency exchange specialists (find out how they can save you thousands!) and international mortgage specialists to help your property purchase in Cyprus be as smooth and hassle free as possible.  

 

Cyprus Village Medieval World Heritage Fikardou

Why do I need a lawyer when buying property in Cyprus?

There are many advantages to buying a property in Cyprus, whether it’s a permanent move or an investment in a holiday home. The year-round sunshine, relaxed culture breath-taking scenery, picturesque villages, bustling cities to name just a few.

However, there are a number of pitfalls that foreign buyers may encounter when purchasing a property in Cyprus, so potential buyers should exercise caution when buying a property in Cyprus and always seek the advice of an independent lawyer in Cyprus.

What are the pitfalls of buying a property in Cyprus? 

As with a property purchase anywhere in the world, there are some pitfalls to be aware of when buying a property in Cyprus. Some of the common issues buyers face when purchasing property in Cyprus are as follows:

  • Difficulty in obtaining title deeds
  • Land/property mortgaged by developers
  • Lawyers linked to vendors, estate agents and/or developers/builders
  • Fluctuations in currency exchange rates
  • Issues relating to planning permission

How can I protect my assets when buying a property in Cyprus?

The good news is, all of these issues are easily resolved! Here are our top tips to ensure that your property purchase in Cyprus is as safe and stress-free as possible.

1. Seek independent legal advice

By ‘independent’ we mean that your lawyer should not be linked in any way to the vendor, estate agent and/or developer or builder. The reason for this is to avoid any conflict of interest. While it may be tempting to save costs on legal fees by using an agent or developers “free” or “recommended” legal services, ultimately not using your own independent lawyer could cost you much more long-term. It’s crucial that you instruct a lawyer that will sufficiently protect your interests from the very beginning.

It’s essential when signing a reservation agreement for a property purchase in Cyprus that it outlines the agreed deposit for the property and the circumstances in which a refund will be paid. This offers protection and means that if your Cypriot lawyer finds that there are legal issues, such as difficulties obtaining ‘clear title deeds’, then your deposit can be refunded.

Instructing an independent lawyer is particularly important in Cyprus as it is common practice for developers to take out mortgages on land or property. This debt can be passed on to the buyer if you sign a contract and the builder/developer/landowner goes bankrupt, for instance. A reputable lawyer acting on your behalf should check whether there are any mortgages on the land or property and advise accordingly. Unfortunately, a lawyer associated with the developer may not be upfront about such details.

They will also ensure that the property in Cyprus matches the description on the title deeds and check that no alterations (such as additional buildings/structures, swimming pool etc.) have been made to the property without the required planning permission. If such alterations are not included on the title deeds, an application must be made to authorise these amendments to the property before completing the property purchase in Cyprus.

In addition, your Cypriot lawyer will make sure that all terms negotiated between the vendor and buyer are outlined in the contract of sale.

Your lawyer should be registered with the Cyprus Bar Association and specialise in guidance on immovable property law in Cyprus.

If you’d like a recommendation for an independent English-speaking lawyer in Cyprus call us on 01244 470339 or email info@worldwidelawyers.co.uk

2. Be clear about the costs of buying property in Cyprus before signing a contract

Before making a decision about buying a property in Cyprus you need to be aware of the full costs involved with the property purchase in Cyprus. Request a breakdown of the costs – legal fees, surveyor’s fees, property taxes etc. – at your first meeting with you lawyer in Cyprus, so that you can budget and won’t find your final bill a nasty surprise! Find out more information about the costs of buying a property in Cyprus.

You should also be aware of the ongoing costs involved with the running of the property in Cyprus. What local taxes are payable? What will your utility bills cost? Ask for copies of recent bills from the current owners so you can get a clear idea of what your monthly outgoings will be. If the property is part of a communal building you will also need to check what the annual service charge is.

3. Enlist the help of a currency exchange specialist

When buying a property in Cyprus you will usually need to pay the purchase price in Euros. If your money is held in a UK bank account, this means that you’ll need to exchange the funds from Pounds Sterling into Euros, and the high street banks often charge a hefty commission and do not provide a very good exchange rate. A currency specialist can typically save you between three to five per cent of the property purchase amount compared to the banks – potentially saving you thousands of pounds.

In addition, currency exchange specialists can help you ‘fix’ a favourable exchange rate for up to two years, which means that you won’t be negatively affected by exchange rate fluctuations. This can be particularly useful to manage mortgage payments in Cyprus and can be used to fix the euro purchase price amount in pounds sterling, so that currency fluctuations do not result in an increase of the property price between making your offer and paying the purchase price due.

Find out more about how a currency exchange specialist can help you save money!

If you’d like a recommendation for a currency exchange specialist call us on 01244 470339 or email info@worldwidelawyers.co.uk

4. Draft a Will

Once your property purchase in Cyprus is complete it’s advisable to draft a will in Cyprus. In Cyprus, there is forced heirship legislation which, depending on your circumstances, may apply to your estate in Cyprus. Getting proper legal advice in relation to a Cypriot will ensures that your property in Cyprus will be disposed of according to your explicit wishes. Having a separate will in Cyprus, which covers your property and other estate in Cyprus, also means that probate in Cyprus can be less complicated and time consuming.

For more information about buying property in Cyprus check out our guide to Buying Property in Cyprus. You can also call us on 01244 470339 and email us on info@worldwidelawyers.co.uk – our friendly team will be happy to offer FREE initial advice!

We can also put you in touch with independent English-speaking lawyers in Cyprus, currency exchange specialists and mortgage specialists.  

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What is the cost of buying a property in Cyprus?

The property buying process in Cyprus

 

beach-and-boats-in-cyprus

What is the cost of buying a property in Cyprus?

There are huge financial benefits to buying a property in Cyprus. Property prices in Cyprus are incredibly low – you can bag yourself a studio apartment in Paphos for as little as €30,000! There are also fantastic tax benefits available for property owners with no inheritance tax in Cyprus and for those who are retired, you can expect to pay just five per cent tax on a foreign pension in Cyprus.

Plus, there’s the Republic of Cyprus’ “golden visa” scheme which grants Non-European citizens an EU passport or Permanent Residency Permits when investing in a property in Cyprus* – which may appeal to anti-Brexiteers!

With the cost of living being nearly 19 per cent cheaper in comparison to the UK, according to global consumer comparison price website Numbeo it’s no wonder that Cyprus is a popular choice for savvy buyer’s when it comes to investing in property overseas. But, what are the costs involved with buying a property in Cyprus? 

Legal fees in Cyprus

It is highly advisable that you use an independent lawyer in Cyprus when buying a property in Cyprus. Your lawyer in Cyprus should progress the property purchase whilst ensuring that your best interests are looked after and your assets are protected. It is not uncommon for there to be issues with title deeds in Cyprus and your lawyer will need to ensure that any potential problems are dealt with properly and that your property purchase in Cyprus is safe and legitimate.

Legal fees in Cyprus are usually charged as a percentage of the property purchase price – typically 1-2 per cent plus IVA (VAT). Their services should cover the search with the Lands Office, checking of planning and building permits, checks that the land is suitable for building (if relevant), drawing up of contracts, stamping and registering the contracts, and applying for permission to purchase from the Council of Ministers.

If you require your lawyer to act as Power of Attorney there will also be a small additional fee for drafting the Power of Attorney, arranging to have it certified, getting it stamped in the tax office and then visiting the land registry to lodge it.

Surveyor’s fees in Cyprus

Your chosen surveyor should be registered with The Cyprus Scientific and Technical Chamber (ETEK), which can provide a guide to charges as well as a list of surveyors registered with them. On average charges are approximately €500, but this varies depending on the value of the property and the complexity of the report required.

Stamp duty in Cyprus

In Cyprus the purchaser must pay stamp duty within 30 days of signing a contract. The rate of stamp duty payable is 0.15 per cent of the property price purchase for properties up to the value of €170,000 and 0.2 per cent for properties over €170,000. The first €5,000 is exempt from stamp duty.

IVA (VAT) payable on property in Cyprus 

All new properties are subject to IVA (or value added tax, VAT) at 19 per cent. The only exception to this is those where the application for planning permission was submitted to the planning department before 1st May 2004. Sometimes this can be included in the asking price, so check with the developer before making an offer. On the plus side, first-time buyers pay IVA at only 5 per cent. For “second hand” properties you do not need to pay IVA.

Property Transfer fees in Cyprus 

A property transfer fee in Cyprus is payable when the transfer of the title deeds to a property in Cyprus takes place by your lawyer transferring and registering the property in your name at the Lands Office in Cyprus. The fee is based on a sliding scale from 3 to 8 percent depending on the value of the property. For instance, for the first €85,000 of a property’s value, you pay 3 per cent of the purchase price; between €85,001 and €170,000, the rate is 5 per cent; and over €170,000 the rate is 8 per cent.

The cost of transfer fees in Cyprus can also vary depending on whether a property is purchased in one name or joint names.

For properties purchased in a single name, the purchaser pays the whole fee. However, if a property is purchased in joint names (i.e. husband and wife), the purchase value is divided between the two and each is assessed separately. So, for a property valued at €170,000 a sole owner would pay €6,800 in transfer fees but joint owners would pay €2,550 each, €5,100 in total – a saving of €1,700!

Transfer fees payable to the government is based on the value of the property as estimated by the land registry on the day of the transfer. The sales price will be an indicator but the actual value will be based on comparative sales. So, it is possible that the land registry may value the property you are buying  a little higher than the actual purchase price.

Properties subject to IVA (VAT) are exempt from the transfer fees.

 

For more information about buying property in Cyprus check out our guide to Buying Property in Cyprus. You can also call us on 01244 470339 and email us on info@worldwidelawyers.co.uk – our friendly team will be happy to offer FREE initial advice about buying property in Cyprus!

We can also put you in touch with a recommended independent English-speaking lawyers in Cyprusas well as currency exchange specialists (find out how they can save you thousands!) and international mortgage specialists.  

 

* This programme requires a person to invest €2million in property in Cyprus for three years. The citizenship is granted within 6 months.

You might also be interested in…

Why do I need a lawyer when buying property in Cyprus?

The property buying process in Cyprus

Italian Trulli

Do I need a notary or a lawyer when buying a property in Italy?

There is often confusion about whether you need a lawyer or just a notary (notaio) when buying a property in Italy. It can be tempting to cut corners and save a money on hiring an Italian lawyer (avvocato) when buying a property in Italy, as people often mistakenly believe that the notaio performs the same function as a lawyer.

The truth is you need both!

The property buying process in Italy

In Italy there are three stages to the property buying process:

  1. Proposa d’aquisto – this is the initial formal offer at which point you will be expected to sign a contract and pay a small deposit of up to five per cent, which is held by either the estate agent or your lawyer. Typically, this ensures that the property is removed from the market for up to four weeks, giving your lawyer time to carry out basic checks on the property. If the sale falls through for legal reasons this deposit is usually refundable.
  2. Contratto Preliminare de Vendita – Once the buyer and seller have agreed to go ahead with the transaction, the next stage is a binding, preliminary contract called the Contratto Preliminare di Vendita. This contract details the selling conditions including a description of the property, rights of way, ownership rights and stipulates the essential elements of the transaction. At this stage a deposit of 10-20 per cent of the property purchase price is usually payable by the buyer.
  3. Atto di Vendita (also known as Rogito) – Once the Contratto Preliminare di Vendita has been signed the notaio is appointed to draft the deed of sale known as the Atto di Vendita. This is a conveyance document that transfers the legal ownership of the Italian property, which is signed by both the buyer and vendor in their presence at the notaio’s office, completing the final stage of the buying process in Italy.

A reputable Italian property lawyer will assist if the buyer has any concerns and there are issues that need to be resolved before entering into a legally binding contract and parting with any money! Instructing a good independent Italian lawyer will help you avoid any potentially costly mistakes. 

What does an Italian lawyer do that a notaio doesn’t?

notaio is a public official who must remain completely impartial, as typically in Italy vendors and buyers use a single notaio for the property purchase transaction and therefore must not favour either side. Their main role in terms of Italian property purchases is to help facilitate the transfer of ownership between the buyer and seller. They oversee the property purchase, collect the taxes due and register the property with the Italian land registry (Catasto). However, crucially they cannot offer advice, unlike an independent Italian lawyer who represents the interest of the purchaser so it’s advisable to instruct and English-speaking independent Italian lawyer at the beginning of the buying process to ensure the following:

 

That you are protected as a buyer

By providing you with specialist advice, an independent English-speaking Italian lawyer will help you to make an informed decision about the property purchase in Italy. They are also in a position to negotiate the best contractual terms and conditions in the best interests of the buyer and advise you regarding any issues that (will inevitably) arise and negotiate a solution to this on your behalf.

 

All searches are carried out in good time 

While an Italian notaio will carry out searches with regards to land registry, ownership and the presence of mortgages, for example, they cannot offer any legal advice if any issues arise.

In addition, typically the notaio does not get involved with the property purchase until the third stage of the property buying process in Italy, by which point you will have already signed a legally binding contract and parted with a substantial amount of money. Your Italian lawyer will ensure that all the searches are carried out in plenty of time, meaning there won’t be any nasty surprises along the way, long before you sign any contracts and, crucially, before you hand over any funds!

 

Arrange a Power of Attorney (if needed)

If necessary your Italian lawyer can arrange a Power of Attorney so that all essential documentation can be signed on your behalf if you are unable to be present in Italy when the paperwork needs to be signed. This could save you additional money on potential unplanned trips to Italy.

You might find that an Italian lawyer can also assist with the transfer of utilities for a property purchase and obtaining a fiscal number (Codice Fiscale), a tax code similar to a National Insurance Number in the UK, which you will need in order to be able to buy property in Italy. If you’re not fluent in Italian it can prove challenging to organise such things, so an Italian lawyer may be able to help with this.

What do you need in an Italian lawyer?

If you’re buying a property in Italy it’s crucial that you instruct an independent Italian lawyer early in the buying process to ensure that your interests are protected. When choosing an Italian lawyer, you should consider the following:

 

Is your lawyer independent? 

By ‘independent’ we mean that your lawyer should not be linked in any way to the seller, developer or estate agent, to ensure that there is no conflict of interest.

Your Italian lawyer should be independent from the estate agent so that you can be sure that they are acting solely in your best interests. If the lawyer is connected to or regularly works with the estate agent they may have an interest in ensuring that you buy the property so the estate agent receives their sales commission. An independent lawyer however will only be concerned about ensuring you know everything you may need to know and any issues are resolved before you proceed with your property purchase in Italy.

 

Your lawyer should be able to speak both Italian and your own language.

Things can easily get lost in translation, so it’s crucial that your lawyer can communicate easily in your own language to explain everything clearly, as well as being fluent in Italian.

 

Is your lawyer clear about the costs involved?

A good lawyer should outline all the associated costs with buying a property in Italy (including lawyers’ fees, land registry, notary fees and purchase taxes) so that it’s clear from the beginning what the full cost will be and there are no nasty surprise bills at the end!

 

For more information about buying a property in Italy or for assistance from one of our recommended Italian lawyers give us a call on 01244 470 339 or email info@worldwidelawyers.co.uk

You can also download our FREE Buying Property in Italy guide.