The purchase of a home in Spain usually takes place in several stages. Although every transaction may have its own particular features, three principal moments are common: the reservation, the deposit agreement and completion by public deed.
Each has different effects and, above all, every document should be reviewed before it is signed. A seemingly simple clause may later determine whether sums are refunded, the transaction timetable or even whether the buyer can withdraw.
1. The reservation
The reservation is usually the first document signed once the buyer decides to proceed with a property.
It normally involves paying a sum to withdraw the property temporarily from the market while the transaction is prepared. However, there is no single model of reservation agreement and they do not all have the same effects.
Before signing, it is important to review matters including the agreed price, the reservation period, who receives the money and the circumstances in which it may be refunded or forfeited.
Where documentation is still outstanding, it may therefore be advisable for the document to state expressly the conditions on which the transaction will continue.
2. The deposit agreement
The deposit agreement is one of the most important stages of the purchase.
Although it is not mandatory, it is a genuine contract and may create significant obligations for both buyer and seller from the moment it is signed.
It should therefore not be limited to identifying the property, the price and the proposed completion date.
Before assuming a significant financial commitment, a legal review of the property is advisable.
3. Completion by public deed
The third stage is signature before a notary.
The deed formalises the transfer, records the price and payment methods and incorporates or verifies different legal aspects of the transaction.
Among other matters, the notary verifies the identity and capacity of the parties, the land-registry position and charges, certain owners’ association and property-tax matters, payment methods and the tax obligations arising from the purchase.
However, reaching the notary does not replace the work that should have been carried out beforehand.
Ideally, the deed should reflect a transaction that has already been reviewed and negotiated, rather than being the first moment when the buyer discovers a charge, documentary discrepancy or unexpected condition.
What if the buyer is foreign?
The structure of the transaction is essentially the same, but some additional formalities should be prepared in advance.
A foreign buyer will need an NIE, the identification number used in Spain for procedures connected with economic, professional or social interests.
A Spanish bank account may make subsequent property-related payments easier, but it should not be confused with a general legal requirement for purchasing property in Spain.
Conclusion
A purchase does not begin on the day of completion.
Reservation, deposit agreement and public deed are three different stages, and what is signed early in the process may determine what happens later.
Reviewing the property documents in advance, identifying potential risks and drafting the clauses correctly allows the buyer to know exactly what is being acquired, on what terms and which obligations are being assumed before the most significant payments are made.