When to apply for a renting license and how much it will cost

For the past year, we’ve been writing about the current situation regarding renting licenses for holiday villas and apartments on our blog. Specifically, we’ve discussed the legal requirements, the zoning project. Today we are back with an update that helps shed some light on some of the points that need more clarification: when and how much will licenses cost.

Provisional date

The Mallorca Council has prepared a new zoning proposal after the feedback received from the different municipalities of the island, and now the Environmental Commission of the Balearics has a month to finalise their report. This report is expected to be approved in the parliament session on the 27th July, but then a period of 45 days will be open to receive feedback and meet up with several associations pushing the final application date to the end of September. In the case of the capital, Palma, it looks like it might take a few weeks more until the 1st August, as their zoning proposal was introduced at a later date.

Cost

The determined prices for each sector which include €875 per place of occupancy for apartments, €3.500 for townhouses and villas and €291,67 for those who choose to rent their home for up to 60 days. Find out more about the pricing here.

Buying a Property in Mallorca

Buying process in Spain 
Once you have found the property you love, it is time for the paperwork. The property is selected and the terms agreed on. The property must then be secured. This can be done through private contracts between the two parties. It is customary that 10% of the purchase price is paid at this time. On completion a deed of conveyance ‘Escritura Pública’ must be signed by both parties under notary’s supervision in Spain.

Legal Advice in Spain 
It is advisable to appoint a local lawyer, who speaks the purchaser’s language who will carry out a title search, and advise the purchaser on all aspects of the investment.

NIE Numbers
All non-Spanish citizens require a personal identification and tax number to buy a property, referred to here in Spain as an NIE number. This can take some time (estimated between 3 and 6 weeks) so we recommend you apply early. Please note this does not affect your status in your home country. You can either apply for an NIE yourself at the Department of Extranjeros (Foreigners Department) ensuring you take your passport, or through your chosen legal advisor. Non EU applicants should contact their embassy for details of application.

Taxation in Spain
As a simple rule, when buying a property in Spain if you allow approximately 10%-12% on top of the asking price you will normally end up with some change in your pocket.  This will include Property Transfer Tax or VAT*, Notary and Land Registry fees, solicitor fees as well as any possible mortgage costs.

Property transfer tax & Stamp duty
On re-sales there is a property transfer tax set at on the following sliding scale:

Purchase price up to 400.000 € is 8%
Purchase price from 400.001€ to 600.000 € is 9%
Purchase price from 600.001€ and more is 10%

*Vat & Stamp duty
For first sale of newly built properties VAT is 10% and 1.2% Stamp duty.
For commercial property and first sale of a building plot, or a plot sold from a company Vat is 21% plus 1.2% Stamp duty

Registration 
The registration of the property is done by entering the deed of conveyance “Escritura Publica” at the land register office.

Completion
Completion can take place on whatever date you and the seller agree upon, from as little as one week (as long as you get the mortgage company to agree) up to one year if desired, from the date of signing the Option Contract. This date will be detailed in the Option Contract.

If the purchase is financed by a mortgage, the bank representatives will be present in order to authorise the new mortgage and pay the seller. If you are not able to attend on the specified date you are able to grant your solicitor/lawyer power of attorney so he or she can complete on your behalf.

Completion will take place between the relevant parties in front of the Notary who will witness the signing and transfer of the title deed or Escritura de Compraventa. The Notary acts for neither party specifically, but is a government official responsible for the execution of public documents; He/she will confirm the identity of both parties, and will check the Land Registry to verify legal ownership and that there are no out-standing debts or orders against the property.

The balance of the purchase price will be paid to the seller at this time, and any remaining purchase tax and fees will also be paid if going through a mortgage provider (if paying in full these taxes need only be paid within the month). The Escritura will then be registered by the lawyer in the corresponding Property Register. Once the Deed is signed you will be given the keys to your new property and a copy of the title deed, until the formal deed comes to you from the land registry (or via your Mortgage provider if they have acted on your behalf).

Congratulations! – it’s yours…home sweet home. Sit back and raise a glass of bubbly or two in celebration!

If you are interested in buying property in Mallorca and would like to speak to one of our sales team then we are happy to give any assistance you may require. Contact us

Real Estate and Mallorca, the never-ending love story

Well, it’s fair to say things are recovering here in Mallorca. From when the recession initially began and the great real estate bubble burst, house prices in Mallorca like everywhere in Spain, plummeted and the market became stagnant. Buyers and investors were affected and influence by:

  1. Banks not giving mortgages
  2. Problems with the Euro and Euro zone countries linked to the Sovereign debt

Now, seven years on from the onset of the recession the real estate market in Mallorca is showing positive signs of recovery and we perceive a new-found confidence in the property market developing again. With an increase in the number of sales and a number of good summer holiday seasons, this gives buyers sense of ‘security’ when owning a property in Mallorca.

We found this quote which sums up our thoughts on the current real estate market in Mallorca:

“A funny thing happens in real estate. When it comes back, it comes back up like gangbusters.” – Barbara Corcoran

Maybe Barbara was right, only time will tell…