Real Estate Investment in Spain

Summary: How can foreigners purchase a real estate property in Spain? In this article, we aim to provide an overview of the key legal and practical aspects foreign clients should consider before investing in the Spanish housing market. 

How does a property purchase in Spain work?

Spain offers a transparent and legally secure process for real estate investment. However, it is not without risks, particularly concerning private purchase contracts, which are not subject to a mandatory format and rely heavily on the contractual freedom of the parties involved.

Although ownership is typically transferred during the notary appointment, prior private purchase contracts, often accompanied by a 10% deposit, are very common in Spain and are fully effective under formal law aspects. In practice, this means that the decision to purchase and the review of all legal aspects and risks must occur before signing the private purchase contract as this document sets out all the binding conditions between the parties. The subsequent notarial deed merely formalizes or executes the terms previously agreed upon. Moreover, it is important to understand that the notary serves solely as a certifying official in Spain. They do not act to protect the buyer or offer legal advice and must remain neutral.

Therefore, engaging qualified legal support is essential to ensure a safe investment and to fully protect your rights. International buyers should be aware that certain procedural steps are highly recommended to ensure full protection of their ownership rights.

Spain has two complementary real estate registration systems which are characterized below.

If you would like to get to know more about how you can find information about real estate and get the certificate from the Land Registry we encourage you to look at another guide prepared by Legalmodo which you can find here.

1. The Land Registry (Registro de la Propiedad) is the official legal registry that confirms ownership from a civil law perspective and lists encumbrances (e.g., mortgages). Registration here is highly recommended as it offers protection against third parties acting in good faith.

The Land Registry is a specialised body under the Ministry of Justice. Each Land Registry office is run by a Registrador de la Propiedad- a legally qualified public official.

Legal information about registered property may be obtained by applying for:

• a “nota simple”- an unofficial extract containing basic property data, useful for informational or preliminary purposes or;
• a “Certificacion registral”- an official and legally binding certificate confirming ownership and registered rights.

These documents may be obtained from the relevant Land Registry office or via the electronic portal of the Colegio de Registradores de España.

2. The Cadastre (Catastro) is an administrative and fiscal registry that describes the property’s physical characteristics, such as location, surface area, layout, and cadastral value, for taxation and urban planning purposes, but does not certify ownership.

The Cadastre is managed by the General Directorate for the Cadastre (Dirección General del Catastro), which forms part of the Ministry of Finance (Ministerio de Hacienda).

Cadastral data is publicly accessible and may be obtained either online or in person. The main channels are:

• The official Cadastre portal: https://www.sedecatastro.gob.es/
• Local Cadastral Information Points (Puntos de Información Catastral- PICs) and municipal offices

The following official documents are available:

• Certificación catastral: a legally binding certificate that confirms the cadastral details of a property.
• Consulta Descriptiva y Gráfica: a non- certified extract providing a descriptive and graphical overview of the property’s characteristics.

Real Estate Property purchase process

The typical purchase process in Spain provides legal certainty and transparency. The main steps are as follows:

Real Estate Agency contract

The process often starts with the seller signing a contract with a real estate agency, outlining the agent’s services and commission. While not mandatory, a written contract ensures transparency. Although the seller typically pays the commission, the agency may also enter into a separate or additional agreement with the buyer, particularly in transactions involving property search. It is common for agents to have agreements with both the seller and buyer; however, agents primarily represent the seller and must disclose any dual representation to avoid conflicts of interest. Buyers are advised to seek independent legal advice, as agents do not act as legal representatives.

Reservation Agreement

Once a property is identified, the buyer and seller may sign a reservation agreement, usually with a deposit of 1–2% of the purchase price. This agreement temporarily removes the property from the market, allowing time for document review and due diligence.

The reservation deposit is typically paid to the real estate agency. To ensure legal certainty, the reservation agreement should clearly set out the conditions under which the deposit is refundable. If the transaction is not finalised and the seller or the agency refuses to return the deposit, the buyer may seek legal enforcement through civil proceedings.

Private Purchase Agreement

As indicated below, this stage of the purchasing process is very important. This contract will usually have a decisive impact on the final transaction. Therefore it should be drafted with utmost care and with the assistance of an experienced real estate lawyer.

This contract defines and confirms all agreed terms. It usually involves a 10% deposit. A thorough due diligence is essential at this stage, as the buyer assumes full responsibility for the property. It is often agreed that the deposit is forfeited if the buyer withdraws from the contract and, if the seller withdraws from the contract, they must repay double the deposit.

As with the reservation agreement, the second deposit is generally paid either directly to the seller or to the real estate agency, depending on the arrangement. In Spain, there is no public escrow system or neutral body responsible for managing such funds. Accordingly, if the transaction does not proceed and the seller or the agency refuses to return the deposit, the buyer may pursue legal remedies through civil proceedings.

While it is not standard practice, sometimes it is possible to arrange for the deposit to be transferred to a notary or lawyer who may act as an escrow agent under a private agreement between the parties. As it is not common it may be difficult to arrange in practice.

Public Deed Before a Spanish Notary

As explained before, together the Título and Modo ensure that ownership is validly and securely transferred. In practice, this usually takes place with the signing of the notarial public deed before the Spanish notary, which formally represents the transfer of possession (Modo). In most cases, the remaining purchase price is also paid at the same time because the seller transfers the ownership upon signing the public deed.

Land Registry and Cadastre Updates

After notarisation, the buyer must register the property in the Land Registry to secure legal title against third parties. While this step is not constitutive of ownership, it offers critical protection and is standard practice. Simultaneously, the Cadastral Office updates the property’s ownership details for tax and administrative purposes.

Conclusion

Spain offers a transparent and legally secure process for real estate investment. However, the process is not without risks, particularly regarding private purchase agreements, which are not governed by a mandatory format and rely heavily on the parties’ contractual freedom. Therefore, engaging qualified legal support is essential for a safe investment and to ensure full protection of your rights.

Verification Of Legal Status

The buyer of a property must have access to the following documentation in order to be fully confident about the sale:

• Property deed. This document must be provided by the seller, who must present the original at the notary’s office on the day the deed is signed.
• Updated simple note issued by the Land Registry. This document summarizes the legal status of the property, indicating its ownership, description, and any encumbrances or liens that may exist on it. The law firm advising the buyer can easily obtain this online. It is an essential document for understanding the legal status of the property.
• Updated cadastral certificate, which describes the physical characteristics of the property, including its size, built-up areas, and indicating measurements and boundaries. It can be consulted via the following link: https://www.sedecatastro.gob.es/ or requested through the law firm; it is very necessary if you are buying land on which to build a house, but not essential if you are buying an existing property.
• Energy efficiency certificate, which provides information on the property’s energy consumption and CO2 emissions. To obtain it, you must hire an authorized technician, who will inspect the home and issue the certificate.
• Certificate of occupancy or first occupancy license. This is only necessary in certain cases, including when the property is newly built.
• If applicable, certificate of debts with the Homeowners‘ Association. This must be requested from the president or administrator of the Association and certifies whether or not the seller has any outstanding debts with the Association.
• Latest property tax (IBI) receipt certifying payment of this tax.
• Technical Building Inspection Certificate (ITE), certifying compliance with the minimum structural requirements of the property (structure, installations, etc.). This is issued by an approved technician and is only necessary in the case of old buildings, those over 50 years old.
• If the property is mortgaged, you will need to request the corresponding certificate from the bank certifying full payment or, failing that, the outstanding debt.