Authored by the expert who managed and guided the team behind the Spain Property Pack
Yes, the analysis of Madrid's property market is included in our pack
If you're considering investing in the vibrant city of Madrid, understanding the legal requirements for purchasing property is a crucial first step.
What are the necessary legal documents? Are there any restrictions for foreign buyers? How can you ensure a smooth transaction?
In this article, we'll break down the legal essentials you need to know before buying property in Madrid.
Actually, we know this market inside and out. We keep tabs on it regularly, and all our discoveries are reflected in the most recent version of the Spain Property Pack
Legal Requirements for Buying Property in Madrid
When purchasing property in Madrid, there are several legal requirements and steps that must be followed. Below is a detailed table outlining these requirements, including necessary documentation, financial obligations, and procedural steps.
| Requirement | Description | Estimated Cost & Time |
|---|---|---|
| Obtain a NIE (Número de Identificación de Extranjero) | A NIE is a tax identification number required for all foreigners conducting financial transactions in Spain, including property purchases. | €10-20 1-2 weeks |
| Open a Spanish Bank Account | Necessary for handling financial transactions related to the property purchase, such as paying taxes and fees. | Varies by bank 1-2 days |
| Hire a Lawyer | A lawyer can assist with due diligence, contract review, and ensuring compliance with Spanish property laws. | €1,000-3,000 2-4 weeks |
| Conduct a Property Survey | A survey ensures the property is in good condition and verifies the boundaries and legal status. | €300-600 1-2 weeks |
| Sign a Preliminary Contract (Contrato de Arras) | This contract reserves the property and typically requires a deposit of 10% of the purchase price. | 10% of property price Immediate |
| Obtain a Mortgage (if needed) | If financing is required, a mortgage must be arranged with a Spanish bank. | Varies by lender 4-6 weeks |
| Sign the Public Deed (Escritura Pública) | The final contract is signed before a notary, officially transferring ownership of the property. | Notary fees: 0.1-0.5% of property price Immediate |
| Pay Property Transfer Tax (Impuesto de Transmisiones Patrimoniales) | A tax on the transfer of property, typically around 6-10% of the purchase price. | 6-10% of property price Immediate |
| Register the Property | The property must be registered in the Land Registry to ensure legal ownership. | €400-700 1-2 weeks |
| Pay Notary and Registry Fees | Fees for the notary and registration services, usually a small percentage of the property price. | 1-2% of property price Immediate |
| Arrange for Utilities and Services | Set up accounts for water, electricity, and other utilities in the new owner's name. | Varies 1-2 weeks |
| Obtain Home Insurance | While not legally required, home insurance is recommended to protect the investment. | €200-500 annually Immediate |
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What You Need to Know Before Buying Property in Madrid
What are the residency requirements for non-EU citizens buying property in Madrid?
Non-EU citizens can purchase property in Madrid without needing to be residents of Spain.
However, if they wish to stay in Spain for more than 90 days, they must apply for a visa or residency permit.
For property investments over €500,000, non-EU citizens may qualify for a Golden Visa, granting residency rights.
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Are there any restrictions on the type of property a foreigner can buy in Madrid?
Foreigners can buy both residential and commercial properties in Madrid without restrictions.
There are no specific limitations on the type of property, whether it's an apartment, house, or land.
However, purchasing property in certain historical or protected areas may require additional permissions.
What taxes are applicable when buying property in Madrid?
When buying a property in Madrid, buyers must pay a Property Transfer Tax (ITP) of approximately 6% to 10% of the purchase price.
New properties are subject to a Value Added Tax (VAT) of 10% instead of the ITP.
Additionally, there is a Stamp Duty (AJD) of around 1% of the property value.
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How much are the notary and registration fees when purchasing property in Madrid?
Notary fees in Madrid typically range from €600 to €1,000, depending on the complexity of the transaction.
Property registration fees are generally between €400 and €600.
These fees are usually paid by the buyer and are essential for the legal transfer of property ownership.
What is the process for obtaining a mortgage in Madrid as a foreigner?
Foreigners can apply for a mortgage in Madrid, but they may face stricter lending criteria compared to residents.
Spanish banks typically offer mortgages covering up to 70% of the property's value for non-residents.
Applicants must provide proof of income, credit history, and other financial documents to secure a mortgage.
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What is the average cost per square meter for property in Madrid?
The average cost per square meter for property in Madrid is approximately €3,500, but this can vary significantly by neighborhood.
In prime areas like Salamanca or Chamberí, prices can exceed €6,000 per square meter.
Conversely, in less central areas, prices may be as low as €2,000 per square meter.
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Are there any legal requirements for conducting a property survey before purchase?
While not legally required, it is highly recommended to conduct a property survey before purchasing in Madrid.
A survey can identify structural issues or legal discrepancies that may affect the property's value or usability.
Buyers typically hire a qualified architect or surveyor to perform this assessment.
What is the role of a gestor in the property buying process in Madrid?
A gestor is a professional who assists with administrative and legal paperwork during the property buying process.
They help ensure that all necessary documents are correctly filed and that the transaction complies with Spanish law.
Hiring a gestor can be particularly beneficial for foreigners unfamiliar with the local legal system.
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How long does the property buying process typically take in Madrid?
The property buying process in Madrid usually takes between 6 to 12 weeks from the initial offer to completion.
This timeline can vary depending on factors such as mortgage approval and the complexity of the transaction.
Delays may occur if there are legal issues or if additional documentation is required.
What are the legal implications of buying a property with existing tenants in Madrid?
When purchasing a property with existing tenants, the new owner must honor the terms of the current lease agreement.
Spanish law provides strong tenant protections, and eviction can only occur under specific legal circumstances.
Buyers should review the lease terms and consult with a legal expert to understand their obligations.
Is it necessary to hire a lawyer when buying property in Madrid?
While not mandatory, hiring a lawyer is highly advisable to navigate the legal complexities of buying property in Madrid.
A lawyer can conduct due diligence, review contracts, and ensure compliance with all legal requirements.
This can help prevent potential legal issues and provide peace of mind throughout the transaction.
What is the impact of community fees on property ownership in Madrid?
Community fees are regular payments made by property owners in shared buildings or developments for maintenance and services.
These fees can range from €50 to €200 per month, depending on the amenities and services provided.
Buyers should consider these costs when budgeting for property ownership in Madrid.