How to change the ownership of a house

We were having a drink together with the building workers as one of the property that we had designed and managed was finally completed and ready to be handed over.

 

The client, a young vivacious business Expat spitted out after the first glass of wine if I knew how much it will cost to add a new co-owner to the house deeds. Apparently he just met the love of his life (three month ago) and wanted to incorporate this person as co-owner of the property.

 

After the initial commentaries about how sure he was about it etc, I did mentioned that it would not cost much but in any case I would carry out some research on the subject and provide him with an approximate cost, recommending however to get in touch with a solicitor to carry out the process.

 

Very expensive and complicated.

After I concluded the research on the matter however, I had to admit that the cost and complexity of changing the ownership of a house was more, much more costly of what I had anticipated.

 

Not all legal forms are economically viable when incorporating a spouse as joint owner in the deeds of a house. However, it isn't so because of the costs and the procedures involved. Counting only notaries expenses, lawyers and the process itself to change ownership at the Property Registry, you can be over 1,000 Euros out of pocket. In addition, the dissimilar taxation in the different regional community where the operation is performed could raise the final sum up to 25,000 Euros, being the house of similar characteristics but in different geographical location.

 

There are two ways to introduce a wife/husband in the deeds of a house; through a sale or donation?

Whatever the choice, he or she, at the time of starting the process, becomes either 'buyers', in the first case, or 'donor' in the second. In the latter case, being married or not may have implications for tax calculation, since the character of 'not been a family member' increases the taxation rate.

 

Purchase of the property.

Of the two existing two options of introducing a couple in the ownership of the property through a purchase or donation, the first is often the most economical for both parties. Expenses such as notary fees are shared, although the remaining expenses fluctuate depending on whether we are referring to a buyer or a seller.

 

The buyer must cope with changing the ownership in the deeds at the Land Registry, although this process usually can be done by the notary himself. But the more onerous disbursement to be assumed by the buyer is the Transfer Tax (ITP), which taxes 7% of the final amount of the sale. In addition, it must be shown beyond any doubt before the notary the agreed form of payment.

 

Expenses such as notary fees are shared, although the remaining costs vary depending on whether is a buyer or seller.

 

For the seller, apart from sharing notary expenses, must also face the payment of Municipal Value of Land Tax Increase (IMIVIT), better known as the "Plusvalía Municipal". You will also have to pay 18% income tax on the difference between the transfer value and the acquisition cost. The financial amounts of these payments vary, in the first case, according to the municipality and the assessed land value of the property and in the second, depending on the price of the property.

 

Donation.

The other possibility for introducing the couple as a co-owner in the deeds is by bequest part of the ownership. Some procedures matches that performed in the process of buying and selling, as the notary and the Land Registry expenses are similar. But keep in mind that the Tax Donations could make the operation much more expensive. The minimum to be paid will be 7.65% of the purchase price of the property and can reach up to 34%.

 

The higher the heritage amount, the more that has to be paid.

But also, to the figure that it is obtained after applying the percentage that it is assigned a number of multipliers had to be incorporated, which vary according to the relationship of the protagonists and the existing heritage of whom receives the gift. If the degree is direct, i.e. between parents and children or spouse, the figure is multiplied by one. While if you want to include in the deeds a girlfriend (as this was the case), it should be multiplied by two. And this is because one member of an unmarried couple is considered a 'stranger' so it would be cheaper to wed first and then carry out the donation.

 

The amount also depends on the autonomous community in which they are domiciled, since in certain Spanish communities living together it is considered the same as a marriage. But this tax also takes into account the existing assets of the person who is donating the house. The lower section is to 390,657.87 Euros. The higher the heritage of whom receives it, the more that will have to be paid.

 

Before an operation of this magnitude is initiated and provided the amount of paperwork required I highly recommend using an expert on the subject of course. 

 

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