Buying or selling in Mallorca with confidence

Three documents usually follow one another in a property sale. The reservation contract is a short agreement under which the buyer pays a small sum so that the seller withdraws the property from the market for a few days while the documentation is reviewed. It should state what happens to that sum if the transaction does not go ahead.

The deposit contract (contrato de arras, or private sale contract with a deposit) sets the final terms: price, deadline for signing, method of payment, charges, expenses and the consequences of non-performance. It is the most important document of the preliminary stage, because it binds both parties and determines everything that follows.

The public deed before a notary is the act by which the sale is formalised, the outstanding price is paid and the keys are handed over. It is then entered in the Land Registry. Although the private contract already binds the parties (either of them may require the other to raise it to a public deed), registration is what protects the buyer against third parties, so it should not be omitted.

Article 1454 of the Civil Code governs penitential deposits: if the buyer withdraws, the sum paid is forfeited; if the seller withdraws, the seller must return double that sum. This is the regime that applies as a general rule, unless the contract expressly provides otherwise.

Two other types should be distinguished. Confirmatory deposits (arras confirmatorias) are a part of the price paid on account and do not allow withdrawal: the party in breach may be compelled to perform or to pay compensation. Penal deposits (arras penales) set compensation for non-performance, but they do not confer a right to withdraw either.

The drafting is therefore decisive. The contract must state clearly what type of deposit it is, until when withdrawal is possible and what happens if the deed is not signed within the agreed period. The courts look at the intention of the parties and the literal wording of the clauses, and ambiguous drafting often ends in litigation. Moreover, withdrawal is possible only while the sale has not been completed: once the deed has been executed, it is no longer available.

Beyond the price and the sum paid as a deposit, a well-drafted contract should set out: the full identification of the parties; a description of the property with its registry details and cadastral reference; the position regarding charges, mortgages, tenants or occupiers, which must match the registry extract (nota simple); the method and timetable of payment; the deadline for executing the deed and for handing over the keys; and who bears each expense and tax (for example, the municipal plusvalía tax or the cost of the habitability certificate).

It should also include the documents the seller undertakes to provide (energy certificate, habitability certificate, certificate of debts to the owners' association, property tax receipts), a condition precedent if the buyer depends on a mortgage, the specific consequences if one of the parties fails to attend the signing, and the condition in which the property is to be handed over.

These clauses must be negotiated before any money changes hands: once the contract has been signed, changing them is very difficult.

Property due diligence is the legal, registry, planning and tax review of the property before committing to buy it. Its purpose is to ensure that the buyer knows exactly what is being acquired and subject to which charges. As a minimum, it examines the registry extract from the Land Registry (owner, description, mortgages, seizures, easements and tax encumbrances), the title deed and the cadastral record, checking that the area and the owner match the Land Registry.

It also studies the planning position (licences, declared building works, enforcement proceedings, land classification and restrictions), the position of the owners' association (debts, approved special levies, bylaws, outstanding technical inspections), the property tax (IBI) and other local taxes, and the possession position: whether the property is vacant or occupied by tenants or other occupiers.

In Mallorca, this also covers the habitability certificate, the energy certificate and, if the property is operated as a holiday let, the authorisation for that activity. Ideally it should be carried out before signing the deposit contract. If that is not possible, the contract must leave open a way out if a problem arises.

In Mallorca it is common to find rural properties with buildings that are not correctly recorded in the Land Registry or the Land Survey Register (Catastro), or that were erected without a licence. Before buying, it must be verified that the building exists lawfully (a licence or title supporting it), that it matches what is recorded in the Land Registry and the Catastro, and that it is not subject to any planning enforcement proceedings or demolition order.

The age of a building may prevent the authorities from ordering its demolition, but it does not automatically legalise it: it may remain in a situation known as «fuera de ordenación» (non-conforming), with limits on carrying out works and with difficulties in obtaining finance, insurance or utilities. On rural land, moreover, Balearic legislation (Law 12/2017 on town planning in the Balearic Islands, and the island regulations) restricts the permitted uses and extensions, so a preliminary planning report is advisable.

Rights of way, access by public or private track, water rights (wells, cisterns), sewerage and any effect of protected areas or the coastal easement zone must also be reviewed. All of this should be recorded or covered in the contract.

The purchase of a second-hand home is subject to the Property Transfer Tax (Impuesto sobre Transmisiones Patrimoniales, ITP), which is paid by the buyer. In the Balearic Islands a progressive scale applies by bands: 8% up to 400,000 euros, 9% up to 600,000, 10% up to 1,000,000, 12% up to 3,000,000 and 13% on any excess. Reduced rates and allowances exist for a main residence in certain cases (for example, young people, large families or persons with disabilities), subject to requirements and to a maximum price limit that is updated periodically. The current position should be checked with the Balearic Tax Agency (Agència Tributària de les Illes Balears, ATIB) before signing.

If you buy a new home from the developer, you do not pay ITP but VAT (as a general rule, 10% on housing) plus Stamp Duty (Impuesto de Actos Jurídicos Documentados, AJD), which in the Balearic Islands is generally 1.5%. The return is filed after signing, normally within thirty working days.

Notary, Land Registry and administrative agency fees must be added to the taxes. Before deciding whether a transaction suits you, calculate the total cost with a prior estimate.

The municipal plusvalía (Tax on the Increase in Value of Urban Land) is charged on the increase in the value of the land during the time the seller has owned it. By law the seller pays it, although the parties may agree otherwise in the contract; such an agreement binds only them, not the Town Council.

Following the 2021 reform (Royal Decree-law 26/2021), the tax is calculated by two methods and the more favourable applies: the objective method, which multiplies the cadastral value of the land by coefficients depending on the years of ownership, or the actual method, based on the gain actually obtained on the sale. If the property is sold at a loss, there is no increase and no tax is due. Each Town Council sets its coefficients and its rate (with a statutory maximum of 30%), so the ordinance of the municipality should be consulted.

The deadline for filing the self-assessment is thirty working days from the deed in transfers between living persons, and six months from death in inheritances, extendable to one year if requested in time. Late filing incurs surcharges and interest.

In addition to the municipal plusvalía, a resident seller is liable to personal income tax (IRPF) on the capital gain, which is the difference between the transfer value and the acquisition value, adjusted for the expenses and taxes inherent in both transactions. The gain forms part of the savings tax base and is taxed on a progressive scale.

There are significant reliefs. The gain on the sale of the main residence is exempt if the proceeds are reinvested in another main residence within the statutory period (two years), and it is also exempt where the seller is over 65. These rules carry requirements that should be studied before selling, not afterwards.

If the seller is not resident in Spain, the buyer must withhold 3% of the price and pay it to the Spanish Tax Agency (form 211) as a payment on account of the seller's tax. The seller is taxed on the gain at a fixed rate depending on their residence, and the withholding is subsequently regularised. This must be provided for in the contract, because it reduces the amount the seller receives on the day of signing.

Yes, within limits. Under Article 9.1.e) of the Horizontal Property Act, anyone who buys a flat or commercial unit is liable, with the property itself, for the contributions owed by the previous owner, up to the amount due for the current year and the three preceding calendar years. This is known as a real encumbrance (afección real): the association may claim against the property even though the buyer is not the debtor.

To avoid surprises, in the deed the seller must declare that payments are up to date or provide a certificate of debts signed by the person acting as secretary of the association (usually the property manager), with the approval of the chairperson. The buyer may expressly release the seller from providing it, but doing so means assuming the risk.

We therefore recommend always requesting the certificate before signing and reviewing the minutes of recent meetings to identify approved or pending special levies, refurbishment works or ongoing litigation. If there is a debt, it is normally deducted from the price or settled at the signing.

They are two different documents. The energy performance certificate is compulsory for selling or letting almost any home and its rating must appear in advertising for the property. It is issued by a qualified technician and registered with the regional body.

The habitability certificate (cédula de habitabilidad) is a requirement specific to the Balearic Islands: it certifies that the home meets the minimum conditions to be lived in (Decree 145/1997 and Law 5/2018 on housing in the Balearic Islands) and is issued by the Island Council; in Mallorca, the Consell de Mallorca. It is essential for contracting water, electricity and gas supplies on a permanent basis and, in practice, is required in order to formalise sales and lettings. It has a period of validity (usually ten years), after which it must be renewed.

Please note that the regulation has recently changed. The first-occupation certificate has been replaced by the municipal first-occupation licence and the obligation to include the details of the certificate in advertisements has been removed, so it should be checked which document applies to each property. The deposit contract must make clear who obtains and pays for the certificate or its renewal.

Law 5/2019, regulating real estate credit agreements, reinforces transparency. The bank must provide you sufficiently in advance (at least ten calendar days before signing) with the European Standardised Information Sheet (FEIN) and the binding offer, and before signing you must attend the notary, who will check that you have understood the terms. This prior notarial step is compulsory.

Under current law, most of the costs of arranging the mortgage (notary, Land Registry, administrative agency and stamp duty) are borne by the bank, and the borrower generally bears the valuation. Review carefully the arrangement fee, default interest and early repayment demand clauses.

The timetable is a critical point. If the purchase depends on the mortgage, the deposit contract must include a condition or period allowing you to withdraw without losing the deposit if the bank does not grant the finance. In addition, banks usually finance a percentage of the lower of the price and the valuation, so you will have to contribute your own capital, in addition to taxes and expenses.

Anyone who buys a let property must respect the tenancy agreement on the terms laid down by law. If the property was registered and the buyer meets the requirements of a protected third party (tercero hipotecario), the Urban Leases Act obliges the buyer to respect a residential tenancy for the first five years of the contract (seven, if the landlord was a legal entity), even if the tenancy was not registered. After that period, if the contract is not recorded in the Land Registry, the buyer may bring the arrangement to an end.

In addition, in a residential tenancy the tenant has, unless validly waived, a preferential right of acquisition. The seller must give the tenant verifiable notice of the decision to sell, the price and the essential terms, and the tenant has thirty calendar days to exercise the right of first refusal (tanteo). If the tenant is not notified, or the sale is made on terms more favourable to the buyer, the tenant may exercise the right of redemption (retracto) after the sale, also within thirty days of being notified of the deed.

If you buy a let property, require in the contract a copy of the tenancy agreement, up-to-date receipts and proof that the tenant was notified or waived the right. If you are selling, give notice before signing the deposit contract.

It depends on whether the property is a dwelling and how quickly action is taken. If the occupation affects a home where someone lives or a second home that is actually inhabited, it may constitute breaking and entering a dwelling (allanamiento de morada, Article 202 of the Criminal Code); if it is an empty home or commercial premises, it may constitute unlawful occupation of property (usurpación, Article 245). In both cases a criminal complaint may be filed, and the 2025 procedural reform allows, in certain cases, these offences to be handled through fast-track trials and for interim removal to be ordered. If the occupation is detected as it occurs, the police may intervene immediately; there is no «two-day» period after which the occupier acquires any right.

The civil route is the summary oral proceeding for protection of possession (Article 250.1.4 of the Civil Procedure Act, as amended by Law 5/2018). It may be used by individuals who are owners or lawful possessors, non-profit entities entitled to possession and public bodies that own social housing. On admission of the claim, the occupiers are required to produce, within five days, a title justifying their possession; if they do not, the court orders the immediate handover of the home. If they produce a title, the oral proceeding continues.

In practice, eviction may be delayed if the occupiers demonstrate a situation of vulnerability, because social services are notified and, depending on the rules in force at the time, it may be suspended. The key is therefore to act quickly, gather the ownership documents and not take the law into your own hands: changing the locks with the occupiers inside or cutting off utilities may give rise to liability.

The formalities are straightforward if prepared in good time. As a foreign buyer you need an NIE (foreigner's identification number), which is essential for signing the deed, paying taxes and opening a bank account. You may sign in person or by means of a notarial power of attorney granted before a notary or consulate, which must normally be apostilled and, where applicable, translated.

Notaries and banks apply the anti-money laundering rules: you will be asked to prove the source of the funds and the payments are identified in the deed, so it is advisable to pay by bank transfer or banker's draft and to avoid cash.

After the purchase, a non-resident owner files an annual Non-Resident Income Tax return (form 210), even if the property is not let, on the deemed income from the property, and may have Wealth Tax obligations. Inheritance and gift taxes must also be taken into account, which vary according to the residence of the deceased and of the heir. It is advisable to plan ownership (in the name of one or both spouses, or of a company) with professional advice before buying.

Signing before the notary is not the end of the process. Once the deed has been executed, the outstanding price is paid (preferably by transfer or banker's draft), the keys are handed over and, where appropriate, a handover record or inventory is drawn up.

Several formalities with deadlines then follow. The buyer must settle the ITP or AJD with the Balearic Tax Agency, normally within thirty working days; if this is entrusted to an administrative agency or to the lawyer, it is done without your needing to intervene. The seller must file the municipal plusvalía within thirty working days. The deed is submitted to the Land Registry for registration, which protects the buyer against third parties, and the change of ownership is notified to the Catastro.

Finally, the utilities (for which a valid habitability certificate is required), the property tax (IBI) and the owners' association must be transferred into the new owner's name, and the home insurance should be reviewed. If a problem emerges later (hidden defects, differences in area, undeclared debts), there are time limits for bringing a claim, so all the documentation from the transaction should be kept.