When buying property in Spain, one of the first formal steps is signing a reservation contract, commonly known as an arras contract. This agreement protects both buyer and seller while the purchase process moves forward.

What is an arras contract?

An arras contract is a private agreement between buyer and seller that:

• Reserves the property at an agreed price.

• Sets a timeframe (usually 1–3 months) to complete at the notary.

• Includes a deposit, normally 10% of the purchase price.

Types of arras

The most common type in Spain is arras penitenciales (penitential deposit), regulated by Article 1454 of the Civil Code. This allows either party to withdraw, but with consequences:

• If the buyer withdraws: they lose the deposit.

• If the seller withdraws: they must return double the deposit to the buyer.

Other forms (arras confirmatorias or arras penales) exist but are less used in property sales.

What happens after signing?

• The buyer usually pays the deposit by bank transfer.

• The property is taken off the market.

• The lawyer begins due diligence: checking ownership, debts, planning issues, and certificates.

• Completion is arranged at the notary within the agreed deadline.

Example

John agrees to buy a villa in Catral for €200,000.

• He pays €20,000 deposit (10%) when signing the arras.

• If he later changes his mind, he loses the €20,000.

• If the seller backs out, they must refund him €40,000.

• Both are now committed to proceed, unless prepared to accept the penalties.

At Holiday Homes Catral, we prepare arras contracts that are clear, fair, and fully bilingual. We check that all conditions are transparent, that deposits are handled securely, and that buyers and sellers know exactly what they are signing.

⚖️ Disclaimer: This article refers to arras penitenciales, the most common type used in Alicante property transactions. Legal conditions may vary depending on the case. Always seek professional legal advice before signing.

If you plan to rent a property in Spain for more than 11 months, your agreement will likely fall under the Ley de Arrendamientos Urbanos (LAU), Spain’s Urban Rental Law. Knowing the rules helps both tenants and landlords protect their rights.

Duration of contracts

• Standard contracts last 5 years if the landlord is a private individual, or 7 years if the landlord is a company.

• Even if the contract is signed for 1 year, the tenant may extend it up to the full legal term.

• After this, contracts renew annually up to 3 more years, unless either party gives 30 days’ notice.

Rent increases

• Allowed once per year only if written in the contract.

• Linked to the IPC (Consumer Price Index) or other agreed index.

• In 2025, rent increases are capped at 3%.

Deposits and guarantees

• 1 month’s rent is the legal deposit.

• Landlords may request extra guarantees (e.g. 1–2 months more), but it must be in writing.

• Deposits must be lodged with the regional housing authority in the Valencian Community.

• When the tenant leaves, the landlord must return the deposit within 1 month, minus legitimate deductions for damages or unpaid bills. Delays mean interest is owed.

Agency fees

Since the housing law reform, estate agencies cannot charge tenants a commission. The landlord must pay the agency’s fee.

Responsibilities

• Tenants: pay utilities, keep the property in good condition, and handle small day-to-day repairs.

• Landlords: ensure the property is habitable and carry out major repairs.

• An inventory with photos at check-in is strongly recommended to prevent disputes.

What landlords can do to protect themselves

• Request additional guarantees in the contract.

• Take out rental insurance that covers non-payment or damages.

• Ensure the contract is correctly drafted and registered if necessary.

• Work only with a professional agency to check tenant solvency.

What happens if tenants default or leave suddenly

• Landlords can initiate eviction for non-payment, but this can take several months.

• If tenants leave with debts or damages, landlords may:

  • Retain the deposit and guarantees.

  • Claim additional amounts through court.

  • Report debts to official credit or tenant registries.

  • In some cases, pursue wage or bank account garnishment if the debtor remains in Spain.

Example

Maria rents an apartment in Alicante for €800/month.

• She pays €800 deposit + €800 guarantee.

• After 6 months, she moves out without paying utilities or the last month’s rent.

• The landlord keeps her €1,600 as compensation and files a claim for €300 in unpaid bills.

• If Maria had remained in Spain, the landlord could have pursued her through the courts and had her listed in a tenant debt registry.

At Holiday Homes Catral, we prepare contracts that comply with the LAU, screen tenants carefully, and explain all obligations clearly to both sides. We also guide landlords on legal protections and help tenants understand their rights, ensuring fewer risks and disputes.

⚖️ Disclaimer: This article refers to long-term residential rentals in Alicante province under the LAU. Laws may change, and each case is unique. Personalised legal advice is always recommended before signing or letting a property.

If you are buying in Alicante province, one of the first choices is new build or resale. Each has benefits and trade-offs.

New build

Pros

• Modern design and energy efficiency, better layouts and insulation

• Some customisation of finishes during construction

• Legal guarantees on new homes (10 years for structural issues, shorter for other defects)

• Low initial maintenance

Cons

• Delivery time if off-plan, often 12 to 24 months

• Taxes: IVA 10% + AJD 1.5% in Valencian Community

• Often located on newer urbanisations outside town centres

• Less character and mature surroundings

Resale

Pros

• Established areas close to services

• Move in soon after completion

• Taxes: ITP 10% as the general rule in Valencian Community

  • Reduced ITP 6% to 8% may apply only to resident buyers purchasing their primary residence and meeting legal criteria (for example under 35, large family, disability).

• More variety and individual character

Cons

• Possible renovation or upgrades

• Often lower energy performance

• You must verify there are no debts, community arrears or legal issues

Clear tax examples at €250,000

• Resale, standard buyer (non-resident or resident without reduction)
  ITP 10% = €25,000

• Resale, resident buyer who qualifies for reduction
  ITP 6% to 8% = €15,000 to €20,000

• New build
  IVA 10% = €25,000
  AJD 1.5% = €3,750
  Total = €28,750

This shows: new build tax load is €28,750, which is higher than a standard resale at €25,000, and much higher than a reduced ITP resale at €15,000 to €20,000.

At Holiday Homes Catral, we check every resale for debts and legal issues, and we only collaborate with trusted developers on new builds. We explain taxes up front, coordinate with notaries and lawyers, and support you from offer to keys so there are no surprises.

Disclaimer: Information refers to the Alicante province / Valencian Community. Reductions apply only to eligible resident primary-home buyers under current rules. Always seek personalised legal and tax advice.

Mortgages in Spain are available to Spanish nationals, foreign residents, and even foreign non-residents. The conditions vary depending on your status, income, and profile — and knowing the difference can save you both money and stress.

Loan-to-Value (LTV)

• Spanish nationals: typically up to 80%, but certain groups (first-time buyers, under 35s, families with children) may qualify for 90–100% financing.

• Foreign residents: usually up to 80%, though some banks will extend to 90% with strong income and financial stability.

• Foreign non-residents: normally 60–70%, though specialist banks and brokers may arrange more in certain cases.

Loan Terms

• Spanish nationals & foreign residents: standard 20–25 years, with some banks extending to 30–35 years for younger buyers.

• Foreign non-residents: normally capped at 20–25 years.

• In all cases, the maximum borrower age at the end of the mortgage is 70–75 years.

Interest Rates & Incentives

• Current mortgage rates in Spain (2024–2025): 3%–4% on average.

• Spanish nationals and foreign residents: often secure rates as low as 2.5%–3% fixed, depending on profile.

• Foreign non-residents: usually 3.5%–5%.

• Most loans are variable-rate, linked to the Euribor plus a margin (often 1.0%–1.5%). Fixed-rate loans are available but usually higher.

• Many banks offer interest rate discounts if you take other products with them, such as:

  • Home insurance, life insurance, or alarm/security insurance

  • Current account with direct debit of salary/pension

  • Credit card usage

  • Investment or pension products

• These discounts can reduce your rate by up to 1%, but the real cost of bundled products should always be checked carefully.

Documentation Required

All applicants must prove financial stability. Typical documents include:

• Passport and NIE.

• Tax returns.

• Recent payslips (3–6 months).

• Bank statements.

• Details of existing loans or debts.

• For self-employed: audited accounts or company financials.

Real Examples

Example 1 – Foreign non-resident buyer

Sarah, from the UK, buys a resale villa near Alicante for €200,000.

• The bank finances 65% (€130,000).

• She contributes €70,000 plus 12–15% purchase costs (€24,000–30,000).

• Term: 20 years, variable at Euribor + 1.2%.

• Monthly repayment: about €600–650.

Example 2 – Spanish national under 35

David, a 30-year-old Spanish national, buys his first home in Alicante for €150,000.

• He qualifies for 90% financing (€135,000).

• Term: 30 years fixed at 2.8%, with discounts for taking bank insurance and direct debit of his salary.

• Monthly repayment: around €555.

This shows how much conditions can differ depending on whether you are a foreign non-resident, a foreign resident, or a Spanish national.

Why Work With Us

At Holiday Homes Catral, we collaborate with banks and independent brokers to secure the best possible deals. We handle the process from start to finish: preparing documentation, negotiating with banks, ensuring secure fund transfers, and providing complete transparency. Our support continues until the day you collect your keys.

⚖️ Disclaimer: This information applies to the Alicante province / Valencian Community. Mortgage terms vary depending on the bank, nationality, residency status, and personal financial profile. Personalised advice is always recommended.

Spain attracts thousands of international buyers every year, many of whom are non-residents. Purchasing property here is entirely possible, but there are specific rules, documents, and taxes that non-residents must take into account.

NIE Number

The most important requirement is obtaining an NIE (Número de Identificación de Extranjero). This is a foreigner’s identification number needed for any property purchase, tax payment, or utility connection in Spain.

Bank Account

Opening a Spanish bank account is usually required to handle the purchase, pay taxes, and set up utilities.

3% Retention on Sale

Non-resident sellers should be aware of the 3% retention rule. When selling a property, the buyer must withhold 3% of the declared price and pay it to the Spanish Tax Authority (Hacienda). This ensures any capital gains tax due is collected. If no tax is owed, the seller can later request a refund.

Taxes on Purchase

Non-residents pay the same purchase taxes as Spanish residents:

• ITP (Transfer Tax): 10% on resale properties.

• IVA (VAT) + AJD (Stamp Duty): 10% IVA + 1.5% AJD on new builds.

Ongoing Taxes for Non-Residents

Non-resident owners must also pay:

• IBI (Property tax): annual municipal tax.

• Non-Resident Income Tax (IRNR): applied even if the property is not rented.

• Rental tax: If rented out, tax on rental income (19% for EU/EEA residents, 24% for non-EU).

Mortgages for Non-Residents

Spanish banks do offer mortgages to non-residents, but usually with stricter terms:

• Maximum financing of 60–70% of the price.

• Shorter repayment periods.

• More documentation required (proof of income, tax returns, bank statements).

Currency Exchange

Most non-resident buyers transfer funds from abroad. Using a currency exchange specialist instead of a high-fee bank transfer can save thousands.

A Real Example in Catral

John, a UK resident, buys a resale home in Catral for €150,000. Here is what he faces as a non-resident:

• NIE application: approx. €20–30 in government fees (plus lawyer assistance if needed).

• ITP (Transfer Tax): 10% = €15,000.

• Notary and Land Registry: around €1,200–1,500.

• Lawyer: approx. €1,500.

• Currency exchange: by using a specialist, John saves nearly €3,000 compared to his UK bank’s rate.

• Ongoing taxes: annual IBI (about €300–400 in Catral), plus non-resident income tax (calculated on cadastral value).

In total, John needs to budget around 12–15% extra on top of the purchase price to cover all costs — so for €150,000, about €18,000–22,500 in additional expenses.

When selling a property in Spain, one of the most common questions is about the “Plusvalía” tax. Officially called the Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana (IIVTNU), this municipal tax is applied when urban land is transferred — such as in a property sale, inheritance, or gift.

How is Plusvalía Calculated?

Plusvalía is a local tax set by each town hall. It is based on:

• The cadastral value of the land (not the property itself).

• The number of years the seller has owned the property.

• A percentage rate established by the municipality.

Importantly, Plusvalía does not measure how much profit you made on the sale. Even if you sell at a loss, the tax may still apply, though recent court rulings allow owners to contest it in cases where there is no real gain.

A Real Example in Catral

Let’s imagine a seller in Catral who purchased their home 15 years ago. The cadastral value of the land (excluding the building) is €30,000. The town hall applies its own coefficient based on years of ownership and a local tax rate.

• Years owned: 15

• Cadastral land value: €30,000

• Example coefficient applied: 0.15

• Local tax rate: 30%

Calculation: €30,000 × 0.15 × 30% = €1,350 Plusvalía tax

This means that even if the seller didn’t make a big profit on the property, they would still need to pay around €1,350 to the Ayuntamiento when selling. In some cases, the figure can be lower, but in others (especially for long ownership periods and higher land values) it may run into several thousand euros.

Who Pays Plusvalía?

• In sales, the seller is normally responsible for paying Plusvalía.

• In inheritances or gifts, the beneficiary (heir or recipient) pays.

• In rare cases, if the seller is a non-resident, the parties may negotiate, but by law the obligation rests with the seller.

When is it Paid?

The payment must be made to the local town hall within 30 days of signing the deed at the notary (or 6 months in the case of inheritance, extendable to 12).

Why is it Important to Check Early?

Because Plusvalía is calculated at local level, it is always best to request an estimate from the town hall before completing a sale. At Holiday Homes Catral, we guide our clients through this step to ensure there are no surprises after signing.

At Holiday Homes Catral, we always explain Plusvalía clearly during the selling process. We request estimates from the local council, inform clients of their obligations, and ensure the tax is paid correctly after the sale. Our goal is that every seller understands exactly what they will net after costs.

⚖️ Disclaimer: The above refers to the Alicante province / Valencian Community. Plusvalía is a local tax, and exact amounts depend on the regulations of each municipality. Always verify with your town hall or legal advisor before signing.

Purchasing a property in Spain, particularly in the Alicante province, is a major decision that requires careful planning. While many buyers focus on the advertised sale price, it is essential to understand that there are additional costs and taxes involved in the process. Being aware of these from the beginning helps avoid surprises and ensures a smooth transaction.

Taxes

• Transfer Tax (ITP): For resale properties, the standard rate in the Valencian Community is 10% of the purchase price.
  However, reduced rates between 6% and 8% may apply if the buyer is a Spanish resident purchasing their primary residence and meets certain requirements:

  • Under 35 years old.

  • Recognised large families (familia numerosa).

  • Families with dependent children.

  • Buyers with a disability of 65% or more.
    These reductions only apply to Spanish residents. Non-resident foreign buyers generally pay the full 10%.

• IVA (Value Added Tax): On new build properties, the rate is 10%.

• Stamp Duty (AJD): For new builds, buyers must also pay 1.5%.

Notary and Land Registry

Property purchases must be signed before a notary. Fees generally range from 600€ to 1,000€.
The Land Registry adds another 400€ to 800€.

Legal Fees

Independent lawyers typically charge around 1% of the purchase price, with a minimum of 1,200€ to 1,500€.

Bank and Mortgage Costs

• Opening fee: up to 1% of the loan.

• Valuation: approx. 300€ to 600€.

Other Expenses

• Gestoría: 300€ to 500€, if a bank is involved.

• Currency exchange: Specialist providers can save significant amounts compared to banks.

• Home insurance: Mandatory with mortgages, strongly advised otherwise.

Total Costs to Expect

In practice, buyers in the Alicante province should budget 12% to 15% extra on top of the purchase price. For a 150,000€ resale property, that means 18,000€ to 22,500€ in additional costs.

At Holiday Homes Catral, we ensure no surprises are left hidden. We check for debts on every property, explain all costs upfront, and connect our clients with trusted lawyers, notaries, and currency specialists. From the first viewing to receiving the keys, we guide you every step of the way.

⚖️ Disclaimer: This information refers to purchases in the Alicante province / Valencian Community. Reduced ITP rates (6% to 8%) may apply only to Spanish residents who meet legal requirements such as age, family status, disability, or first-time buyer conditions. Non-residents should budget for the full 10% ITP on resales.

Renting a property in Alicante Province can be an exciting step, whether you are relocating for a new lifestyle, seeking a holiday base, or simply testing the waters before buying. The Costa Blanca attracts tenants from all over the world, and while the process is straightforward, it is important to understand the rules, responsibilities, and costs before you sign on the dotted line.

The Legal Framework

In Spain, most residential rentals fall under the Ley de Arrendamientos Urbanos (LAU). This law governs the rights of both landlords and tenants. Some key points to keep in mind:

• Long-term rentals are generally considered contracts of 12 months or more. Tenants have the right to extend their stay up to 5 years if the landlord is an individual, or 7 years if the landlord is a company, provided they comply with the contract.

• Short-term rentals under 11 months are usually designed for temporary stays and do not give the same long-term protections. These are common for holidaymakers or people on fixed-term assignments.

• A contract should always be in writing and signed by both parties. Verbal agreements or informal deals are risky and not recommended.

Deposits and Guarantees

By law, the landlord must take a minimum one-month deposit for residential rentals. Many landlords request an additional guarantee, usually one or two extra months, especially if the property is furnished or of higher value. These amounts are refundable if the tenant leaves the property in good condition and all bills are settled.

Who Pays What?

It is important to be clear on financial responsibilities before moving in:

• Tenant usually pays: monthly rent, utilities such as water, electricity, gas, and internet, and sometimes rubbish tax.

• Landlord usually pays: community fees, property tax (IBI), and home insurance.
  Contracts can vary, so make sure everything is written clearly.

Setting Up Utilities

Tenants may need to transfer utility contracts into their own name, which requires proof of identity, the rental contract, and in some cases a bank account in Spain. This is standard procedure and ensures that you have full control of your consumption and bills.

Registering on the Padrón

Anyone renting in Spain long-term should register at the local town hall (ayuntamiento) on the municipal register known as the padrón. This is proof of residence and is needed for things like healthcare, schooling, and vehicle registration.

Income Declaration for Landlords

Landlords must declare rental income to the Spanish tax authorities, even if they are non-residents. Tenants are not responsible for this, but knowing your landlord is compliant can give peace of mind.

Insurance and Peace of Mind

Landlords are strongly advised to hold home insurance that covers both the property and third-party liability. Tenants can also consider a contents insurance policy to protect their personal belongings.

Final Thoughts

Renting is a fantastic way to experience the Costa Blanca lifestyle, but taking the time to understand the legal framework and practical steps will save stress later on. At Holiday Homes Catral, we make sure every rental is handled transparently with contracts that protect both tenants and landlords. From preparing the paperwork to ensuring utility setup runs smoothly, our goal is to help you settle in with confidence.

If you are thinking about renting in the Alicante Province, get in touch with us today and we will be happy to guide you through the process.