Investing in Mallorca: Important tips for German property buyers

The Importance of the 10% Deposit

The 10% deposit is a crucial element in the Spanish property purchase process.

If the buyer fails to appear at the notary appointment after signing the private purchase agreement without a valid reason, or if they do not complete the purchase, this deposit may be forfeited.

Conversely, the deposit also protects the buyer. If the seller backs out of the sale, for example, because they later receive a higher offer, they are typically required to refund the 10% deposit to the buyer and pay an additional 10% as a penalty.

Therefore, a private purchase agreement should only be signed when the buyer is absolutely certain they want to purchase the property.

Due Diligence Before Signing
It is strongly recommended to conduct a legal due diligence review of the property before signing the private purchase agreement.

While the contract can theoretically be made conditional, for example, contingent upon a positive due diligence result, in practice it is safer to complete all essential checks beforehand to avoid future disputes or interpretation issues.

Due diligence should include checking

whether the property is free of encumbrances;

whether there are any debts or liabilities;
whether all building permits are in place;

whether any alterations have been legalized;
whether the certificate of occupancy is available;

and whether the property complies with building regulations.

Building Regulation Review in Mallorca

Building regulations are particularly important in Mallorca.

It must be verified whether the house was legally constructed, whether all extensions or renovations are permitted, and whether the property complies with applicable building regulations.

Special caution is advised with rural properties, as extensions, renovations, or changes of use may be restricted.

Hidden risks such as unauthorized additions, missing licenses, or ambiguities in building regulations can have significant consequences.

Timeframe until the Notary Appointment

After signing the private purchase agreement, a deadline for the notary appointment is usually agreed upon.

This deadline is negotiable. Periods of one to three months are typical, and in some cases, even longer.

If the buyer requires financing, especially through a Spanish bank, sufficient time should be allowed. Financing in Spain can easily take two months or more.

Payment of the Purchase Price at the Notary’s Office

Another important difference from Germany is the payment process.

In Spain, the full purchase price is usually paid on the day the deed of sale is executed at the notary’s office.

On this day, the buyer receives the keys and becomes the owner of the property.

There is no such thing as a later reversal of the transaction as in Germany. Therefore, financing, due diligence, and all contract documents must be fully arranged before the notary appointment.

Tourist Rentals and Holiday Rental License

If the property is purchased as an investment, the possibility of tourist rentals plays an important role.

In Spain, a rental is generally considered a tourist rental if the rental period is less than two months and the property is rented through platforms or agencies such as Airbnb.

For longer rental periods, for example, three or four months, a tourist rental license is usually not required.

In Mallorca and the Balearic Islands, however, tourist rental licenses are heavily regulated. There are zones where tourist rentals are prohibited, and the number of licenses is limited.

Furthermore, a homeowners’ association can prohibit tourist rentals in certain cases.

Anyone buying a property with the intention of generating rental income through holiday rentals should definitely have this point checked as part of their due diligence.

Taxes when buying property in Mallorca

There are also significant tax differences between Spain and Germany.

When buying a used property in the Balearic Islands, property transfer tax is levied. This is generally between 8% and 11%, depending on the purchase price.

Notary fees are often lower in Spain compared to Germany, as the Spanish notary primarily fulfills a formal function.

Legal review, contract drafting, and support throughout the purchase process are predominantly handled by a lawyer in Spain.

Therefore, it is particularly important to consult a specialized lawyer early on.

The role of the lawyer

The lawyer plays a central role in real estate purchases in Spain.

He inspects the property, prepares or reviews the private purchase agreement, coordinates with the notary, checks the legal and tax aspects, and accompanies the buyer until the notarized deed of sale is signed.

For German buyers, it is particularly advisable to choose a Spanish lawyer who speaks German.