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Buyers Guide
Contents
Introduction [Top]
Buying a property is always going to be a memorable experience. In Spain or
in any other foreign country it may at first appear to be a little daunting. This
may be due to the different languages, laws, regulations and procedures that
take place. Our professional and dedicated staff at Property Alliance S.L. are
always on hand to offer support and advice to make your purchase as stress
free as possible.
Due to the sub-tropical climate, Tenerife (Canary Islands) is an ideal location
both for visitors and residents. Whether your intention is to relocate, own
a holiday home or increase your income through investment, the team at
Property Alliance will help you find the right property for you. We hope
this brief guide will help you to understand the procedures required when
purchasing a property in Tenerife.
About Tenerife [Top]
The eternal freshness and warmth of the islands is unrivalled elsewhere
in Europe and with this in mind it is little wonder Tenerife's business and
investment climate has become equally attractive. Whether you are buying for
pleasure or profit, any investment in Tenerife is a sound one.
Opportunities to indulge in history and tradition as well as social and
sporting activities are equal. Tenerife is swamped with incredible dive sites
and schools, trekking, cycling, Championship Golf Courses, mountainbiking,
deep-sea fishing, wind, kite and traditional surfing are a few more
reasons why more home-buyers are flocking to Tenerife. The flora and fauna
of Tenerife is incredibly diverse and incorporated into many aspects of life
in Tenerife. Golf courses, archaeological sites, National Parks and walks
all provide opportunities to enjoy Tenerife's wilderness. The standard of
Tenerife's beaches is understated in Europe. Tourist attractions are especially
unique and equally interesting to residents and visitors alike. All this has
led to the incredible development of southern areas in Tenerife. Demand to
acquire a piece of paradise has been immense over the last twenty years and
the trend continues to grow. As a result house prices have increased more than
comfortably for those who own a home in Tenerife. Better returns have rarely
been found elsewhere in Europe in recent years.
Tenerife offers the homebuyer more than any other European location. Property
Alliance can offer further advice on all of the things we have tempted you
with here and we hate to tell you but we have barely scratched the surface.
Purchase Contract [Top]
When you have found the property that is right for you it will be necessary to
pay a deposit.
In order to take a property off the market you will need to pay an initial holding
deposit, which can range from 3,000 - 6,000e.
For a re-sale apartment the deposit is usually 10% of the purchase price.
A contract will be drawn up which will detail the terms and conditions of
the purchase and will state a date for completion. It will also confirm that
the person selling the property is entitled to do so and will guarantee that the
property will be transferred free from all encumbrances and rights of third
parties and will also state who is responsible for all costs and taxes involved.
If you are buying "off plan" the deposit can range between 10-25%. Again
the contract will state similar details and in addition will include further
information regarding ownership of the land, completion date, building
permissions and the setting up of communities.
Your solicitor will read through the contract and will clarify any details or
clauses you maybe unsure of before you sign.
Legal Advice [Top]
As in the United Kingdom when purchasing a property it is advisable to
appoint a Solicitor. We will introduce you to an independent English speaking
Spanish Solicitor.
Your appointed Solicitor will make all the necessary checks and searches
and will confirm the property is free of any debts and obtain the following
documents and receipts before you sign the Escritura (Title Deed).
Nota Simple: To confirm ownership and all land searches.
I.B.I.: (Local Council Rates) to confirm this has been paid and is fully up to
date.
Utility Accounts: Collection of the most recent receipts for water, electricity,
basura (rubbish) and community fees which have been signed and approved
by the President of the Community where you are purchasing, which will
confirm that all bills have been paid and are up to date.
You will need to have the originals of the documents with you in order to sign
the Escritura (Title Deeds). As this is a legal requirement the Notary will NOT
sign the deeds if any of these documents are missing.
If you are residing outside of Tenerife and are unable to return to sign the
Escritura (Title Deed) you can appoint your solicitor to act on your behalf.
You and your Solicitor will need to sign an official document in front of
the Notary. This is known as Escritura de Poder de Compraventa (Power of
Attorney).
NIE Number [Top]
In order to make any financial purchases in Spain it is a requirement to have
an N.I.E. (Numero de identificacion de extranjeros) number.
This is a government issued identification number for foreigners. It may also
be necessary to obtain a Non-Residency Certificate.
In addition, non-residents must also appoint a financial representative who is
resident in Spain to deal with all tax issues.
Your solicitor will assist you in obtaining all of the above documents, which
must also be presented in front of the Notary.
Banks & Mortgages [Top]
One of the most secure forms of capital investment is purchasing a property as
your property invariably increases at a higher rate than inflation.
Your greatest asset is probably your primary home in the United Kingdom,
which can provide means of raising capital to purchase your property in
Tenerife.
It makes sound financial sense to use the equity which has accumulated from
your primary residency and re-invest in a second home abroad.
A mortgage is also obtainable in Tenerife by using the property you are
intending to purchase as collateral against the loan. With the interest rates
being more competitive than the UK this can prove cost effective and
mortgages can be repayable over a period up to 40 years (subject to status). A
non-resident can generally borrow up to 70% of the value of the property and
a resident of Spain can borrow up to 80% of the value of the property from a
Spanish Bank. If you obtain a mortgage to purchase your property the bank
will offer you home and contents insurance. The amount may vary depending
on the value of the property and its contents.
Property Alliance can introduce you to a Spanish Bank Manager (fluent
in English) who will offer any financial or mortgage advice. It would be
advisable to open a non-resident bank account at this time, for the transfer of
monies for your purchase and to set up direct debits to pay utility bills.
The Notary [Top]
All property purchases and sales in Spain must be registered in the Registro
de la Propiedad (Land Registry Office) and the Escritura de Compraventa
(Title Deeds) must be prepared by a public official called a Notary.
Both the seller and purchaser will sign the Escritura in the presence of the
Notary.
It is the responsibility of the Notary to ensure that the Title Deeds are drawn
up correctly. This will include a full description of the property and will
confirm that the agreed declared purchase price, or agreed proportion, has
been paid to the vendor and is in the appropriate currency.
The Notary will then witness the signing of the Escritura and will collect the
fees and taxes.
The Escritura will then be sent to the Registro de la Propiedad (Land Registry
Office) where the name of the new owner will be recorded.
An authorised copy of the Escritura will be given to the purchasers. The
original will be given to the purchaser or bank when it is returned from the
Land Registry Office, which can take some time.
Costs & Fees [Top]
In addition to the purchase price of your property there are tax costs. These
are approximately 10% (over and above the purchase price). The following is
a breakdown of these taxes:
- Plus Valia (Land Gains Tax)
This tax is calculated annually on the increased value of the land since the
previous sale. Under Spanish law it is the liability of the seller to pay these
costs, however, in practice the purchaser is responsible to pay these taxes for
the transfer of the property.
- Registro de la Propiedad (Land Registry Costs)
Once the Escritura has been signed the property needs to be recorded by the
Registro de la Propiedad (Land Registry Office) with the new owner's name.
- Notary Fees
Preparation of the Escritura is compiled by the Notary. For this service there
will be a charge.
- 5% I.G.I.C. (Equivalent to VAT) plus 0.75% stamp duty
This tax is payable when purchasing a new property direct from a developer.
- 6.5% ITP Tax (Transfer Tax)
This tax is payable when purchasing a property from a private owner.
Tax Retention [Top]
Non-Resident Vendor
Under current legislation it will be necessary for an amount of 3% of the
declared purchase price in the Escritura (Title Deed), to be retained from the
completion monies being paid to the Vendor. This amount will be paid to
the Hacienda (Spanish tax authorities) to ensure that the vendor has paid all
relevant taxes before leaving the country. It will be noted in the Escritura
(Title Deed) and your appointed Solicitor will make the payment. It is then
the responsibility of the vendor to instruct his fiscal representative to re-claim
this money if no tax is due.
These taxes are due for payment on the same day you sign the Escritura (Title
Deed).
Resident Vendor
If the vendor is a resident of Spain it is now a requirement to present a Fiscal
Residencia Certificate (issued from the Hacienda) in order to prevent the 3%
retention.
Utility Bills [Top]
Once the purchase of your property is complete it will be necessary to sign
forms which will transfer the bills into your name. The electricity board and
the water companies have these forms.
All property owners have to pay I.B.I (Impuestos de Vienes e Inmuebles),
which are the Local Rates. This is payable at the appropriate Town Hall. You
will need to visit the Oficina de Recaudacion / Hacienda Local at the
appropriate Town Hall in order to change the rates into your name. You will
need to set up a standing order from your bank as bills are NOT sent out. Your
appointed solicitor can make the necessary arrangements on your behalf.
Community of Owners [Top]
The majority of people who purchase a house or apartment in Tenerife will
find themselves a member of the Community of Owners.
Each property owner in the complex owns a percentage of the communal areas
(e.g. swimming pool, garden areas, pathways), and therefore is responsible
for making a payment to the Community for the maintenance and services,
which is known as Community Fees.
The Community of Owners Association is created to co-ordinate the smooth
running and upkeep of the complex, which will be in accordance with the
rights, needs and wishes of the majority of owners. There will be a general
yearly meeting with the President, Administrator and Committee Members
(majority of members) to approve budgets, establish and clarify new rules
and regulations, to elect a President for the forthcoming year and to discuss
matters raised by the Community.
It is important for the owners to attend these meetings in order vote and to
look after their own interests.
Making a Spanish will is neither expensive nor time consuming and is as
straightforward as making an English will.
We understand that people do not like to think about death and statistics show
people do not like making wills but you need to consider what would happen
to your assets should anything happen.
We recommend you speak to your appointed solicitor, as even though it is
a simple process the laws are not. In order to distribute your accumulated
wealth in accordance with your wishes it is advisable to make a will.
IMPORTANT: This guide has been produced with you the Buyer in mind.
Whilst every effort has been made to ensure the information is correct at the
time of publication, it is not intended to be a substitute for professional or
legal advice. Laws and regulations can and do change and therefore Property
Alliance S.L. will accept no responsibility for damage or any loss caused by
actions taken or not taken as a result of reading this guide.
