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.
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 - 6,000 Euros. 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.
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).
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.
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. Mortgages can be repayable over a period up to 40 years (subject to status) and a non-resident can generally borrow up to 70% whereas a resident of Spain can borrow up to 80% 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.
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.
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:
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).
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.
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 Bienes 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.
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 to 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.