Property in Spain

The Canary Islands enjoy one of the finest climates in the world. Of all the islands, Tenerife is the most popular because of its diversity of contrasting environment, from areas outstanding natural beauty to lively resort areas. Frequent flights of approximately four hours are available from the majority of European airports and the local time is the same as the United Kingdom.

The sub tropical climate provides twelve months of sunshine and warm temperatures truly the ´sunshine state of Europe´, providing an idyllic lifestyle for residents and visitors alike. For investors, the resort areas of the island have no closed season, and cater for visitors throughout the year. This means maximum yields can be achieved from rental income.

With sustained rises in property values (15% per annum in recent years) and the added bonus of rental income for investment buyers, Tenerife continues to be the first choice to own a holiday home in the sun or invest in a business.

Therefore, to summarise, Tenerife offers the following advantages:-

· Property Investment - secure return on capital
· Property Letting - excellent opportunities and profits
· Year round warm and sunny climate
· Continuous and stable property demand
· Favourable taxation/costs for property owners
· Accessibility regular flights from most UK airports
· Contrasts in scenery from the lively southern resorts to areas of great natural beauty

Here at Tenerife Homes just for you we have a professional team available to provide a full and comprehensive service in all aspects of buying and owning property on the island.

We have an excellent reputation for honesty and integrity and will serve you with trust and confidence when buying your new home here in Tenerife.

The first thing your lawyer will do is check the official Property Registry to ensure that the seller owns the property free of charges and encumbrances. As the Property Registry is the last word in owner-ship, this step is absolutely essential in any property purchase.

We confirm that the owner of the property is the legal owner of 100% of the property - that no other parties have a claim.

We check that there are no outstanding debts on the property by way of mortgages, unpaid tax contributions or any other encumbrances. This is done by obtaining a ¨Nota Simple´. This document details the exact registered location, size and description of the property, the owner, and information of any debts attached to it.

Unless an immediate cash payment of the full purchase price is made, the next step is for Tenerife Homes just for you to draw up a private purchase contract which reflects the legal description of the property, purchase price, form of payment, date of completion, date of possession etc.

Upon signature of the private contract, a payment on account of the total purchase price is made, which can vary depending on the terms of sale and date of completion. A normal deposit for completion within 30-60 days is 10% of the agreed purchase price.

When the entire purchase price has been paid, the seller will grant vacant possession of the property and issue the public deed of conveyance (Escritura) to the purchaser, free of charges and encumbrances, which is issued before a Spanish Notary.

It is then passed to the tax office to pay stamp duty then presented to the property registry for inscription under the new owner's name.

It should be noted:

Taxes and Costs involved in the purchase of a property in Spain.

Purchasing a property in Spain is a relatively straightforward procedure but you should not forget to budget for the additional costs and taxes over and the above the purchase price of the property you finally set your heart on.

As a foreigner in a country whose laws you might not be accustomed to, it is always advisable to retain the services of a local English speaking reputable lawyer to represent your interests.

Tenerife Homes just for you work closely with respected English speaking lawyers on the island to ensure you get the best service available.

Payable on all transfers of Spanish properties are fees and taxes typically as follows:-

TYPICAL COSTS OF BUYING IN SPAIN

Transfer Tax (Stamp Duty) on resales - 6.5% of the declared value
Legal Fees - 1% approximately
Notary and Land Registry Fees - 1% approximately
Title Deed Tax - 0.5% of the declared value
Plus Valia tax on any increase in land value - varies, and may not even apply

1) TRANSFER TAX: This tax is 6.5% of the purchase price on a resale property and 5.75% if you are purchasing a new property from a developer.

2) TITLE DEED TAX: The Title Deed or Document Tax is 0.5%.

3) NOTARY FEES: Notary Fees are charged for the preparation of the Escritura and the witnessing the signatures of the two parties. These are government fixed and based on the value of the property.

4) LAND REGISTRY FEES: Land registry fees are a charge made to register the Escritura, and again is government fixed and based on the value of the property.

5) PLUS VALIA: This is a Municipal tax based on the increase in the value of the land from the last time the property changed hands. By law it should be paid by the seller, but in Tenerife it is customary for the buyer to pay it.

LAWYERS FEES

The fees for the lawyer will generally depend on how much time and work is involved in any particular purchase. In normal circumstances the fee will probably be about 1% of the purchase price.

Tenerife Homes just for you will be pleased to recommend an English speaking Lawyer on your behalf.

3% TAX RETENTION

When a property changes hands between a vendor who is a non resident of Tenerife, 3% of the declared purchase price is retained by the purchaser or their representative in lieu of capital gains tax. The money must be paid to the Spanish Inland Revenue within 30 days of signing for the Title Deeds.

The responsibility of ensuring that the money is retained and paid to the Spanish Inland Revenue is that of the purchaser and it is then up to the vendor to instruct his fiscal representative to claim the money back if tax is not due. Your Lawyer will ensure that this is done for you.

If the vendor is a resident of Spain, then there is no need to retain the 3% as the vendor would be expected to be making his own tax returns on a regular basis.

Any person wishing to purchase a property or have a fiscal representation in Spain must obtain a certified identification number (N.I.E.) and appoint a qualified fiscal representative who is resident in Spain to deal with his tax affairs.

This is simply an identification number required by non-residents. If you subsequently become a resident this will also be the number of your ´Residencia´.

You must produce your passport and a photocopy at the Police Station for them to keep, together with two passport size photographs. The application form is filled in (with our assistance) and signed and the N.I.E. number is usually available for collection within a few weeks.

This number will be required by the Notary and will also be required by your bank. In the future it will be requested in other situations, such as ordering a telephone, or to purchase a car, etc. and your accountant will need it for your returns.

You can obtain a mortgage in Tenerife using the property that you are purchasing as collateral for the loan. Interest rates are low and therefore cost effective, and loans can be repayable over any period up to 25 years dependant on age. In general you can borrow up to 70% of the purchase price as a non-resident and residents of Tenerife can obtain up to 80% of the value of the property.

Here at Tenerife Homes just for you we have strong links to all the leading banks on the island and can recommend one of these banks for your mortgage purposes.

The mortgage rates in Tenerife are some of the cheapest in Europe, requirements generally are as follows:

DOCUMENTS REQUIRED

· Six months Bank statements (i.e. current accounts, savings, loans, current mortgage)
· Three month salary slips
· Copy of employment contract
· Two years tax declarations
· Copy of P60
· Two years audited accounts (if applicable)
· Value of UK property - for example a recent valuation or copy of recent buildings insurance
· Details of share portfolio and savings plan if applicable
· Copy of purchase contract - Tenerife Homes just for you will supply this document
· Copy of Escritura and Nota Simple for new property
· Copy of stage payments paid or deposit - Tenerife homes just for you will supply
· Copy of Escritura and Nota Simple of existing Spanish owned property

Details of mortgage rates and repayments are available on request subject to status.

COMMUNITY FEES: Controlled by the committee of owners based on the percentage of the cost to maintain the facilities provided, relative to the size of your property - Vary, but usually between 0.5% and 1% of your property value.

LOCAL RATES: Payable annually in June for the current year - Vary, 0.2% is typical.

PROPERTY TAX: 0.2% of rateable value.

WATER AND ELECTRICITY: These have a standing charge and metering - Similar to UK and Ireland.

FISCAL REPRESENTATIVE: (Gestor) to manage tax returns etc. - £100 equivalent usually.

There is a charge for rubbish collection although sometimes this is included in the community fees.

Tenerife Homes just for you can arrange your contents insurance at competitive rates.

Let Tenerife Homes just for you with their professional sales and advisory team guide you smoothly throughout your purchase or sale in Tenerife providing you with every before and after sales service you could possibly require.

Every effort has been taken to ensure the information given in this page is accurate at the time of publication, but it is not intended to be a substitute for legal advice or professional assistance. Laws and regulations can and often do change and therefore Tenerife Homes just for you accept no responsibility for any loss or damage caused by actions taken as a result of reading this information. *

On completion day, both parties, or their representatives with power of attorney, will appear before the Notary, who is a government official responsible for the execution of public documents and to ensure compliance with Spanish law.

The Notary acts for neither party, and does not replace the need for your own lawyer, but witnesses the signing of the Escritura de Compraventa (the transfer deed). At this time the balance of the purchase money will be paid to the seller, and any remaining purchase tax and fees will be paid.

You will then have the keys to your new property and a copy (Copia Simple) of the title deed until the formal deed comes to you from the land registry.

At every stage, both here and in Spain, Tenerife Homes just for you will be on hand to co-ordinate and answer any questions you may have that are not covered by your lawyer.

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