|
Advice on buying Property in Tenerife, Canary Islands |
In depth summary of the legal procedures, obligatory legal fees and taxes when purchsing property in Tenerife, the Canary Islands.
Appointing a solicitor in Tenerife
It is vital to appoint a solicitor to assist in your Tenerife property purchase, we always appoint an independent conveyancer who will then carry out all searches on the property, obtaining all the necessary paperwork, to confirm that there are no outstanding debts or embargoes on the property. The agency or lawyer has the responsibility to gather up-to-date receipts and to see that there are no pending debts on the property.
The paperwork gathered includes:
Nota Simple (Confirmation of ownership and any mortgages or embargoes)
I.B.I. (Local council rates)
Electricity and water receipts up to date
Community fees receipts up to date, signed and approved by the President of the community of owners and the secretary
Copy of the deed (Escritura)
NIE number (Numero de Identificacion de Extranjeros).
Once the deeds to your new home have been signed, you need to obtain your NIE number. This is a simple process which is needed to register the property. An NIE number is also needed to change the household bills into your name, i.e. Water, Community charges, Electricity, Telephone, Rates etc..
Applying for a Bank Account in Tenerife
The cost of opening a bank account for 'non-residents' is around 10 for the administration fee.
Help is also on hand to set up Direct Debits for your household bills, so you have peace of mind that all your bills are being paid whilst you are not here in Tenerife.
Applying for a Mortgage in Tenerife
You can choose to apply for a mortgage in Tenerife or from the UK. Mortgage rates in Tenerife tend to be amongst the lowest in Europe, and are currently around 3.75%.
Applying for a mortgage in Tenerife is a straight forward process, as in the UK. You will need to prove that you have an income or sufficient funds to pay the mortgage. The level of mortgage offered is directly dependent on your financial status and also the declared value of the property you wish to purchase.
There are generally 2 levels of mortgage offered, one for residents and one for non-residents. For non-residents the mortgage offered is up to 70% of the bank valuation, for residents it is usually around 80% of the bank valuation of the property. We must point out that banks in the Canary Islands do not value a property the same as in other countries. Rebuilding costs play an essential role in the official valuation purpose of mortgage loans.
Costs involved
Valuation will cost approximately 250€
1% mortgage opening commission
Insurance will vary from 150€ to 350€ per year. (Tenerife Property Consultancy will be able to recommend and arrange adequate insurance for you)
Notary and registration of the mortgage
Provided you submit the requested financial information, the mortgage can be available within 10 to 15 working days. The financial information requested is minimal and a mortgage is available whether you are self-employed or employed. It does not reflect your country of origin.
Buying a Property in Tenerife
Once you have decided on the property you wish to purchase and the terms and conditions have been negotiated with the vendor then a deposit of 10% of the purchase price is required to secure the property and as official confirmation of your intent to purchase that property. The remaining 90% is payable on the signing of the title deeds before the Notary.
If you are purchasing a new construction then the constructor will ask for stage payments to be made on the property. These can vary dependent on the constructor. Normally an initial reservation deposit is required; this is then normally made up to 10% within 30 days of the contract date. The balance of the monies will be in stage payments, which are usually a further 30% on commencement of the foundations, 30%, once the construction reached roof level and the final 30% on completion at the time of signing the escritura (Title deeds).
Your appointed solicitor will then carry out all necessary searches on the property; to ensure that it is owned by the vendor, it has planning permission, and there are no outstanding debts or charges on the property.
Once the searches on the property are satisfactorily completed and the deposit has been paid in accordance with the terms and conditions of the contract then the title deeds are signed by both the buyer and the seller before the Notary.
The Notary (Notaria)
This is a solicitor appointed by the Spanish government to witness the signing of all legal public documents. In this case the title deeds (escritura) of the property. He represents both the buyer and the seller. The Notary fees are around 2% of the purchase price of the property and must be paid at the time of the signing of the deeds. The Original signed document is retained by the Notary who will apply for a formal change in the land registry. The purchaser will receive an initial legal copy of the title deed which is signed and stamped by the Notary. The official title deed can take a while to be processed and until then this is your official proof of ownership and must be kept in a secure location.
Legal Costs and Taxes
These are in addition to the sales price of the property and range between 8-10% of the sale price.
They are as follows:
Transfer Tax
This is paid by the purchaser and is a standard 7% tax applied to the declared value of the property. This tax must be paid within 30 days of signing the title deed. Transfer tax is calculated on the increase in the value of the land from when it was last sold. The calculation is based on the ratable value of the property and is a 'one-off' payment.(Impuesto sobre Tramisiones Patrimonales y Actos Juridicos Documentados- Mod 600) of the new declared value on the deeds (equivalent of VAT) when buying a re-sale property
5% if new and Stamp Duty 0.5% of Mod 600
Notary fees - Fixed scale of charges based on the price of the property purchased
Property Registration Office
Plus Valia (added value, land/capital gains tax). This is a tax levied by the Town Hall and is based on the surface area of the land, against the annual increase of the property since the previous sale, on the cadastral value and on the date of the previous escritura.
Rates
This is like the old English rates system and is based on the declared value of the property. These are paid yearly and are generally much lower than the UK.
Community Fees
These are payable quarterly and vary dependent on the property. These are paid in respect of services i.e. the complex swimming pool, street lighting, security, community gardens etc.
FREQUENTLY ASKED QUESTIONS
What is a sales agreement?
A private document signed between the buyer and seller. It must reflect ownership of the property, legal definition of the property, the exact dates of deposits and completion, currency of the transaction (euros, pounds etc) and penalty clauses.
What happens if there is a mortgage on the property I want to buy in Tenerife?
If there is a mortgage on a property; before the signing date at the Notary, your agent or lawyer will have to inform the holding bank to prepare cancellation costs, amount and interest due from the seller. On the day of the signing we will be asked to prepare a bankers draft for the amount due, to cover the mortgage etc, for the seller. Please note that once the bank has collected the last payment; you should make sure that the cancellation deed is duly registered in the Land Registry.
When we sell a property in Tenerife do we have to pay tax?
a) Tax regulations require the buyer to withhold 5% of the price on the escritura and to pay it to the tax office when buying property from non-resident vendors.
b) Capital Gains
Whilst we endeavour to ensure that the information is correct at the time of publishing this information is intended for guidance only.
About AuthorTony Riley has 15 years experience in the Tenerife property market as Managing Director of Tenerife Property Consultancy.
For further information please visit our advice page and this about Tenerife guide
Source: ArticleTrader.com
Read more at: . |
