Advice on buying Canary Islands Property

You have found a property you wish to purchase in Tenerife, Gran Canaria, Lanzarote, Fuerteventura what next?

A 10% deposit is normally required on a resale property.The vendor and the purchaser must sign a contract which will include a completion date and the method and dates of payment.
Your estate agent or solicitor then has the responsibility to gather all up to date receipts to confirm there are no debts on the property.

These documents include:
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)

Without the original of these documents on the day of completion a Notary will not sign the deed unless it is clearly stated that you are aware that certain receipts were missing.
Should there be a mortgage on the property, this will be cancelled and the cancellation registered on the same day that you sign at the Notary.
Advice on Taxes and Legal Fees
These are in addition to the sales price and range between 8-10% of the new declared value on the escrtitura. They are as follows:
Transfer Tax
5% (I.G.I.C.) of the official (declared) value, when you buy a NEW build property
or 6.5% ((Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados- Mod 600) when you buy a RESALE property from a private owner.
Title Deed
(Documented Legal Acts Tax) (Impuesto de Actos Jurídicos Documentados) 0.5% of the declared value
Title Deeds
A Spanish Escritura, the equivalent of title deeds in the U.K., is a more complicated business than similar documents in other E.C. countries. The document consists of several pages and contains details of the property including number of bedrooms and bathrooms, the size in square metres of each room and any terrace, garage or garden space. It also contains the names and ID numbers of both seller and buyer and the purchase price.
Land registry fees
This fee is about 0.5% of the declared value
Notary Fees
This fee is about 0.75% of the declared value The Notarial charges for preparing the Escritura and presiding over its signing are set by law on a set scale depending on the property value.
Lawyers fee
Depending on the time and work involved normally a fee of between 1 - 2% of the purchase price may be requested.
Plus Valia Tax
The Plus Valia Tax is a type of capital gains tax, based on the increase in value of the land and not the increase in value of the property. It is strictly speaking, a tax payable by the seller, but in practice the purchaser is normally asked to pay all fees and taxes due on transfer of property, this can be negotiated at the time of sale. This is a tax levied by the Town Hall and is based on the surface area of the land and is calculated at various rates on the annual increases in the value of the land since the previous sale, on the cadastral value and on the date of the previous escritura.
Guide to Mortgages
Non-residents can obtain between 60 to 70% of the bank valuation. 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 210€
1% mortgage opening commission
Insurance will vary from 120€ to 240€ per year.
Notary and registration of the mortgage

Advantages:
Provided you submit the requested financial information, it should be in place within 10 to 15 working days.
The financial information required is minimal
Amongst the lowest interest rates in Europe, currently approximately 3.75%
Banks in the Canary Islands will finance you a percentage of the valuation, NOT of the real selling price, sometimes higher than the buying price
Frequently asked questions

What is a sales agreement?
A private document signed between the buyer and seller. It must reflect true ownership, legal definition of the property, the exact dates of payment, currency of the transaction (euros, pounds, dollars etc) completion dates and penalty clauses. We strongly recommend that the vendor commits to paying double the amount of the deposit paid should he withdraw from the contract. There would also be a penalty paid by the purchaser in the amount of the deposit held should he withdraw from the agreement.
Is it easy for a foreigner to obtain a mortgage?
Yes, Provided you can submit basic financial information to them, getting a mortgage here is much easier than in most European countries.
Other costs involved in owning a property in Tenerife

LOCAL RATES Local rates are payable annually, and are calculated from the rateable value of the land assigned by the local Tax Office.
RUBBISH COLLECTION
The rubbish collection rate is applied by the Town Hall according to the property and payable every 6 months.
WATER RATES
Water consumption is calculated by the water meter and is payable every 3 months. Payment can be made directly at the Town Hall or by bank with direct debit instructions
COMMUNITY FEES
Properties on some complexes will have an annual community charge to cover costs of general maintenance, pool care, gardens, reception etc. Depending on the size of the development and the services offered, this can vary between £800 and £1200 per annum. Other complexes will not share services and there will be a minimal fee to cover street lighting etc.
ELECTRICITY
Charged bimonthly with minimum rates applicable (whether you are in residence or not). Don't forget you use a lot less electricity in Tenerife as no heating is required.
TELEPHONE
Charged monthly. Standard rates vary according to equipment installed, but can be in the region of £9 per month including a touch-dial telephone. Broadband internet connections are available in Tenerife.
These guidelines are meant for guidance only and describe a straightforward purchase scenarios. However this information is not meant to replace proper legal advice, which we always insist you take.

John Everitt is a consultant to Globespan European property portal. Please visit our estate agents directory