A Guide To Buying Property in Tenerife
Friday, 10 June 2011
If you're about to buy, or thinking of buying property in Tenerife then it's important to have an understanding of how a property transaction works in Tenerife as it is no doubt different from your home country.
Before you look for properties for sale in Tenerife you must first decide what you want to buy the property for. Do you want to use the property entirely yourself or do you want to buy the property to create an income out of holiday rentals? It is normal in Tenerife as in the UK and elsewhere, to use an Estate Agent when purchasing property, and Estate Agents here vary considerably in the work they do for you.
If you want it for your own use then can you chose a property anywhere on the island, on a community or independent houses or villas - if you buy on a tourist registered complex you would be wise to consider potential noise from holiday makers, such as dragging their suit cases along the corridor for example - as this may affect you.
If you want to purchase a property on a holiday complex that is registered with the tourist board you will be able to earn an income on your investment legally without fear of reprisals from the tourist board or angry residents. Read more about the Tenerife letting laws.
Costs involved
Next you need to think about your budget. Whatever price range your dream property falls into, you need to set aside some money for the different costs that arise from buying a property in Tenerife - you'll need about 8-10% of the property costs to complete the transaction. Here's what you'll need to pay:
Transfer Tax = 6.5% of the sale price on resale properties in Tenerife.
Notaries fees / Land Registry fees - these are about 1000€ per property but can vary.
Lawyer’s fees - about 1500€ but some do it for less, others more. If you trust your Estate Agent implicitly, you may find that they will have some lawyers they recommend however if you are not sure, find one of your own, who speaks, reads and writes your language.
Finally there is a another tax called Plus Valia that in the past was attributed to the buyer although it is clearly a tax on the seller, Plus Valía tax is a type of capital gains tax based on the increase in property value since the last transfer, there is no fixed percentage so it's important to find out how much this is going to be before agreeing a sale - the responsibility of the plus valia tax is that of the SELLER so make sure they know this, or you could end up footing the bill! The other thing to remember is to try and put the actual amount you are paying for the property on the Escritura (title deeds). In the past it has been customary to put a lower amount on the Escritura to save taxes, but when you come to sell the property you will pay capital gains tax calculated from the increase in value from the lower amount.
Requirements
To buy a property in Tenerife you will also be required to have an N.I.E. number (this will be your Spanish identification number) for all legal and tax affairs in Spain. This can be obtained from the police station and takes about 2 hours. You will need to open a Spanish bank account, this can be done quite easily with just your passport.
When buying a property in Tenerife, the seller, if not a fiscal resident, needs to deposit 3% of the agreed price with the tax office against any unpaid taxes on the property. The seller can claim this 3% back at a later date once all taxes have proved to be paid. If this amount is not left with the tax office then the new owner of the property could end up footing the bill!
The property will be signed over at a public notary and at the time of signing you will be talked through what you are buying and have the title deeds read to you, at this point you will also be asked (or should be!) if you have read and understood the rules and statutes of the community you are buying a property on (assuming you are buying on a community). These rules are usually impossible or very difficult to change without majority or unanimous approval, so if there's anything you really don't agree with it might be better to look elsewhere.
If you have now agreed a fee and found the prefect property in Tenerife, you will need to pay a deposit to the estate agent of around 10% and sign a purchase agreement. These agreements are legally binding and usually say that if you back out you lose your 10% deposit, and if the seller backs out, you get your deposit back plus the same again. This ensures both parties are serious.
A purchase can be done as fast as 7 days but more often a 6-8 weeks is the time frame for signing over.
The seller or his agent will arrange the completion date with the public notary. The Estate Agent or Lawyer will need:
A certified copy from the administrator for the complex that all community fees are up to date.
Receipt for the local rates for that year - or you will inherit the debt!
Proof that various other bills, water, electricity etc are paid up to date.
A copy of your N.I.E (spanish ID).
The completion money. (This is usually in the form of a banker’s draft.)
After Completion
After completion at the notaries' office your lawyer should arrange for all of the fees to be paid and register the property with the land register. They will also change the title holders name with the rates office (but check that they will, as not all do.).
After completing the purchase of your property in Tenerife you will need to introduce yourself to the administrators if you have bought on a community. They will take your bank details so you can pay your community fees (this pays for the upkeep of the communal grounds and installations) and water supply if the community are responsible for the water supply.
When you buy on a community of owners you are given a quota of the shares of the complex, the amount of community fees will be your % quota of the annual budget. For example if a complex expects to spend 400,000 euros a year to maintain the complex and your share is 0.4% of the complex you can expect your community fees to be 1600 euros per year (usually paid quarterly).
Electricity supply is normally metered and paid monthly or bi-monthly. It is important to instruct your lawyer / estate agent to change the supply into your name as you will have problems in the future if you do not. Sometimes, with older property it is necessary to install a new set of trip switches and plug sockets and have a new "boletin" (supply contract) set up.
Aside from community fees, water & Electrics, you will also have other running costs such as income tax (18% of declared income) paid quarterly and a small non letting tax (paid annually). You will also be charged local rates (consorcio de tributos) which is similar to a local council tax.
It is a good idea to appoint an accountant to deal with your property, a good one is Marcos Cabrera in Los Cristianos - +34 922 752 157.
If you have purchased a property on a touristic complex and plan to rent your apartment or have it rented for you, you will need to speak to the licence holders, register your apartment with the tourist board, and give them keys in order for them to look after your new property. The on-site registered agents will also be able to give you advice on upgrades for your apartment should you want or need them.
To find your dream property in Tenerife use our easy to use property search page, We have property for sale in Los Cristianos, Playa De Las Americas, Adeje, San Eugenio, Torviscas & pretty much anywhere you could wish for in Tenerife.
Related article: Tenerife letting law 7/1995
Author Information
Author: John Parkes
Bio: John is a 30 something property enthusiast who has
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