Advice on buying Tenerife Property

Appointing a Spanish Registered Abogado (Lawyer) in Tenerife

Tenerealty always insist that all of our clients use the services of a Spanish Registered Abogado (Lawyer) and all deposits and monies are paid directly to the Lawyer, not to our agency.

It is vital to appoint an independent lawyer in order to safeguard your interests during your Tenerife property purchase.

The lawyer will then thoroughly carry out all the relevant searches on the Tenerife property, obtaining all the necessary paperwork, to confirm that there are no outstanding debts or embargoes on the Tenerife property and that it is fully legalized.

The lawyer has the responsibility to gather up-to-date receipts for all utilities and services and to see that there are no outstanding debts on the property in Tenerife.

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 property title deed (Escritura)

Without the original of these documents on the day of completion a Tenerife Notary will not sign the deed unless it is clearly stated that you are aware that certain receipts were missing.

Should there be an outstanding mortgage on the property, this will be cancelled and the cancellation registered on the same day that you sign at the Notary.

NIE number (Numero de Identificacion de Extranjeros)

The lawyer will assist in obtaining your NIE number.

This is a simple process which is needed to register the Tenerife 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

We work closely with all of the Spanish banks in Tenerife and can help you to open an account at the bank of your choice here in Tenerife.

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.

Buying a Property in Tenerife

You have found a property you wish to purchase what next?

We will then introduce you to one of our Spanish English speaking fully licensed qualified Abogados lawyers who will oversee the whole real estate purchase procedure for you, taking ALL of the worry out of the process of buying property in Tenerife for a relatively small cost.

The Lawyer will require a few hours of your time to explain the process to you and answer any questions you may have and organize the various things necessary whilst you are in Tenerife.

The vendor and the purchaser must sign a contract which will include a completion date and the method and dates of payment.

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 in Tenerife then the constructor will ask for stage payments to be made on the Tenerife 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, 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 set by law on a set scale depending on 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 Tenerife 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 of buying a property in Tenerife

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 property purchaser and is a standard 6.5% (on a Tenerife resale property) tax applied to the declared value of the property. This tax must be paid within 30 days of signing the title deed. ITP - Property 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 Transmisiones Patrimoniales y Actos Jurídicos Documentados- Mod 600)of the new declared value on the deeds when buying a re-sale Tenerife property

I.B.I. Impuesto sobre Bienes Inmuebles (Local Tenerife Ayuntamiento council rates) in Tenerife

This is like the old English rates system and is based on the valor catastral Catastral value of the property. The Local Ayuntamiento (Town Hall) sets the Catastral Value of a Property. The IBI are paid yearly in Tenerife and are generally much lower than the rest of Europe.

Valor Catastral

The valor catastral (cadastral value) is the rateable value of a property set by the municipal government. The valor catastral is usually much lower than the market value of the property. The cadastral value of a property can be found on Local Ayuntamientos IBI (Rates receipts).

The tax year runs from 1 January to 31 December in Tenerife, Canary Islands and Spain.

Community Fees

Properties on some complexes will have a community charge to cover costs of services and general maintenance, for example: the complex swimming pool, complex external lighting, community gardens, security, 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. These are payable monthly or quarterly and vary dependent on the property.

Impuesto sobre la Renta de no Residentes Modelo 210

Non Residents Tax payable to the Agencia Tributaria (known as Hacienda, the Tax Authorities).
This is a tax payable by persons who are Non Residents of Tenerife but own a property in Tenerife that is not their main residence.
The rate of Tax payable is 24.75%.
The rate of Non Residents Tax was increased to 24.75% from 24% from the year of 2012.
To calculate the rate payable determine the Propertys Valor Catastral (cadastral value, this can be found on Local Ayuntamiento IBI Rates receipts).
Multiply the Valor Catastral by 1.1 % if the Catastral value has been modified since 1994.
Then multiply this sum by 24.75 % and this is the amount of Tax Payable.
The Impuesto sobre la Renta de no Residentes is paid once a year for the previous calendar year.
Please note if a property is owned jointly by a married couple they must each file Individual Non Residents Tax returns.

Impuesto sobre el Patrimonio - Patrimonial Wealth Tax

This is a Wealth tax for anyone holding Assets and Monies over 700,000 Euros in Spain. This includes Real Estate and Funds in Bank Accounts. If you are a Non Resident this Patrimonial Tax applies only to Spanish assets.
This tax had been reduced to zero % in 2008 but has been reintroduced for the years 2011 and 2012.
The Tax is paid once a year for the previous year, ie you will pay the Tax for 2012 in 2013.
The percentage rate varies from 0.2 % to 2.5% on various thresholds, on assets over the basic threshold of 700,000 assets.
Please note if a property is owned jointly by a married couple they must each file Patrimonio Tax returns.
As a husband and wife will file individual tax returns if a property and assets are in joint names, this allows 1,400,000 Euros.

The Patrimonial Tax is calculated on whichever is the Highest value of:
1. Escritura (Title Deed) - the price declared on your Escritura

2. Valor Catastral - >The valor catastral (cadastral value) is the rateable value of a property set by the municipal government. The valor catastral is usually much lower than the market value of the property. The cadastral value of a property can be found on Local Ayuntamientos IBI (Rates receipts).

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?

The selling costs associated when selling a property are a 3% retention of the total purchase price imposed by the Public Treasurer Ministry of Economy if you are a non resident of Tenerife to arrange for your capital gains tax to be settled.

This procedure is carried out in order to ensure that no public or private debts are pending within the Spanish territory.

Once the Spanish tax authorities have been paid, the balance of the monies paid less your tax bill will be returned to you.

Your personal fiscal representative will be able to tell you exactly what your personal current tax situation is.

Capital Gains

Other costs involved in owning a property in Tenerife

Impuesto sobre Bienes Inmuebles - IBI - Property tax levied yearly.

The equivalent of rates.
This is like the old English rates system and is based on the valor catastral Catastral value of the property. The Local Ayuntamiento (Town Hall) sets the Catastral Value of a Property. The IBI are paid yearly in Tenerife and are generally much lower than the rest of Europe.

Our agency also prides itself on our after sales service, we offer a professional, friendly and honest service from your initial enquiry to after sales care second to none.

We offer ALL our real estate clients an Impartial, TRANSPARENT, Confidential and Professional Tenerife Property Service whether Buying or Selling Tenerife property.

To read more about us please visit About TeneRealty

These guidelines are meant for guidance only and describe a straightforward purchase scenario. However this information is not meant to replace proper legal advice, which we always insist you take.