Advice on buying Canary Islands Property
You have found a Canary Islands property you wish to purchase in Tenerife, Gran Canaria, Lanzarote, Fuerteventura what next?
Canary Islands Property Buyer's Guide explains the legal fees, procedures, purchase taxes and mortgages.
Purchasing Canary Islands property.
A 10% - 15% deposit is normally required on a resale Canary Islands property.The vendor and the purchaser sign a contract including completion date, method and payment dates.
Your Canary Islands estate agent or solicitor then has the responsibility to gather all up to date receipts to confirm there are no debts on the property in Tenerife, Gran Canaria, Lanzarote or Fuerteventura.
These documents include:
Nota Simple (Confirmation of ownership and any mortgages or embargoes)
I.B.I. (Local council rates)
Electricity and water receipts on the Canary Islands property up to date
Community fees receipts up to date.
Copy of the Canary Islands property deed (Escritura)
Without the original of these documents on the day of completion a Notary in the Canary Islands 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 cancellation registered when you sign at the Notary.
Advice on Canary Islands property Taxes and Legal Fees
In addition to the Canary Islands property sales price and range between 8-10% of the new declared value on the escrtitura. They are:
Canary Islands property Transfer Tax
7% (I.G.I.C.) of the official (declared) value, when you buy a NEW build property in Tenerife, Gran Canaria, Lanzarote, Fuerteventura
or 6.5% ((Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados- Mod 600) when you buy a RESALE property from a private owner in the Canary Islands.
(Documented Legal Acts Tax) (Impuesto de Actos Jurídicos Documentados) 0.5% of the declared property value
A Spanish Escritura is more complicated than similar documents in other E.C. countries. It contains details of the Canary Islands property including number of bedrooms, bathrooms, the square metres of each room and any terrace, garage or garden. It also contains the names and ID numbers of both seller, buyer and purchase price.
Land registry fees
About 0.5% of declared value
About 0.75% of declared value Notary charges for preparing the Escritura and presiding over its signing are set by law on a set scale depending on the Canary Islands property value.
Depending on the time and work involved normally a fee of between 1 - 2% of the purchase price.
Plus Valia Tax
The Plus Valia Tax in the Canary Islands 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 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. A tax levied by the Town Hall, based on the surface area of the land and 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.
Canary Island Mortgages
Non-residents of the Canary Islands can obtain between 60% to 70% of the bank valuation. Banks in the Canary Islands (Tenerife, Gran Canaria, Lanzarote or Fuerteventura) 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
Valuation of the property will cost approx 250€
1% mortgage opening commission
Insurance of the property costs from 120€ to 400€ per year.
Notary and registration of the mortgage
Advantages of applying for a mortgage in the Canary Islands:
The mortgage should be in place within 10 to 15 working days.
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 of the property, NOT of the real selling price, sometimes higher than the buying price of the property
FAQ about Canary Islands property purchase
What is a sales agreement in the Canary Islands?
Private document signed between the buyer and seller, reflecting ownership, legal definition of the property, the exact dates of payment, currency, completion dates and penalty clauses. Usually the property vendor commits to paying double the amount of the deposit paid should he withdraw from the contract. Also a penalty paid by the purchaser of the property 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 simpler than in most European countries, untill an amount of 60% of the price.
Other costs involved in owning a property in Tenerife
Rates Local rates are payable annually, calculated from rateable value of the land assigned by the local Tax Office.
Canary Islands Rubbish Collection
Applied by the Town Hall according to the property and payable every 6 months.
Canary Islands Water Rates
Water consumption is calculated by the water meter and is payable every 2 months.
Canary Islands 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 € 700 and €1500 per annum.
Canary Islands Electricity
Bimonthly with minimum rates applicable (whether you are in residence or not). You use a lot less electricity in Tenerife as no heating is required.
Canary Islands Internet and Telephone
Monthly. Standard rates vary according to equipment installed, but can be in the region of € 30 per month with adsl and plain call in Spain.