Tenerife Property Buying Guide
Buying a home in Tenerife does not have to be a daunting process. It is really a matter of understanding the steps and being well informed of the legal and technical jargon. Whether it is a new build or a resale the basic procedure is the same, just with different timescales.
This is a brief outline of the purchase procedure, plus other useful information and an explanation of services necessary or available.
Finding a Property to buy
First; Find out which areas you are interested in. In Tenerife, the place to start is usually to decide between "South" and "North" Tenerife. Of the two, the South is more "touristy", while the North is more "genuine", but this is a very broad generalization. Weather-vise, the South is drier and sunnier, while the North is much greener. The North gets more rain, but usually in short showers, and often at higher altitudes, not so much in the coastal areas. The temperatures in the North usually stays below 30C even in the summer, while in South it can get hotter, especially when there is "Calima". (Hot, dry winds from Sahara.)
Tenerife ha a lot of "micro climates", and the weather can vary a lot between two villages just a few kilometers apart. Also be aware that there often are major differences in altitudes, and higher locations (usually over 500m or so) can get quite cold in the winter, and hot in the summer. In the winter, the temperatures are quite similar.
Aside from the "North" and "South" distinction, there is also the Metropolitan area of Santa Cruz in the Northeast corner of the Island. The climate in Santa Cruz is similar to the South. The region called "North" is the part that is North of the central mountain range, and counted from Santa Cruz it begins west of La Laguna (or San Cristobal de La Laguna, which is the proper name, but is usually shortened to "La Laguna"), and continues to Buenavista del Norte in the Northwest of Tenerife. The whole east, south, and west coasts of Tenerife have the "South" climate.
Do some homework on the areas available in the region of your choice. Browse the Internet for information on those areas that catch your interest. The websites of the Town Councils (Ayuntamiento) in the region you want are a good source of information. Also, use the search function in the Top Menu of our Tenerife*Property web site to make a quick search for property for sale, to get an idea of what properties are available in your price bracket and where they are located.
Eventually, you’ll have to make the trip and visit the areas you are interested in for yourself. It’s best to hire a car, get a good map and drive around so that you can get a better feel of the areas and their surroundings. Check locations of services such as shops, schools, medical facilities etc. It is also a good idea to visit at different times of the day and on different days to get a better idea of traffic conditions, weather and so on.
When you have found the Property of your dreams
Once you have found the property you want, you make an offer to the Estate Agent. Property owners here generally know the value of their property, but some negotiation normally takes place with the Estate Agent mediating.
Once the price has been agreed on, the Estate Agent may ask for a small reservation fee, usually 3000 Euros, to take it off the market whilst a private sale/purchase contract is drawn up. This forms part of the balance of the deposit due.
This private contract, between buyer and seller, should contain details of the agreed purchase price, the deposit payment (usually 10%, paid into a solicitor’s escrow account), provision for payment of the outstanding balance, any extras, e.g. furniture, the intended completion date and all other relevant terms and conditions.
A specific clause (called an arras) is often included in this contract, with a financial penalty should either party default on the terms of the contract. In the case of the seller they would return the deposit and forfeit an equivalent sum, i.e. give the buyer double the deposit. If the buyer pulls out they lose the deposit paid.
Your solicitor checks all the property paperwork and the contract before it is signed to ensure it protects your interests. To be legally accepted in Spain the contract must be written in Spanish, but the solicitor can normally help providing a translation in English too. It’s very important that you know what you sign.
Once the contract is signed by both parties and you have paid the deposit there is then a binding agreement between buyer and seller.
If you don’t have one already, now it’s time for you to get a Spanish NIE number, plus a Spanish bank account. You’ll need both to be able to complete the purchase, and pay taxes and utilities etc, after completion. A NIE is essentially a foreigner’s identity number. Your solicitor can normally help you with this, once you provide him with a power of attorney, in front of a Spanish notary or following his instructions in a notary of your country of origin.
Before completion the solicitors will check the existence of any debts that may affect the property to be sold, (mortgages, tax registered charges, community of owners debt, electricity and water debts, local council debts, rubbish fees…), and will provide a breakdown of all retentions and need to be taken into account on price according to each case.
On the day of completion, you meet with the seller, your solicitor, and if a Spanish mortgage is involved, a representative of your bank, at the office of a Public Notary.
Normally your Tenerife*Property real estate agent also attends.
The Notary Public prepare the Property Title Deeds, (Escritura de Compra Venta), following the instructions given by your solicitor and vendors solicitor or representative, identifies all signatories, and witness the signing of the deeds. At this time, you will also pay the seller the remaining balance of the purchase price.
If a Spanish mortgage in involved, there will be separate deeds to sign for them, for you and the representative of the bank.
The Notary fees are usually in the region of 800-1000 euros, payable by you, the buyer. If there is also a mortgage, there is a separate Notary fee for the mortgage deeds.
If you are unable to attend the completion your solicitor will do for you using the power of attorney.
Once the formalities have been completed at the Notary, your solicitor will pay the necessary fees and taxes and present the Title Deed to the Land Registry Office for registration, and arrange debits for all utility, local tax office, rubbish and community fees, changing contracts to the new owners name.
This process can run into one or two months before the official stamped Title Deed (Escritura) is available to you. For this reason, you should make sure that you are given a Copia Simple of the Title Deed at the time of signing to have evidence of the purchase itself.
The tax you need to pay when buying a resale property in Tenerife is 6.5% of the purchase price or official valuation (whichever is highest). This needs to be paid to the Canarian Tax Office within one month from completion at the notary.
For a new property, the taxes are 7% IGIC (Canarian sales tax), plus a 1% stamp tax called AJD, both based on the purchase price. AJD needs to be paid to the Canarian Tax Office within one month from completion at the notary, while IGIC is paid at the moment of completion to the seller.
The fee for the registration in the land register is normally 400-600 euros.
Overall, you should budget about 10% above the purchase price, to cover all taxes and fees. If you are planning to get a Spanish mortgage, you’ll need to budget for that too. A mortgage is most often to a maximum value of 70% of the purchase price, although some banks would refuse to finance over a 50% to non residents, but may be more depending on the type of purchase and your financial status. Like the property purchase, a mortgage is also subject to taxes and fees, usually about 2% over purchase price, so always ask the bank to provide you with a quote.
Community Fees. If you are buying property in Tenerife that forms part of a complex, there will be a Community of Property Owners that is in charge of collecting a monthly, or sometimes quarterly, fee to pay for the upkeep of the common areas (lifts, stairs, swimming pools, gardens etc). Please note that water and electricity fees are usually not included in the community costs.
Property tax, (IBI, “Impuesto sobre Bienes Inmuebles”) and garbage fees are charged by the Town Council (“Ayuntamiento”). Garbage fees are approximately € 60 - 80 per year in most Municipalities, and the property tax depends on the cadastral value. The exact yearly IBI tax for a property depends on its size, which Municipality it is in and the property type. Rates can vary from 0.4% to 1%.
This IBI receipt is very important because it confirms what the owners have paid in the last year on their rates and it also provides information in relation to the Cadastral Register.
The IBI bill will show the property’s Cadastral reference number which can give you information from a Spanish Tax Office perspective on the property you are buying.
(Read more on this page: http://www.sedecatastro.gob.es - This website has details of the size of the land, the size of the property and there may also be photographs showing the property)
The IBI bill will also show the property’s Cadastral value as assessed by the Hacienda (tax office) which in turn dictates your annual rates bill as well as a base for calculation of some cases of Non Resident Income Tax.
Your lawyer (prior to completion) will make sure that all IBI taxes have been paid for the last 5 years so that there are no ongoing liabilities for you.
Non-resident tax. If you aren’t a Spanish resident, you’ll have to pay this tax. Tax duties will vary depending on the use given to your property, rented or not rented. Talk to your solicitor.
Extraordinary community costs. If you are buying property in Tenerife that forms part of a complex, there is a possibility of extra costs on top of the normal community fees. This happens only if there is not enough money in the community to make significant/necessary repairs etc. However, this might never happen if the community has a strong economy. The costs (if any) will be divided between all the properties in the complex. Those approved before completion should be assumed by the seller and subsequently your solicitor will request the right retention on the final price.
When you purchase a property in Spain, it is recommended that you make a Spanish will that is independent of the will made in your home country. This can help avoid a great deal of trouble and expense. The will made in your home country should be carefully worded to respect the terms of your Spanish will. It is necessary to sign your will in front of a Notary and this can be done simultaneously to signing the Title Deed on the day of completion if prior arrangement is made with your solicitor. Having a Spanish will is specially advised for UK and Danish buyers. All other cases should be carefully studied.