INTRODUCTION
If you are reading
the My Home In Lanzarote, S.L. Buyers Guide,
you are obviously already considering the
benefits of owning your own home overseas
but may have found the whole prospect rather
daunting due to a lack of understanding of
the laws and regulations in a foreign country.
Well, look no further because we have put
together a basic overview of how you can purchase
your new home in the Canary Islands, arming
you with all the knowledge you will need along
the way.
My Home In Lanzarote S.L.
The My Home In Lanzarote property team has
extensive knowledge and experience of buying
and selling property in Canary Islands.
Our role is to assist you in all aspects of
the purchasing process, right through to your
after-sales questions and requirements. My
Home In Lanzarote S.L. provide a comprehensive
service to guide you through the procedures
of buying a property here, through to completion
and beyond. We will take the time to find
out exactly what you are looking for and then
search our extensive portfolio of quality
properties to find your perfect match.
Our services include the preparation of purchase
contracts, advice on legal counsel, mortgage
facilities, bank accounts and all other aspects
of the property purchase to enable you to
take possession of your new home.
Once your purchase is complete, we can also
assist with furnishing and kitchens or renting
out your property through our property management
facility. Please consult one of our advisors
for more details.
Back to
top
REASON FOR PURCHASE
Before you start to view any properties, it
is worth considering what you are going to
use it for. There are several options available:
Residential
Congratulations! You have decided to take
the plunge and move abroad and are looking
for a comfortable family home where you can
best enjoy your new Spanish lifestyle. Obviously,
primary considerations will be similar to
those in the UK, including size and layout
of living space, how many bedrooms/bathrooms,
parking availability and proximity to amenities,
schools, etc. - location, location, location!
Back
to top
Investment
Are you are looking to get a good return on
your investment with a minimum capital outlay?
The best option would be to buy at the `new
launch´ stage of an off-plan development
release. An average capital outlay would be
in the region of 30%, to be paid (often in
stage payments) during the construction process
(generally 18-24 months). Upon completion,
you will then have the option of selling the
property prior to taking title or taking title
and renting the property.
Holiday Home
Many people would be horrified at how much
they spend per year on package deals abroad.
Consequently, it makes a lot of sense to buy
your own home abroad, especially if you are
fortunate enough to take holidays several
times a year. Depending on your level of usage,
you also have the option to gain income through
rentals, whether this is to family and friends
or through a managed rental scheme on the
island.
Back
to top
Buy-to-Let
Traditionally a popular reason for purchasing
a property in the UK, this method also makes
a lot of sense in Lanzarote, particularly
when you take into consideration the number
of residents here. There is currently a huge
demand for long-term rental properties on
the Island. As with the `Residential´
option, you need to take the same considerations
on board as this is going to be home to someone
for an agreed amount of time. The advantage
to the purchaser is that you will have a regular
monthly income from the property - useful
if you have taken a mortgage on the property
and need help to finance the repayments. The
disadvantage, of course, is that your personal
use will be restricted by occupation of the
property. Standard long-term rental contracts
can be for 3, 6, 9 or 12 month durations and
rental management fees are in the region of
10%.
Short-term Rentals
If you are going to rent a property to tourists
then important criteria to consider is accessibility
of amenities e.g. supermarkets, bars, restaurants,
availability of a swimming pool and proximity
to the beach. One of the main advantages of
renting to tourists is the higher income you
will receive per week compared to renting
to residents/long-term tenants - a guideline
is that one week of tourist rates is the equivalent
to one month of long-term rates. Another is
that you can choose the weeks you would like
to keep the property free for your own use.
Obviously, the disadvantage is that you are
not guaranteed occupation all year round so
will need to be flexible regarding the income
you will receive from the property.
Back
to top
Guaranteed Rentals
Alternatively you can opt for a guaranteed
rental option. These are generally for a set
period of time (usually one or three years)
and you will receive a pre-determined amount
per month or quarter, regardless of occupation.
This can be an excellent option for first-time
buyers, however remember to check what availability
you, the owner, will have as this will generally
be restricted.
Back
to top
FINANCES:
Fees & Taxes
Anyone who would like to purchase a property
in Spain needs to have a foreigners identification
number (N.I.E. - Numero de Identificación
de Extranjero) and a qualified local representative
who will deal with tax affairs.
Throughout the purchase process, there are
several fees and taxes to be paid. As a general
rule, remember to add around 10% onto the
purchase price and this should cover all your
fees and taxes. A breakdown of where the fees
go is as follows:
· Document tax of 0.75%;
· Local tax (I.G.I.C.) which is currently
5% of the official value of a new property
(off-plan) or 6.5% transfer tax of the value
of a resale property from a private owner;
· Notary fee for the preparation of
the Title Deeds (Escritura);
· Notary fee for registering the property
in the new owners name;
· Plus Valia, a tax on the increased
value of the land;
· Solicitor or lawyers fees (dependant
on how much time and work is involved). Always
use a bonded lawyer to ensure the final bill
matches your quoted fee, your Estate Agent
should be able to recommend one for you.
Under Spanish law, the vendor should pay the
Plus Valia tax but in practice the purchaser
is asked to pay all fees and taxes on the
transfer of a property (resale). The fees
and transfer tax need to be paid soon after
the Escritura is signed, the Plus Valia will
be asked for later on.
Back
to top
Reservation Fees
Once you have chosen your perfect home in
the sun, you will be required to make a reservation
deposit. Depending on the purchase price of
the property, this will be between €3,000
and €6,000. Payment of this ensures that
your property is taken off the market and
reserved in your name and following this,
contracts will be drawn up. This reservation
fee forms part of the 10% deposit you will
generally need to make.
Back
to top
Mortgages
As the capital investment you make will invariably
increase at a higher rate than inflation,
buying a property is one of the safest forms
of investment you can make and your home in
the UK can be used to release equity to enable
you to purchase your second home abroad.
As a non-resident, you are generally eligible
for a Spanish mortgage of up to 70% of the
value of the property at completion (off-plan)
or of the official value of the property (resale).
Residents can generally get mortgages of 80%
and upwards. It is relatively easy to arrange
a mortgage in Lanzarote, with all banks providing
this facility for overseas purchasers. An
added benefit of arranging your mortgage here
is to take advantage of the lower interest
rates we enjoy in the Canary Islands, currently
between 3-4%. As in the UK, various types
of mortgage are available over several repayment
periods, according to your requirements. My
Home In Lanzarote, S.L. will be able to introduce
you to local bank managers during your visit.
Back
to top
The Community
of Owners
One important fee to remember is the community
fees the purchaser must pay to an owners association.
This will apply whenever there are parts of
the building that are jointly owned or where
there are communal gardens or swimming pools
and all the owners share the cost of maintenance.
The amount payable will depend on the type
of development, the amenities available and
the level of maintenance. It is important
that owners look after their own interests
by attending owners´ association meetings
and voting when relevant.
Back
to top
Insurance
Property - Just as you would insure your home
and contents in the UK, the same applies to
property in Lanzarote. If you are unlucky
enough to have to make a claim, you must go
to the local police station and tell them
the value of everything that has been taken.
They will record this and issue a Certificate,
which the insurance company will need before
they settle a claim.
Life - If you are purchasing a property with
stage payments or are taking on a mortgage
on completion of the property, it is worth
taking out life insurance to cover repayments
in the event that anything happens to the
main earner of the family. Ask your insurance
advisor in the UK for more details.
Back
to top
Tax Retention
According to current legislation, 5% of the
declared purchase price needs to be retained
by the purchaser (or the purchasers´
representative) and paid to the Spanish Inland
Revenue (Hacienda) within 30 days of signing
for title deeds (Escritura). This is payable
whenever the vendor is a non-resident of Spain.
If the vendor is a resident of Spain, there
is no need to retain the 5% as they would
be expected to make their own tax returns
regularly.
Back
to top
THE PURCHASE
CONTRACT
There are 2 types of purchase contract, one
for an off-plan property (one yet to be constructed
or still under construction) and one for a
resale (completed) property:
1. Off-Plan :
This type of contract will provide details
of the vendor and purchaser, including information
on ownership of land, building permissions,
completion dates and setting up a community
of owners, etc. It will also specify the purchase
price and method of purchase. There will be
confirmation that the Title Deeds (Escritura)
will be passed to the purchaser on completion
of the sale, free from all encumbrances.
2. Resale :
A resale contract will provide the above details
with the exception of items specifically relating
to an off-plan purchase (i.e. ownership of
land, building permissions, completion dates
and the setting up of a community, etc.).
Contracts will be either in English or Spanish
with an official English translation. My Home
In Lanzarote, S.L. can go through the contract
with you and explain anything you are unsure
of.
Back
to top
LEGAL PROCEDURES
Property purchases and sales in Spain need
to be registered in a local deed registry
and the Title Deed (Escritura de Compraventa)
must be prepared by a Notary. The vendor and
purchaser will sign the Title Deed in the
presence of the Notary, who will then collect
the fees and taxes. The deed then gets sent
to the Land Registry Office for registration
of the new legal owners´ name. This
process can take some time but an authorised
copy will be provided in the meantime.
If you do not have time to return to Lanzarote
to sign the Title Deed, you can appoint someone
to sign on your behalf by granting `Power
of Attorney´. This would normally be
in the name of your lawyer and can be prepared
by the Notary at the time you agree to purchase
the property.
A Notary is a lawyer who has extra qualifications
which enable them to carry out additional
duties involved in the purchase and sale of
property. He/she is responsible for the correct
drawing up of the conveyance deed, i.e. a
full and accurate description of the property
and payment to the vendor of the agreed purchase
price in the correct currency.
My Home In Lanzarote, S.L. will ensure that
all legal procedures are followed correctly
and will assist your lawyer and Notary in
completing the process, taking the stress
away from you, the purchaser.
Back
to top
Commonly
Used Phrases
No
doubt you will have come across a number of
phrases again and again when looking at purchasing
in Lanzarote. Phrases like NIF number or NIE
number, Escritura, Notary and so on. If may
make you feel a little embarrassed to ask
what they are all about – and so this
is intended as a brief guide. All of these
can be fully explained in further detail once
you have found your ideal home. Should there
be anything which is not covered here, please
don’t be afraid to ask us and we will
be happy to sit down with you and go through
it all.
Notary
The Notary is a
public official who is present at the time
of signing the purchase deed. Their job is
to ensure that all parties involved understand
what is happening and that all paperwork presented
at the time of signing is correct. Every property
title deed has to be signed in front of a
Notary.
Escritura
The Escritura is the title deed of a property,
or a plot of land. It is the document used
when transferring ownership and under Spanish
law, has to be signed in front of a Notary.
Land Registry
Just because you are buying a house and not
land does not mean that you need not bother
with the Land
Registry
Once you have signed your Escritura, it then
needs to be presented to the appropriate Land
Registry. We will ensure that this happens
for you. It is a process which can take several
months and Land Registry fees will be collected
throughout this period.
Plus Valia
This is a municipal capital gains tax and
has to be paid on the transfer of a property.
Generally speaking, it is usually a small
tax in the region of 250 – 350 euros,
but can in cases be substantially more. The
tax should be paid by the seller, but many
contracts transfer it to the buyer. Along
with your lawyer, we can advise you on this.
ITP or Transfer
Tax This is the
tax which makes up the bulk of the 10% fees
you should expect to pay above the price of
the property you are buying. It is typically
6% - 8% of the total fees payable.
Gestoria
Gestorias are private agencies specialized
in dealing with legal and administrative work
and carry out all the paperwork related to
real estate purchase and mortgages.
Back
to top
