The
Estate Agent
Tenerife
estate agents do a much more comprehensive
job than their counterparts in other
countries. In the U.K. for example,
an estate agents only job is to bring
the buyer and seller together.
Premier
Properties’ services to you include
preparation of purchase contracts,
assistance in opening a Spanish bank
account, obtaining an N.I.E. number,
certificates for non residents and
arranging legal counsel and a notary
for transfer of title. We also assist
you with transfer of electricity
and other services including insurance,
furnishings and last but not least,
registration of legal and unencumbered
title deeds.
Our service
to you, the client, is second to
none and fully documented in advance.
Please see “our
services”.
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Why
Tenerife?
Tenerife
has a superb all-year-round sub tropical
climate, which has created a full
twelve-month holiday industry. It
is also a duty free island, which
means that many goods are much cheaper
than mainland Spain or other European
countries. It has therefore also
become the first choice for many
that wish to spend winter under the
sun or even take early retirement.
Combine
this with Spain’s secure economy
and the stability gained with EEC
membership and you have all the ingredients
necessary for a property boom.
Tenerife
property prices have grown steadily
over the last 20 years and have had
several “booms” without the falls that have been associated with other countries in times of economic depression. There has never been a period of negative equity, which has happened in other countries – especially
the U.K. over the past few years.
The increasing
demand for property ownership and
the increasing demand by tourists
for accommodation means that the
opportunity for both capital growth
and income for investors is second
to none, especially in the south,
where 75% of all holidaymakers choose
to stay.
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Legal
Advice
Prospective purchasers should consider if they would purchase a property in their own country without legal advice. If not, then why should they purchase in a foreign country where the language and laws are different.
Unlike
other countries however, purchasers
have an option when buying a property
in Tenerife. Some estate agents offer
a complete legal service to all purchasers,
cutting out the solicitor. However,
experience tells us this can cause
a conflict of interest, as the agent
is also acting for the seller as
well as the buyer. Premier Properties
would strongly advise all purchasers
to take on a lawyer but with a small
difference.
A lot
of the work a solicitor does is mundane
administration work – collecting
information on outstanding debts,
obtaining the “official rubber stamp” from
government offices and so on. So,
Premier Properties offers a free
service to clients whereby we do
a lot of the legwork involved. Clients
are welcome to take advantage of
this service and then for complete
peace of mind, have a solicitor check
things over and actually produce
the legal documentation. This will
result in a thorough job and a much
smaller lawyer’s bill.
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The
Purchase Agreement
Spain
has a system where “gazzumping” is
unknown, a practice, which has become
common in the U.K. Here, similar
to the Scottish system, a purchaser
will pay a holding deposit to secure
the property whilst all legal checks
are carried out (usually around 10%).
In the rare event that your legal
representative finds some reason
why you should not proceed, the deposit
would be refundable. If the vendor
withdraws from the sale, the agreement
will contain a clause stating that
damages must be paid to the purchaser,
usually the same amount as the deposit
paid.
Often
contracts are written in English
and sometimes in Spanish with an
English translation. The agreement
will contain details of the vendor
and purchaser, the price and method
of payment. It will confirm that
full title (Escritura de Compraventa)
is held by the vendor, will guarantee
that the property be free from
claims and rights of third parties
and who is liable for costs and taxes
involved in the transfer.
Premier
Properties will prepare this agreement
for you so that you can be sure
that it will be correct and fair.
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Legal
Procedures
All property
transfers in Spain are registered
and the title deeds (Escritura) prepared
by a Notary (Notario). Both seller
and buyer then sign the deeds in
his presence.
The Notario
is a lawyer with special qualifications
authorising him to deal with matters
such as wills, authenticating official
documents, legal notices and of course
property deeds.
He
ensures that all paperwork has been
correctly drawn up, witnesses the
signing of the escritura and collects
fees and taxes. The escritura is
then presented to the land registry
office where the details of the new
owners are registered.
Those
who may have purchased on a short
visit to Tenerife and do not wish
to return simply for the signing
of the deeds, may appoint a representative
by “power of attorney” usually their
lawyer. Premier Properties will always
assist your lawyer and the Notario
in ensuring a smooth completion on
your behalf.
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Fees
and Taxes
There
are two fees and two or three taxes
payable on transfers of property
in Spain. The Notario will charge
a fee for preparing the transfer
and there is a fee charged for the
registration of the property in the
new owners names. Both are calculated
on the value of the property.
There
is a transfer tax, which at present
is 5% on new properties from a developer
and 6.5% on resale properties from
a private owner. There is also a
0.75% tax (A.J.D.) only when purchasing
from a developer.
A further
tax is levied on the increase value
of the land, known as Plus Valia
and is calculated on the annual increase
in value since the previous sale.
Strictly speaking this tax is levied
against the seller, but in practice
the purchaser normally pays all fees
and taxes in the transfer of a property.
Most fees and taxes are due as soon
as transfer is complete but Plus
Valia may not be claimed until some
time later when a lot of previous
owners cannot be traced (and the
purchaser will end up paying the
tax anyway), hence the above practice.
Of course, the same applies to you,
if and when the property is sold
on later.
As mentioned
earlier, fees will also be charged
to employ an independent solicitor.
This fee will obviously depend on
the amount of work needed to be done
and can be as high as 3,000 Euros
(£2200) if
the transfer has complications. However,
for the average purchase, the cost
is usually around 1,500 Euros (£1,000).
Although
there are many things that affect
the calculation of the above fees
and taxes, generally speaking, if
you allow about 8% of the property
purchase price (or 10% if taking
a Spanish mortgage) you will not
be far out.
After
the purchase of your property you
may have monthly or quarterly community
fees to pay to an owners association
that looks after the general running
of the complex – pools, gardens,
walkways etc.
Lastly,
yearly outgoings would be “Contribution Urbanas” (local rates) which
are very small compared with other countries and a wealth tax, which is also
low, being only 0.2% at present of the value of assets held in Spain.
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Identification
Number (N.I.E.)
Everyone
wishing to do any financial dealings
in Spain requires an identification
number (N.I.E.). A recent change
in the law means that this number
is now not needed before the purchase,
but it must be obtained shortly afterwards.
In addition, you should also appoint
a financial representative who is
resident in Spain to deal with your
tax affairs.
These
are relatively simple matters and
Premier Properties will assist you
in obtaining these items in order
to make things as simple as possible.
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Bank
Entry Certificates
Non-residents
are required to obtain a Bank Certificate
if purchasing from a Spanish individual
or company. The certificate will
show that Euros have been purchased
with foreign currency equal to the
purchase price of the property – hence
a Spanish Bank account is necessary.
However
if you are resident in Spain, or
if you are buying from a foreigner
who already has a Bank Certificate
registered in the escritura, a new
bank certificate is not required.
Premier
will advise and make arrangements
necessary ensuring no inconvenience
or cost to purchasers.
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Letting
your Property
There
are a few things to consider if you
intend to rent your property. To
be absolutely legal, the property
should be registered with the Ministry
of Tourism and tax declarations need
to be made to the tax authorities
(although this is not always the
case in practice).
On the
practical side, you will need to
find people who wish to rent the
property. You will also need someone
to clean the property and do the
laundry in between rentals and maintain
it to a good standard.
To help
you with the rentals, you may approach
a professionally run letting agent
who can offer the property to
tour operators and travel agents.
Although sometimes a small privately
run operation (husband and wife team?)
runs better and can be more practical.
Premier
will be pleased to advise and have
details of services that can be provided.
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Mortgages
Should
you wish to finance part of your
property purchase, you should look
first at your greatest asset – the
house you live in. This can provide
a simple means of raising the capital
necessary for purchase of your dream
home abroad. Using the equity acquired
in your own home and investing this
in a second property makes good financial
sense. Lending periods are generally
longer and interest rates lower than
can be found elsewhere.
Alternatively,
a mortgage can be obtained using
the new property as collateral.
As a non-resident, you can normally
obtain 50% of the value of the
property with repayments over 10
or 15 years. Residents can borrow
up to 80% of the value with repayments
over 15 or 20 years. Although in
general interest rates are similar,
should you wish to re-sell your property
at a later date, the new owner
can normally take over a Spanish
mortgage making this very attractive
to prospective buyers.
Apart
from borrowing at home or in Spain,
for example, mortgages are offered
by offshore branches of the Royal
Bank of Scotland or Abbey National
in Gibraltar, both of which have
very competitive rates.
Premier
will assist you in finding the right
method to suit you.
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The
Community of Owners (Communidad)
Wherever
there are parts of buildings that
are jointly owned or where there are
pools, gardens, shared access, private
roads or lighting common to all, new
purchasers will become members of
a community of owners. Payment for
these services is made by way of a
monthly or quarterly community fee.
This fee will vary depending on the
type of development and standard of
upkeep.
The community is run democratically
in accordance with the wishes of the
majority of owners and assures the
community should be well run for the
benefit of all.
An owners association is created to
co-ordinate the smooth running and
upkeep of the development and represent
the legal rights of the owners. There
will be an annual meeting where a
management company is decided upon
for the following year, and officials
– president, secretary etc are
appointed. Each owner will be able
to vote at these meetings.
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Wills
If you
wish, you can incorporate your Spanish
property (and any other assets) into
a Will made in your own country.
However this has presented major
problems in the past and we strongly
advise that a Spanish Will be drawn
up at the same time as purchasing
the property.
The most
suitable Spanish Will for most people
is a “Testamiento
Abierto” or “Open Will”. Your lawyer
will advise the contents needed in
the Will and how best to carry out
your true intentions. A Notario will
then prepare the Will on the instructions
from the lawyer and it is signed
in his presence. This can even be
done at the same time as the title
deeds are signed. The Will is then
registered in the central register
of Wills and you are provided with
an authorised copy showing the registration
number. This is a good system, which
avoids the dangers of a Will being
lost or overlooked.
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Insurance
- Property
The community
fees cover insurance on the community
itself and very often the owners
association will have made arrangements
for a block policy to cover buildings.
Opting into this policy is most likely
to be cheaper because of the number
of people covered. It is not compulsory
however and independent insurance
can be obtained through one of many
companies operating locally. If you
are taking a Spanish mortgage however,
a separate buildings insurance policy
taken out with the bank is obligatory.
Contents
insurance should be arranged separately
and premiums for both are similar
to those in the U.K.
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