Whether you or looking for a one bedroom apartment in Puerto del Carmen or a luxury country villa as a long term investment, If you don’t need finance or you have a pre-arranged mortgage, you will have a distinct negotiating advantage when it comes to settling a price. If you require a mortgage, but have not yet arranged a loan, we recommend you do so before looking at property. The next step begins the conveyance and at this stage we recommend you use a lawyer. Your lawyer will investigate the Escritura (Title Deed) for the property you wish to buy and will carry out the local Land Registry Search
As soon as your lawyer confirms that everything is legally in order, a deposit contract is drawn up between you and the vendor. This states the conditions of the transaction, identifies the property and the parties involved, as well as the deadline for completion. It will state if the property is being sold furnished or unfurnished. If the property is being sold furnished, it is advisable to include an inventory signed by both you and your vendor. Once the contract is drafted and both parties sign, you transfer 10% of the sales price to your vendor (or to your lawyer, who will then pass the money on) and you have entered into a contract which is regulated by the Spanish government. If you change your mind after this stage and decide not to buy, you will lose your deposit. If the seller fails to sell after this stage, they will be forced to repay your 10% deposit back to you, with the same amount again as compensation. The law on deposit contracts is regulated by the Spanish Civil Code, and is designed to prevent gazumping. Between the deposit contract stage and completion, your lawyer will work on your behalf to organize all paperwork and prepare final conveyance.
Your new Escritura will be signed by you (or your lawyer if you have granted power of attorney) in front of a Spanish notary and the outstanding amount will be paid over to the vendor. Before this happens, the notary will require the vendor to provide the evidence that municipal rates are paid and up to date. In addition to the purchase price, you will need to pay notarial costs, Land Registry fees, Impuesto sobre Transferencias Patrimoniales – Transfer taxes (stamp duty), lawyer’s fees and legal costs, as well as several minor taxes including the Plus Valua, which is a land appreciation tax paid to the local municipality. Utilities bills will be transferred to your name and direct debits will be set up to pay future bills. The same applies for telephone (if relevant) and the community charge, if your property is on a complex with a community of owners. After you sign your deed of purchase in the notary, your lawyer will finalize the paperwork by submitting the Escritura to the local Land Registry. Once the title deed has been registered in your name, you will receive your registered deed which is your proof of ownership and should be kept in a safe place. The entire process from signing in the notary’s office, to receiving your registered deed takes about 2 months, but you are entitled to receive a Copia Simple (shorter pre-land registry deed) within 2 – 3 days of signing. It is advisable to seek advice from your lawyer at this point regarding wills. Also please remember to ask your accountant for form 210 which is your annual tax return on your Spanish property.
Banking and Mortgages :
Terms and Conditions vary, depending on the bank and type of mortgage you require, but as a rough guideline non-residents can borrow up to a maximum of 60% of the purchase price or bank’s valuation (whichever is lower) for a maximum loan period of 30 years. Residents may obtain up to 70% mortgages on the purchase price or bank’s valuation (whichever is lower) and again the maximum loan period is 30 years. Interest rates in Spain are currently among the most competitive in Europe and are probably more competitive than similar rates in the U.K. or Ireland. Discounted first year rates start from as little as 2.5% depending on your circumstances. Mortgages in Spain differ from those in the U.K. and Ireland in that they are levied on the property, not on the person who owns the property.
If you calculate to add approximately between 8% and 10% for taxes and costs on top of the sale price of the property. This applies to both a resale and newly built properties.
These costs are made up of the following: –
• 6.5% ITP Tax (Impuestos sobre Transmisiones Patrimonials) for resale properties.
• Notary fees
• Property registration fees
• Translation fee (If you do not speak fluent Spanish)
• Legal fees (If a Lawyer is required)
• Plus Valia- This is a local tax on the property value, that is shown on the deeds.
• Mortgage fees if a loan is required then plus 0.75% stamp duty on mortgage deed.
These costs add up to between 8% – 10% of the sale price.
Documents required for Mortgage Application.
Details required for Employees:
• P-60 from all applicants
• Credit Report (for Ireland, report application website: www,icb,ie ) (for UK report application website: www experian.co,uk )
• Photocopy of all applicants valid passports
• Last 2 payrolls
• Justification of other income, if applicable.
• Justification of assets i.e. Current mortgages etc.
Details required for the Self-Employed:
• Photocopy of all applicants valid passports
• Previous 2 years income tax returns
• Credit Report (Ireland, report application website: www.icb.ie), (English report application website: www.experian.co.uk)
• Payments on account of income tax for previous 2 years
• Justification of other income, if applicable.
• Justification of assets (Net worth)
The investment for the rental market place:
1) long term rental,
where this is a continuous set monthly amount. There is also a growing number of local professional workers, who along with their families, have created a huge demand for long term rental properties. Normally you will have less return on this basis but there is really no input by the property owner to get involved with situations like weekly cleaning, linen and towel changes, etc.
2) The weekly holiday rental market.
This has seen enormous growth in the past few years. With the event of the Internet and the ease of which individuals can now find, book and choose a airline to reach their preferred destination is the main reason for this growth in the rental market. Advertising your property on specialist websites such as Owners Direct, Home & Away Holiday lets, Espanabreaks, Holidaylettings, Premier-holidays, are to name but a few, where clients can book your rental property all year round. Promote your property correctly and you can expect well over 45 weeks per year rental income. There are many cleaning companies and individuals on Lanzarote, who are geared up for looking after your rental property. They will make sure that your property will have the correct clean and change over for your clients. Prices vary from the type of property you have and the amount of clients that are staying in your property.
Questions and Answers:
QUESTION: How do I apply for a mortgage in Lanzarote?
ANSWER: As in other countries, Spanish banks will want to be satisfied as to your income and will lend around 60%.
QUESTION: How much deposit should I have to put down to secure a property?
ANSWER: It is customary to pay a 10% deposit, then the balance when signing for the deeds.
QUESTION: When can I move in?
ANSWER: You can take possession of the property when the title deeds have been signed at the notary.
QUESTION: Does Lanzarote have a national health care system?
ANSWER: Yes, it’s free to any EU citizens. Also there is a good private healthcare facility.
QUESTION: Can my UK State Pension be paid to my Spanish bank account?
ANSWER: Yes, and we can help you set up a bank account on the same day :that you apply at the bank.
QUESTION: Do I have to do a tax deceleration in Spain.
ANSWER: Yes, you have to fill in a tax deceleration even if your a non-resident, owners of Spanish property still have to file a tax return ( Form 210 ) .
If the property was last revalued before 1st January 1994 then its 2% of the cadastral value, and if it was after that date its 1.1%
QUESTION: Do I need a UK solicitor as well as a Spanish one?
ANSWER: No, this would only serve to increase your legal fees, but do make sure that your Spanish lawyer speaks and writes fluent English. We have English lawyers and accountants available for you.
QUESTION Can I take my car to Lanzarote?
ANSWER: Yes, assuming you have owned it for six months or more. If you’re planning on keeping it here you’ll need to get an export certificate from the DVLA, and if you take up residency you’ll have to register the car in Lanzarote and get Spanish number plates. We can advise you on the best freight service to use for Lanzarote, and for all your furniture too.
QUESTION: What about the Spanish education system?
ANSWER: It is excellent education in Lanzarote and there are several schools to choose from on the island
QUESTION: Can I take up employment in Lanzarote?
ANSWER: Yes, if you are from a country that is in the EU.
QUESTION: Can I bring my pets with me to Lanzarote?
ANSWER: There’s no problem with this providing you have evidence of the relevant vaccinations. Don’t forget to apply for a pet passport if you want to bring your animals back to the UK.
QUESTION: Will I need an ID card?
ANSWER: This is a NIE. number. You will also require this to purchase a property, open a bank account and to become a resident, we will help you apply for this.
QUESTION: Should I have a Spanish will?
ANSWER: Yes, definitely, make a separate Will to dispose of any assets located outside of Spain. A British Will, for example, has no bearing on your Spanish estate.
QUESTION: Is it easy to move all my belongings to Lanzarote?
ANSWER: It’s very easy, and the whole process only takes around 3 weeks using the local transport companies based in Lanzarote.
We hope that we have been able to provide answers to many of your questions. However, if there are points on which you would like further information or if you wish to discuss any aspect of property purchase with us in more detail, please do not hesitate to contact us by telephone (00 34) 928 590 928 or for a printable version of this guide please email us at email@example.com.