Buying property in Tenerife is not the same as in the UK, you should rely on independent consultants to assist and guide you and avoid any problems during or after your purchase. When considering the purchase of Real Estate, many thoughts will cross your mind. How does it work on the island? What do I need? What should I do? Will it be legal? What am I getting myself into? So having an independent English-speaking consultant assisting you is no unnecessary luxury, it gives you more peace of mind and prevents problems and high costs afterwards. We are fully insured as a Spanish company for our services for both Spain and the Canary Islands.
The information below is intended to provide you with a first overview of the purchase procedure to ensure that each transaction proceeds in a smooth and correct manner. If you are considering buying a new build home, be sure to read our separate article about buying a new development in Tenerife. If you have any questions, please do not hesitate to contact us.
NIE – Número de Identificación de Extranjero
Buying property in Tenerife as a private individual is not possible without the (in)famous NIE. The NIE is a personal identification number that every foreigner who wants to buy a property in Spain must have. The NIE can be obtained via the Policía Nacional by filling in a document with your personal details and paying a tax to a Spanish bank via another document. Basically you can arrange this in 1 day. Ask the broker if this is included in his services, otherwise we will arrange this together with you.
Registration with the tax authorities
Buying property in Tenerife will unfortunately not go without paying taxes. Since 2018 you have to be registered in advance with the Spanish tax authorities so that you can comply with the tax obligations in Spain. Unfortunately, we all know that we have to pay taxes, in Tenerife this is no different. We will go with you to the relevant services and arrange this completely so that you only have to put your signature on the relevant documents.
Opening a Spanish bank account
Buying property in Tenerife is not possible without a financial contribution. So, the next step is to open a bank account at a Spanish bank. This is required in order to transfer, among other things, the funds you need to buy your property. But more specifically also to have your current accounts directly debited as soon as you become the owner, such as water, electricity, the community of owners and your taxes.
Buying property in Tenerife is also perfectly possible without having your own Spanish bank account. You can transfer the funds directly to the notary, but this will cost around 450€. And a solution for the payment of your utilities needs to be found if you would choose not to open a bank account at all. (We can provide you with this, should you not wish to have your own bankaccount in Tenerife)
Attention! Since the beginning of 2018, when opening an account for a foreigner, the banks require the following: your last tax return from your country of residence (in English, German, French or Spanish) This against money laundering.
You must also be in possession of proof of your work/income. If you are self-employed, a proof of self employment (an extract from the HMRC for the UK) is sufficient; if you are an employee, your last payslip will suffice. You will also have to prove where the funds come from for your imminent purchase. Mortgage, loans, inheritance, gifts, savings, … Contact us for more information about this!
Drawing up a promise of purchase and sale
As soon as you have made your choice regarding the property you wish to purchase, the estate agent or we will draw up a promise of purchase and sale which has to be signed by both the buyer and the seller and which gives legality to the imminent sale. Buying real estate in Tenerife is generally done by signing a promise of sale before going to the notary, even though this is not a legal obligation. It is therefore customary for you, the buyer, to pay a deposit of 10% of the agreed selling price at the time of signing this document. You will lose this deposit if you would renounce to buy the property.
This deposit payment remains in the account of the intermediary (broker, lawyer, third party, …) until the signing of the deed or, if applicable, paid to the selling party.
Please contact us before you sign a promise of sale with a real estate agent, so that we can read it for you and look after your interests! A signed document is legally valid and you need to make sure that you understand what you are signing and buying!
Checking for debts
Buying property in Tenerife is slightly more “dangerous” than in other countries. In Spain and the Canary Islands, you can take over real estate debts, which are not automatically cleared upon the sale of the property. Dramatic stories that you sometimes hear in the news are usually based on the fact that this has not been checked and that the buyer has not been assisted by an independent consultant like ourselves. Or even worse, that there has been malicious intent, although fortunately this does not happen very often.
Buying property in Tenerife with a running mortgage is possible, you can even take over the mortgage, but this is not recommended. If there is still a mortgage on the property, it must be settled after the signing of the deed, unless you would take over this debt, which is possible in Spain and in the Canary Islands. The settlement of a current loan can take some time, as the bank has to be paid back, after which a deed has to be signed again to remove the mortgage from the Register.
It should also be verified that the seller has paid all other current accounts, i.e. water, electricity, community (if applicable), basura (rubbish collection) and IBI (property tax). As a buyer, you need to be sure that you are buying completely free of debts, or that the debts are deducted from the price you pay to the seller so that we can settle them for you with the relevant services.
A capital gains tax must be paid by the seller on the sale of his property, but it is the legal obligation of the buyer to actually pay this to the authorities if the seller is a non-resident. So it is important to know in advance how much this amounts to as this sum is deducted from the price. The capital gains tax is therefor not paid at the notary’s office but later via the municipality. You withhold this amount from the purchase price and Seb Leeson & Co will pay it for you at the competent government agencies.
If the seller is a foreigner and is not a tax resident, 3% must be deducted from the selling price. Again, the obligation to pay this to the government lies with the buyer. This is also not settled with the notary but by Seb Leeson & Co at the competent services.
Buying property in Tenerife with the Notary
Buying property in Tenerife is something you do with a notary. An appointment will be made with a notary (usually between 1 and 3 months later) of your choice, to be chosen by the buyer, for the signing of the deed, payment and handing over of the keys.
In the meantime, you will have time to transfer the necessary funds for the purchase of your property to your Spanish bank account. Keep in mind that the bank will most likely block your transferred funds and will ask you for proof of where they come from, in other words their origin. Again to combat money laundering. Make sure you collect the necessary evidence in advance to avoid problems or delays. Evidence may include the following: deed of sale of a property that was owned by you, proof of receipt of a large sum of money (insurance, …), document from your bank confirming that the funds transferred come from your savings account, …
On the morning of the execution of the deed, you will collect the necessary bank cheque(s) from the bank to be handed over with the deed.
Congratulations, you are now the proud owner of a property in Tenerife!
Your purchase must be registered with the responsible authorities. However, the notary does not do this and you, as the new owner, are responsible for this. It goes without saying that Seb Leeson & Co will take care of this for you.
The Registration procedure often takes several weeks and there are also costs involved, based on the purchase value of your property. These are the registration fees. A brief overview of the extra costs involved in purchasing property in Tenerife can be found here.
In general, when buying property in Tenerife, your biggest extra cost are taxes. In Tenerife, you pay 6.5% of the purchase value as a tax to the government for a second-hand property. You also have to arrange and pay this yourself after the signing of the deed. The notary does not take care of this. It goes without saying that Seb Leeson & Co will take care of this for you.
For new build houses, you pay the IGIC (this is the VAT) + 1% of the purchase value as a tax.
Just like at home, the utilities have to be transferred from the previous owner to your name. This includes the signing of an electricity contract, water supply, garbage collection, etc. It goes without saying that Seb Leeson & Co will take care of this for you.
You must inform the municipality and the land registry that you are the new owner of your property. Every year you will have to pay the property tax called the Impuesto sobre los Bienes Inmuebles (IBI). We have this tax paid through direct debet for all our customers so that you never forget to pay and therefore do not receive any fines.
You will probably also be subject to pay the tax for non-residents.
Buying property in Tenerife means for some investors a way to ensure profitability. If you are planning on renting out your property in Tenerife, be sure to read our article on renting out property in Tenerife.
Where appropriate, there are other obligations, such as:
- Notify the community of owners that you are the new owner
- Payment of the 3% retention at the time of sale
- Payment of the capital gains tax
- Cancellation of a mortgage loan
- Annual payment of a the tax for non-residents
These also all need to be taken care of. So there is a lot of work to be done in Tenerife, especially since the notary’s work is limited to the deed, and it is up to you to take care of all the other obligations, both before and after the signing of the deed.