"My Home In Lanzarote buying guide and information
on property buying in Lanzarote"

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.

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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!

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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