The information below is not intended as a comprehensive guide to purchasing. You are strongly advised to use a Spanish lawyer’s services based in Lanzarote, who speaks your language. Good legal advice will ensure the safety of your investment.
As there is a wide variety of property for sale in Lanzarote, it pays to give some thought to the type of property you are looking for. Whether you are looking for an apartment for sale in Puerto del Carmen or a luxury Lanzarote villa, do spend time getting to know the area(s) before you take the plunge. A good agent should listen to your requirements and advise you of your options when choosing your Lanzarote property. If you are planning a visit to the island, contact agents in advance. That way you can spend your precious time here on the island viewing properties that best match your requirements. When budgeting, remember to allow approximately 10 to 12% on top of the purchase price to cover stamp duty and all the legal costs involved in buying property.
Finance – the key to negotiating a better price
If you don’t need finance or you have a pre-arranged mortgage, congratulations! You will have a distinct negotiating advantage when it comes to setting a price. If you do require a mortgage, but have not yet arranged a loan, we recommend you do so before viewing a property. Essentially you have two options: obtain the loan in your home country (if you are a non-resident) by mortgaging your existing house, or apply for a mortgage on the house you intend to buy with one of the Spanish banks here on the island (both residents and non-residents).
- Spanish banks’ lending criteria:
- Recent bank statements
- Last three payslips
- Your last tax return, or if you are a resident your Spanish Tax Declaration (IRPF) for the last financial year
- Letter of reference from your bank manager and/or employer.
- Passport / Residence permit / Spanish Identity Card of applicants.
- Proof of other income, if applicable.
- Declaration deed for a new build from the developer (new buildings)
- Property deeds of the current owner (second hand homes)
- Private sale-purchase contract or letter containing offer
In the case of self-employed or independent professionals:
- Proof of income tax payments made during the current financial year and declaration of assets and accounts for the last three years
- N.I.E. (Foreign Resident’s Number)
- Terms vary, but as a guideline non-resident can borrow up to a maximum of 70% and residents up to 80% of the purchase price or bank’s valuation (whichever is lower).
Once you have agreed to a selling price with the vendor, 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 (Nota Simple). This is to make sure that everything is in order, for example that the sellers are indeed the lawful owners and that there are no charges, encumbrances, or legal problems with the property. 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. This means it is important to check that the property you buy is free of outstanding debts and mortgages before you sign for the property. Exchange contracts:
As soon as your lawyer confirms that everything is legally in order, a deposit contract is usually 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, normally 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.
Your new title deed 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 evidence that municipal rates are paid up to date.
In addition to the purchase price, you will need to pay notary 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 Valía. This is a land appreciation tax paid to the local municipality.
There will be a minor cost for verbal translation of the deeds into your language before signing. 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.
Your lawyer will finalize the paperwork by submitting the deed to the Land Registry. 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 up to 2 months, but you are entitled to receive a Copia Simple (preliminary copy of the deed before it is presented in the Land Registry) within 2 – 3 days of signing. All that is left is for you to enjoy your property and make the most of the Lanzarote lifestyle.