Buyers Guide - Your Guide to Buying Property in Gran Canaria

Buying a home in Gran Canaria does not have to be a daunting process. It is really a matter of understanding the steps and being well informed of the legal and technical jargon. Whether it is a new build or a resale the basic procedure is the same, just with different timescales.

Below is a brief outline of the purchase procedure, followed by other useful information and an explanation of services necessary or available.

Find out which areas you are interested in:

• Do some homework on the areas available. Browse the Internet for information on those areas that catch your interest. The websites of the Town Councils (Ayuntamiento) in the region you want are a good place to start (We have link to all the Town Councils below on our website). Also, use the Internet to make a quick search for property for sale online, to get an idea of what properties are available in your price bracket and where they are located.
   
• Eventually, you’ll have to make the trip and visit the areas you are interested in for yourself. It’s best to hire a car, get a good map and drive around so that you can get a better feel of the areas and their surroundings. On your way, keep a lookout for services such as shops, schools, medical facilities etc. It is also a good idea to visit at different times of the day and on different days to get a better idea of traffic conditions, weather and so on.
   
• Search for properties in your areas of interest. You can read about the communities here: https://teamcanaria.com/area_guides.html
   
• If you don’t find what you are looking for online, you could check the classified adverts in local newspapers and magazines or even drive around the area looking out for ‘For Sale’ signs. Moreover, if you still cannot seem to find the right property for you on the private market, or if you would like to search concurrently among real estate agents in the Canary Islands, we recommend you look at our list of trusted real estate partners.
   
• Handling a private sale (no agents) Some sellers prefer not to use a real estate agent, and will attempt to sell their property themselves. They may have had a bad experience with an agent in the past, or they’re unwilling to pay an agent’s commission.
  Whatever the reason, you need to moderate your approach as a buyer: It is easier to negotiate with a dispassionate intermediary such as an agent than with a seller who is almost certain to be emotionally involved in the sale.
  The seller may also have a more inflated view of the property’ s value, and may be reluctant to budge on price. There are no hard and fast rules here, except to use more tact and to always explain your reasoning very clearly when negotiating price.
  You should also work closely with a lawyer to ensure that all documentation is above board, and correct legal processes are being followed. (In sales handled by an estate agent, the agent will keep an eye on this on behalf of the seller.)

Remember!

• By using TeamCanaria you do not need to go out and find properties with several different brokers. We are your unbiased advisor throughout the process, and are by your side throughout the entire journey no matter which broker that has the property for sale. It is your safety and security for optimal and independent property search.

The Contract:

• Once you have found the property, the Estate Agent will often ask for a small reservation fee, usually 3000 Euros, to take it off the market whilst a private sale/purchase contract is drawn up. This forms part of the balance of the deposit due.
   

• This private contract, between buyer and seller, should contain details of the agreed purchase price, the deposit payment, provision for payment of the outstanding balance, any extras, e.g. furniture, the intended completion date and all other relevant terms and conditions.
   

• A specific clause (called an arras) may be included with a financial penalty should either party default on the terms of the contract. In the case of the seller they would return the deposit and forfeit an equivalent sum, i.e. give the buyer double the deposit. If the buyer pulls out they lose the deposit paid.
   

• It is important that your lawyer/accountants checks the contract before it is signed to ensure it protects your interests. To be legally accepted in Spain the contract must be written in Spanish. Sometimes it is produced in dual language but you can always ask your lawyer/accountants for it to be translated. Always check if there will be an additional charge for this service as it may be more cost effective to have it translated privately.
   

• Once the contract is signed by both parties and you have paid the deposit there is then a binding agreement between buyer and seller. (We recommend you to use an lawyer/accountants to do all the paperwork)

Land Registry:

• All property sales or purchases should be registered in the Land Registry Office in Spain. They keep details of the property and record financial charges and other matters which may affect the Title Deed. It is important to make sure the vendor is the legal owner of the property and any relevant taxes or outstanding mortgage are paid before signing the new Title Deed on the day of completion.
   

• This information is detailed in a document called a Nota Simple, which is ordered from the relevant Land Registry Office.
   

• In the case of a new build, the builder must have a building license and planning permission for the construction. Given the length of time the planning process takes, sometimes the permissions will still be in the application stage at the time the private contract is signed. Your lawyer/accountants should check this and may suggest an additional clause to protect any monies that you may have paid in the event that the license and permissions are not granted.

Title Deed:

• To complete the purchase, the buyers, seller and their legal representatives are required to be present at the same time to sign the Title Deed (Escritura) in front of a Spanish Notary (Notario Publico). This person, who is a legally trained expert, will check the documentation and identification of all parties before it is signed.
   

• It is at this time you will be required to pay the balance of the purchase money and all additional taxes so if there is a Spanish mortgage involved in the purchase then this will also be signed for in the Notary at the same time as the Title Deed with the bank manager present. You will then be given the keys to your new home.
   

• You are recommended to visit the property before going to Notary to check that everything is in order.
   

• Once the formalities have been completed at the Notary, your lawyer/accountants will pay the necessary fees and taxes and present the Title Deed to the Land Registry Office for registration. This process can run into several months before the official stamped Title Deed (Escritura) is available to you. For this reason you should make sure that you are given a Copia Simple of the Title Deed at the time of signing as this is required to put all the utility bills etc. into your name.

Power of Attorney:

• If you will be unable to attend the completion it is possible to give power of attorney to your lawyer/accountants or another trusted person to act on your behalf. The document, drafted by your lawyer/accountants in Spanish, must be signed by you in front of a Notary. You should always check what the power of attorney allows your representative to do.

Additional expenses of buying property in Gran Canaria:

• Apart from the purchase price of the property, you will also have to budget up to a further 8-10% to cover additional fees, charges and taxes. If you are buying a second-hand property you would have to pay a 6.5% of the declared value within the contract as Property Transfer Tax and if you are buying a new property, you will have to pay 7% IGIC (a reduced-rate equivalent of VAT that applies to the Canary Islands) plus stamp tax at 0.75%
   
• There will also be notary fees, Land Registry fees, bank charges related to obtaining your mortgage (if applicable). Notary fees are fixed with an official scale of charges. The fees will vary according to the amount of land, the size of the property and the price at which the property is being sold. Generally speaking the fees will be around 0.5% of the sales price to the notary. The property register will be updated with the new buyer’s details once the transfer has gone through and the charges for this will be around 0,3% of the sales price..

Yearly expenses of the Property:

• If you are buying property in Gran Canaria that forms part of a complex, there will be a Community of Property Owners that is in charge of collecting a monthly fee to pay for the upkeep of the common areas (lifts, stairs, swimming pools, gardens and so on). We will help you find out what this fee is beforehand, and also check if there are any outstanding dues in this regard.. - Water and electricity fees if not included in the community costs - Property insurance
   

• Non-resident tax - Mainly calculated in the following manner: Tax value multiplied by 1,1%. Then you multiply the result with 24,75%. To be paid in connection with the tax declaration that must be handed in every year, starting from the year after the purchase.
   

• Property tax (“Impuesto sobre Bienes Inmuebles” also known as IBI) and garbage fees are invoiced twice a year. Garbage fee is approximately € 60 - 80 per year and the property tax depends on the catastral value. The exact yearly IBI tax for a property depends on its size, which Municipality it is in and the property type. Rates can vary from 0.4% to 0,9%.
  
  This IBI receipt is very important because it confirms what the owners have paid in the last year on their rates and it also provides information in relation to the Catastro.
  
  The IBI bill will show the property’s Catastral reference number which can give you information on the property you are buying (this website has details of the size of the land, the size of the property and there may also be photographs showing the property)
  
  The IBI bill will also show the property’s Cadastral value as assessed by the Hacienda (tax office) which in turn dictates your annual rates bill as well as any possible tax due when you sell the property.
  
  Your lawyer (prior to completion) will make sure that all IBI taxes have been paid for the last 5 years so that there are no ongoing liabilities for you.
   

• Extraordinary community costs - only if there is not enough money in the community to make significant/necessary repairs etc. However, this might never happen if the community has a strong economy. The costs (if any) will be divided between all the properties in the complex.

NIE Certificate - Tax Identification Number:

• Any person purchasing a property in Spain is required to obtain a tax identification number. You will need a certified copy of your passport, obtained from the Notary, to accompany the application form. This service costs approximately 100 € for 1 person & 150 € for 2 persons in Spain but much more costly if done in your country so it is worth considering making the application very early in the process, whilst still in Spain. TeamCanaria will advise you more about this requirement.

Spanish Bank Account:

• You will have to open a Spanish bank account. The bank account is a must to pay the community fees, water and electric bills, property tax etc. We will help you with the paperwork. We/the lawyer/accountants will also make sure that the fixed expenses regarding the property will be paid automatically from your Spanish bank account.

Mortgages:

• Spanish Banks will allow you to borrow against Spanish property and a mortgage can usually be arranged. This is most often to a maximum value of 60-80% of the purchase price but can be more depending on the type of purchase and your financial status. These funds are made available on the day of completion. As with the property purchase a mortgage is subject to taxes and fees of approximately 2% so always ask the bank to provide you with a quote.

Bank Valuation:

• A valuation will be carried out by a specialist firm associated with the bank if a Spanish mortgage has been applied for. In other cases, it is very unusual to have a property valued. The Spanish law regulates the responsibility of the vendor for structural defects in the property, protecting to some extend you as the purchaser.

Spanish Will:

• When you purchase a property, in Spain, it is recommended that you make a Spanish will that is independent of the will made in your home country, which can help avoid a great deal of trouble and expense. The will made in your home country should be carefully worded in order to respect the terms of your Spanish will. It is necessary to sign your will in front of a Notary and this can be done simultaneously to signing the Title Deed on the day of completion if prior arrangement is made with your Spanish lawyer. The cost will be approx. 130 € per person.

Fiscal Representative:

• Non-resident Spanish property owners are liable for annual wealth and income tax. Those resident in Spain are liable for income tax. In either case a Fiscal Representative will represent you in front of the Spanish Tax Authorities and do your tax returns….

Bank Guarantee:

• When purchasing a new build, the builder should offer a bank guarantee for all the stage payments made during the purchase. The guarantee is issued by the bank after each payment is made. However, due to the costs of those guarantees, some builders tend not to offer such guarantees and this can put you at risk if the property is not completed, e.g. due to financial difficulties faced by the builder.

Declared Value:

• It has long been common practice in Spain to under-declare the value of the house that you are buying in order to minimize the transfer tax. This also helps the seller to avoid Capital Gains tax. Over recent years Spanish lawyers have started to advise all clients to declare the agreed price (or very close to it) as the Spanish tax inspectors have been investigating more and more sales where they feel that values have been under-declared. If you are buying a property and the seller insists on reducing the declared value of the property there is a possibility that the tax authorities will impose a fine once the sale has been completed. In addition when you come to sell the property the Capital Gains Tax will be charged on the profit that you have made since buying the property (the difference between your declared buying price and your declared selling price).

Illegal building works:

• In many cases when buying a property in Gran Canaria you might find certain building violations.
  For example, a swimming pool or the closing of an open space or terrace that has been built without a proper building permit, an extra apartment in the basement etc….
  As owner of a property in Spain with illegal building works you run the risk of having to demolish and restore the situation as it was before.
  However, there are statutes of limitation depending on which autonomous community you live in Spain, which dictate that after a certain amount of years these building violations are tolerated.
  For example, if an illegal pool, was built in Gran Canaria, which belongs to the Canary Islands, 4 years ago or before and you can prove it, then the pool is tolerated and it is not at risk of being demolished.