A Guide to buying Tenerife property

By Doug Parkes

Before buying a property in Tenerife you should first decide what you want it for. Do you require it to return you an income or pay towards a mortgage, or do you want it for a holiday home for yourself and family only. Or perhaps you want to live in Tenerife.

It is important to make the right choice before looking at property as only a small percentage of apartment complexes have a tourist license and without the license you will not be able to let the apartment legally to tourists (Read about the laws regarding tourist rentals). If you want to live in Tenerife you would be better buying in a residential complex where you are not disturbed by the coming and going of tourists.

Your next decision is how much you can afford. You will need to allow between 8% and10% on top of the purchase price for all your legal costs. This is made up of 6.5% transfer tax on resale properties, Plus Valía tax (a tax on the increase in property value since the last transfer), Notaries fees / Land Registry fees (about 1000€), and Lawyer’s fees (about 1500€).

You will also be required to have an N.I.E. number (this will be your Spanish identification number) for all legal and tax affairs in Spain. You will need to open a Spanish bank account, this can be done quite easily with just your passport.

If you are purchasing from a non resident of Spain, you will need to retain 3% of the purchase price which should be lodged with the tax authority against any unpaid taxes on the property. If this is not done the tax authorities will demand the money from the new owner as unpaid taxes are levied on the property.

Having decided on a property in Tenerife you would like to purchase, make sure that you read the community rules and regulations as you will have to abide by these. There are normally two sets of community rules, The Statues and the Interior rules of the complex. These are virtually impossible to change, so if you do not agree with them it would be wise to look elsewhere.

Having found your property and agreed a price, the next objective is to agree a completion date. It can all be done inside a week but 6 to 8 weeks is more usual. You will normally pay a 10% deposit which is normally non refundable but the contract should also say that if the seller does not complete by the given date you are entitled to your deposit back plus the same amount on top.

In the past it has been normal practice to under declare the purchase price (to save you taxes), however when you come to sell you will then pay 18% capital gains tax on the under declared amount, much higher than you would have paid initially - so it is wise to put the actual purchase price on the Escritura (title deeds).

The seller or his agent will normally arrange the completion date with the notaries’ office.
You will need:

A certified copy from the administrator for the complex that all community fees are up to date.

Receipt for the local rates for that year.

A copy of your N.I.E (spanish ID).

The completion money. (This is usually in the form of a banker’s draft.)

The Notaries office will have already searched the title for the property.

After completion at the notaries’ office you will need to instruct a lawyer to pay all of the fees and register it with the land register. They will also change the title holders name with the rates office (but check that they will, as not all do.)

After you have completed on your Tenerife property, you must notify the Administrator of the complex that you have purchased the property and provide him with your name, address and bank details. They will then be able to notify you when the A.G.M. is to take place and debit your bank account for the community fees and water charges. (Some complexes have a private water supply and you will also need to notify the private water company of the change of ownership.)

This leaves the electricity supply to change to your name; this is a problem area as sometimes Unelco/Edesa (the electricity company) will change all the details (name and bank details) for a small fee (or twist of an arm). Other times they may insist on a new meter (boletin) this is only issued by a qualified electrician here in Spain after he has checked all the electrics and replaced any old or unsatisfactory installation.

This brings us to your running costs. These vary according to type of property and complexes. But you will have to pay for the following:

Community fees: These are paid to the community of owners and the % share is stated in the Escritura (title deeds) for the upkeep of the public areas of the complex.

Water: This is always metered and is either payable to the community or the water company.

Electricity: Again metered but paid to the electricity company.

Rates: Paid to the local council once a year.

Tax: Income tax paid quarterly or non letting tax paid annually.

Accountant: To ensure that you pay the correct amount of taxes, in the time limits provided.

For the running costs of an apartment on Paloma Beach click here.

If you have purchased Tenerife property and you plan to let to holiday makers you will need a Management company. Only one management company is licensed for each complex (info here on the Tenerife Letting Laws). Only that company can register your apartment with the tourist board. They are inspected at regular intervals to ensure that the standards are being met. They must have an office on the complex with adequate staff to deal with all clients. Beware if the management company do not or cannot register your apartment with the tourist board as you will be liable for any fines and these are large amounts which could force you to sell the property to pay these fines. Ask to see their credentials with the tourist board for your own peace of mind.

View property for sale in Tenerife on Paloma Beach.

Read about Paloma Beach's partnership with Tenerife property experts Clear Blue Skies.