Many people who fall in love with Lanzarote often end up buying property here – either as a holiday home, or in some cases as their primary residence.
Buying property in Lanzarote shouldn’t be difficult, but it is different to the process in many other European countries, so we’ve listed the steps below, with pointers on each, so that you should know what to expect.
Assuming you haven’t already arranged financing in your home country, then the banks here will lend money for mortgages, but they are pretty cautious about that lending, so we’d recommend a visit to a local bank before you start house hunting in earnest. They will tell you what terms you can expect, and what paperwork you will need to provide. The amount they will lend here is based very much on the value of the property, not the selling price, so at the early stages they will only be able to give you a very general idea of how much you are likely to be able to borrow.
Allow around 10% over and above the purchase price of any property to allow for transfer tax, valuation fees and mortgage fees. So if you are looking at a property you can buy for €150,000, you need to allow to have €165,000 in total.
If your agent or vendor suggests reducing the price of the transaction “on paper” and paying part of the sum in cash to avoid these charges, we’d suggest you refuse. We know of several instances where this has backfired and the tax authorities will come back at a later stage and demand their money.
Estate agents in Lanzarote, as in the rest of Spain, aren’t really regulated. It means that almost anybody can set up an agency. The good ones can be excellent, the bad ones can be very bad, so do some due diligence and invest time in finding one that feels right, is well established, and ideally one that is recommended by other people. Social media might be a good place to ask for recommendations.
It’s worth noting that typically here, vendors place their properties with a number of agents, rather than offering exclusive terms. That’s why you’ll see the same property on many websites, and it also means that most agents can get access to most properties that are for sale.
And whilst we’re talking about agents, don’t lose sight of the fact that the agent is being paid their commission by the vendor, not by you as the buyer.
Moving the currency for your deposit or purchase can cost a lot of money. If you use a high street bank, you may well suffer a poor exchange rate and high charges. We’d suggest using a money brokerage service for large currency transactions.
Narrowing Down Your Choice
Before you contact an agent, draw up a list of what your requirements are. Area is critical, so maybe start with that, and then come up with a list of all the other things you require, broken down into sections – some things you will compromise on and others you won’t. This will save you a great deal of time being shown properties which you would never consider.
Making An Offer
There are bargains to be had, but historically properties tend to be priced to sell here, so while lower offers are becoming more common, they can often be rejected by the vendor. It all depends on their circumstances, of course.
Things to consider when making an offer, and to be clear about, are the time expected to finalise the sale and what’s included in the way of furniture or other effects.
Using A Lawyer
Some agents will suggest you don’t need a lawyer to transact a property sale here, and others will recommend a lawyer to you. We would suggest using an independent lawyer, whose job will be to safeguard your investment. Once again, use due diligence to research one that feels right to you, and ideally one recommended by other people.
Many agents will ask you for a reservation fee once an offer has been made and is accepted – this might be €5,000 and is held by the agent. This step isn’t strictly necessary, and doesn’t always take place, but most agents ask for this as a sign you are serious.
The Initial Contract
The first key legal stage here is for both parties to sign a contract, sometimes known as a “Sales contract.” This document essentially lays down the terms of the sale, with an agreement that you will buy the property and the vendor will sell it to you, and the date on which the sale must complete. It should include a full inventory of what is and isn’t included in the sale – here furniture is often sold with the property. Usually ten per cent of the selling price is paid at this point, and the terms usually include the loss of that ten per cent if you withdraw before completion, and a penalty of twice that amount if the vendor does so.
It’s vital that this document is explained clearly to you by your lawyer, and that any caveats you want imposed are clearly stated. For example, if you want a “get out” subject to valuation or survey or anything else, this must be stated in the contract.
Valuation and survey
Once the contract is signed, if you are getting a local mortgage when buying property, the bank will send their valuer to the property, at your cost. Within a few days, the bank will then confirm how much they will lend against the valuation. Properties here are not normally subject to any kind of structural survey as the construction is so simple, but there’s nothing stopping you from arranging one for yourself.
The final stage of buying property is the visit to The Notary. A notary is one step down from a judge here, and must witness any large value sales in Spain. Their job is to make sure all parties understand clearly what they are doing. For that reason, unless you speak excellent Spanish, you will be asked to pay for a translator. Most notaries have access to them, although your lawyer can also arrange it.
At this point, the previous owner should have cleared everything from the property, and at the notary you will assume ownership and receive the keys.
If you have a local mortgage, the notary visit is now a two step affair. You will be presented with the details of the mortgage – interest rates, term, penalties etc – by the bank in a document called a FEIN. You will then choose a notary to visit, and at the first visit, the notary will quiz you to make sure you understand all the terms of your mortgage in detail. Once satisfied, you and he or she will sign the FEIN.
You’ll then have a second visit to the notary in order to complete the actual property purchase and where the final payment must be made – usually in the form of a banker’s draft, often brought by the bank manager, and paid to the other bank manager, assuming there is a mortgage to settle. The Notary will also expect to see receipts showing that the community charge, rates and utilities are paid up to the date of transfer.
Once the Escritura (the property and mortgage deeds) are signed by all parties and witnessed by The Notary, and the money has been handed over, you will be given the keys, and ownership will transfer to you.
Registering The Property
There’s one final job, which is normally handled by your lawyer and that is to register the new escritura with the land registry, noting you as the new owner of the property.
The important thing through all this process is to keep your wits about you, and to use trustworthy professionals who will look out for your interests. If you do that, you’ll join the ranks of many happy foreigners who have bought their dream homes here in the sunshine.
If you already own a property here, or are thinking about buying one, we’d strongly recommend you sign up to our weekly newsletter in the yellow box below. It will keep you up to date with all things relating to Lanzarote.
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