So you want to buy a Bank Reposession or any property for that matter – here’s what happens after choosing your property.

Note: Some of these procedures are also correct for purchasing a second hand property or new build in the Canary Islands.

Let's get straight to it. The bank’s representatives will ask you for a holding deposit and will start to draw up a “promise to buy & sell” contract. You will be given a time span in which you have to make the deposit up to 10% of the total purchase price. The contract will normally state when and where you should pay the money. Within the contract it will give you a time span in which you will be required to complete.

If you miss either of these dates, then you will lose your deposit. Please make no mistake we are not talking about an ordinary sale here, we are talking about purchasing from the big boys who will not bend. You are buying a property from the bank on their terms, not yours.

Now because we are talking about snatch backs, most banks will not bring all the debts up to date until you are ready to sign and they know that the funds for purchase are in place. It may be “sold as seen” in which case, expect no electric or water meter to be in the property and you will have to organize the re installation of the services.  It has taken them a long time to become the official owners of the property and bills will not have been paid during this time.

If you are taking a mortgage from the bank to buy the property, they will look after you far more than if you are just buying it in cash or with a mortgage from another bank. Of course it is your choice as to who you take the mortgage from, in reality the bank need to get the property off their portfolio. But if you are buying it with a mortgage from them, then they know you can be on their backs for the length of the mortgage and that they are going to make a lot more money out of you.

If you are using your own lawyer or conveyancing company, then they will apply to the land registry for a copy of the deeds as they stand, check with the town hall as to any outstanding rates bills which must be paid and a copy of the receipt presented to the notary at the time of signing the deeds. Please be aware that the Canarian government have recently given all the streets names and what appears on the nota simple, may not be the same as on other documents, what is important is the “Referencia Catastral number” which is the local town hall number that is given to each and every property. If they match, then there should be no problem. If on the contract of purchase there is no referencia catastral, your representative will make sure that the number is the same on the title deeds.

Who to choose, a lawyer or a conveyancing company?

As a general rule of thumb the lawyer is there to cover your back at the notary, he will not register the deeds for you if you are taking a mortgage, the lawyer or “Gestor” of the bank will do this, so it is to them that you must pay your legal fees or give them authorization to take the money from your bank account. Registration of the deeds at the land registry must take place within 30 days of signing.  However, at the notary you should ask for a copia simple. (A simple copy of the deeds).

A conveyancing company (TIBC SL) will go much further than a lawyer,  and they are also cheaper. The normal fees for a conveyancing company are 1500 euros plus out of pocket expenses, where as a lawyer will charge anything from 3000 euros upwards. The conveyancing company will make sure that you have property insurance; inheritance insurance; mortgage protection insurance; ensure the change over of the rates and rubbish into your name; they can also, with a Power of Attorney, represent you at the notary, verbally translate the deeds to you if you attend, collect the copia simple, arrange for the electricity and water to be reconnected and inform the community of your ownership. They will only be able to do all this, if a) they have your power of attorney to do so or b) they are named in the deeds and given the faculties there.

So what do you need for a mortgage?

You need to be able to prove that you earn enough so that the mortgage repayments do not exceed more than 35% of your disposable income.

You must allow them to apply for a valuation of the property and you will pay a fee for this. Most banks will only lend 50 – 60% for a non resident or up to 80% for a resident, by resident we mean that you are fiscally resident in Spain, and can prove your income in a Spanish residents tax return known as “Declaración de la Renta”.

They will then make you an offer which is normally the base rate at the time “Euribor” plus their percentage, this is what they are going to earn. Some mortgages can have a fixed rate, or a fixed rate for x number of years, or be variable, which is normally reviewed once a year. Some have a bottom cap, some have a top cap. Which will limit the percentages either on the up or the down side. There will also be an early repayments penalty, normally 1% of the amount that you pay off the mortgage.

Most banks will want proof of the house and mortgage protection insurance so you should factor this into your costs. A good conveyancing agent will be able to give you the annual price of the house insurance prior to signing.

Your mortgage protection insurance depends on many variables, the interest rate that you have agreed to, the number of years that you have taken the mortgage, your health etc etc. The bank must be named as beneficiaries on the policy with the mortgage number being noted. Your agent will send you a copy for you to forward to your bank to prove that you have complied with your side of the agreement and that you have covered their backs in the event of your death while the mortgage is still running.

The inheritance insurance, must be taken to cover the amount of taxes that will be paid by the inheritors plus the legal fees to inherit the property, so even if you were able to borrow 100%, there would still be legal fees for your inheritors to be able to take over the property. As you pay off your mortgage, you should increase the amount of cover as your percentage of ownership of the property increases. The variables for this are, not only the value of the inheritance, but your age, weight, profession and health.

With all policies that cover the event of death, be that a life policy, a mortgage protection policy or an inheritance policy, once you reach a certain amount, you may be required to have a medical or provide a medical report from your doctor. If you have high blood pressure or diabetes, then you and your doctor will be given a form to complete, to prove that you have these conditions under control. If you are in the UK, then you should get your GP to certify this, however if you are in Spain, then the insurance company will nominate a hospital to complete the medical for you and they will pay for this.

Many banks, if they offer you their own insurance, normally split the amount between the number of purchasers, but if you are a parent with a couple of kids, would you want your remaining spouse to be “lumbered” with the mortgage repayments of half of the property, the answer to that should be no! Especially if the remaining partner is a housewife with no job to support the payments that she needs to make not only on the English property, but also on the Spanish one. You should therefore insure each person for the total amount of the debt. Don't worry, TIBC are well qualified on how to best advise you when it comes to saving your inheritors from having to pay inheritance tax in the Canary Islands.

Some banks may insist that you take the insurances with them, wrong!

You have no legal obligation to take anything other than fire insurance with the bank. It is your choice as to who you insure with, but if you do have a mortgage the bank must be named on the policy as beneficiaries. If in the event of death, there is an excess your named inheritors will receive the difference, after payment of the outstanding debt.

So in preparation for the signing, what do you need to do?

If you are going to attend, then you need to be in Spain a couple of days prior to the notary date to obtain and NIE, nobody can buy anything in Spain without one, but the certificates that are currently issued by the police are only valid for 3 months, so don’t do this too early. Every purchaser who is mentioned on the deeds must have an NIE number. If you have kids, it is also advisable to apply as and when you can for their NIE numbers as well, because if anything happens to either of you, they will need NIE numbers to obtain your inheritance, and although the actual certificates will be out of date, at least with their NIE numbers your representative can start on the inheritance process.

In order to obtain the best rate of exchange for your purchase and any on going transfers that you will need to pay your bills, you should set up an account with Currencies Direct. Contact details can be found below once you've read the rest of this article! You should have the funds, balance of the purchase and the legal costs readily available in Spain at least 1 week prior to signing. The bank will advise you of how much the legal fees will be, but allow extra for your lawyer or conveyancing company.  They will advise you of their bill, and will either ask you for a transfer to their account, or you give them permission to take the funds by direct debit. If you are going to continue on with the conveyancing company for them to pay your annual non resident or quarterly income taxes, they will need access to your account by direct debit. Good ones will always advise you of the amount prior to submitting the direct debit.

If you have sent the funds to your own bank, then you will be required to go to your bank one day prior to signing to get proof of a transfer to the vendors for the balance of the purchase and any other bills that you have agreed to pay, or you can ask for a bankers draft. It is our advice that if you are doing this, you either agree to a direct debit or make a transfer as bankers drafts in Spain have astronomical fees attached. By far the cheapest way is a transfer.  You could do this on the morning of the sale if the notary appointment is later in the day, but banks computers have a bad habit of crashing.  

So now we have the NIE, we have the proof of payment, what happens next?

Still with us?! You will attend the notary at the time and the place given to you by the bank. Banks are pains as they always want to do it just before lunch time, so you may find it a good idea to pack a sandwich as this is a long process, the deeds must be translated to you, the bank will check that all their terms and conditions have been put into the deeds of the mortgage (yes there are two sets of deeds, one for the purchase and one for the mortgage). It is also a good idea to arrange for the notary to do your Spanish wills and mutual power of attorney at the same time. More about that in the annexes below.

However, if all of this sounds like a nightmare to you, or you just do not have the time to go to the notary, you may give your conveyancing agent or lawyer the power of attorney to do this for you. You can give them a general power of attorney which will allow them to do absolutely anything for you, or you can restrict it to say just the purchase if you do not wish them to do anything more for you after the signing.

A good conveyancing company (such as TIBC) will handle your Power of Attorney with the greatest of care. They are there to cover your back as much as they are physically and legally allowed to. After all, they want to keep you as a client! Make sure that they have public liability insurance, and that they have an API number. Although you are free to give your power of attorney to anyone, but that person should understand Spanish law, should understand how to complete tax returns, understand insurance requirements and know how to contact the local authorities for you on your behalf. They should also speak Spanish!

At the signing of the deeds, you or your representative will go into a posh office, have the deeds read to them, part with the proof of payment or bankers drafts and sign and receive a copy of the keys. At this point, you should ask for a copia simple, this will enable the representative to connect you to the electricity and water, give a copy to the rates office, rubbish collection office, and community office, set up the direct debits that are required etc etc. If they do not have a copy, then none of this can be done for you.

The bank's lawyers or “Gestors” will go back to the notary within a week to 10 days, prepare the forms for the stamp duty, present them and pay all the taxes, pay the notary and then present everything to the land registry. Now, depending on where the property is, the land registry for that area may take longer than another area. So you should allow up to 3 months before you see the original deeds of purchase, you must ask the bank to give you a copy of the mortgage deeds and this in turn you should give to your representative, so that they can insure that the mortgage protection insurance is decreased annually to allow for the payments that you have made if this is not already built into the policy from the start.

Once you are informed that the deeds are ready for your collection either from the bank’s lawyer or the bank, then you should also ask for a statement of how your legal fees have been spent, collect the receipts and staple them into the back of your original deeds. Make sure your representative has a copy as you will need them if you decide to sell the property or your representative has to do an inheritance for either of you. These bills are tax deductible on disposal of the property  - by whatever means.

You will then be required to pay:

Annual non resident taxes. This is based on the catastral value of the property which can be found on the rates bill which should be paid annually. You should give a copy of this to your representative.  It is our system that we advise our clients in January annually of the amount of tax due, and debit the client in February. Because of SEPA (banking laws) we cannot pay the taxes prior to 56 days after receipt of the funds, to make sure that they are cleared. Once the funds have been received, we then produce the returns (one per owner – per property) and get them paid for you. Copies are available on request and should be kept for a minimum of 5 years.

If you rent your property, you should provide your representative with details of the income earned in the quarter, less deductions which are:
Repairs, Insurance, Utility bills and Community bills

By deducting one from the other, and multiplying this by the tax rate, it will give your representative the figure plus their fees to be deducted from your bank account.

Income tax returns are paid quarterly, on the 20th of the month following the end of each quarter.

Rates are paid annually, if you are not in Tenerife, then these should be set up on direct debit, if you are here in Tenerife, you can choose to let your representative pay them for you. You MUST  give your representative a copy of this every year.

Annex 1  - NIE numbers explained

An NIE number is a unique number given to you and to you alone, the number itself is valid for life, but the actual certificate is only valid for 3 months.

You are required to provide your original NIE for property purchases, vehicle purchases, obtaining legal documents.

In order to apply for an NIE number, you will need the form from the police website, and a modelo (Spanish for form) 790. The modelo 790 is for payment of the tax due on NIE applications. The price changes frequently but we have never seen it over 10€.

If you are reapplying, then you can take the form to your bank and pay there, however to our knowledge, those who are applying for the first time, need to give their passport number and pay in Banca March.

You will need a copy of your passport, the form from the police and the taxes paid before going to the national police station.

A word of warning here, you will need to pack a bacon sandwich, potty and flask as you will need to be there before they open at 8.00am, get a number and go back when your number is called. They normally only issue 60 numbers per day.

Once you have your certificate, you will see in Spanish on the bottom that the certificate is only valid for 3 months from the date of issue. Why? we can only suppose that it is jobs for the boys and pennies for the pot.  Seeing as when you go back you will be given an identical certificate where only the date has changed.

Please make sure that you keep the original very safe, take a couple of photocopies, so that if anyone needs one, you can show them the original and give them a copy.

Please note that having a simple NIE number does not make you fiscally resident in Spain.

Other terms you may hear:

NIF: Numero de Identificacion Fiscal, this just means basically the same but for those that are Spanish resident.
DNI: This is the number on the Spanish Identity card
CIF: This is the same as an NIE but for companies.

How to find the Police Station in Las Americas, Tenerife

Annex 2: Contacts

Spanish Lawyers operating in the UK capable of doing a Power of Attorney

Ana Alonso:     Mobile 0044 7949161181
        Home    0044 1243 532110
        Email    alonso.ebert@talk21.com
        Little Oldwick House
        West Lavant
        Chichester
        West Sussex PO18 9AD

Victoria Gonzalez
        Tel: 0044 207 395 4300
        Fax: 0044 207 395 4310
        Email: Gonzalez@johnvenn.co.uk
        John Venn & Co
        95 Aldwich
        London WC2B 4JF

For importation of Currency to the Canary Islands

Carol Schleisman
        Tel: 687906607
        Tel: 922 971781
        Email: carol.s@currenciesdirect.com    
        Currencies Direct

Contact TIBC for all your conveyancing requirements, fiscal advice, insurance covers and more!
        Tel: 922 730210
        Email: info@tibc-sl.com

Annex 3

Understanding Powers of Attorney

To purchase a property you may want to give:

A General Power of attorney, a general power of attorney will allow your representative to do everything for you, that includes taking out a mortgage and gives them access to your bank account.

However, you can limit the power to only purchase, being your fiscal representative, to take out an NIE, to sell the property, to accept an inheritance.

You should discuss this with the person who you are going to give power to, see what is required. But remember if you give the person a general power of attorney you are entrusting your credit card to them in the middle of Oxford Street.

Powers can be done in Spain, at the notary, however, you may have to do it in the UK due to time limitations, in the previous annex we have given you the details of two of our trusted lawyers who are able to make the application and have the document legalized under the Haig Convention which makes it a legal document in Spain. Both Anna and Victoria will advise you of cost.

Once they have drawn up the document you will be required to take it to a local notary in the UK and then return it to Anna or Victoria who will then apply to the home office for the apostil to be added, prior to sending the document to Spain.

Only originals are accepted by banks, notaries etc. So your representative will want to hang on to it.

Should you decide that you no longer want the person to work for you, then you must cancel said power. Although it is illegal for that person to use it knowing you no longer want them to work for you, be safe - cancel the power, as you never know.

Annex 4

Understanding the importance of a Spanish Will

When a property owner dies, it is sufficiently traumatic, that's without all the paperwork. But if things have been left, then it is not only going to be traumatic, but it is going to give you nightmares.

Yet another visit to the notary is vital to complete a Spanish will, but speak to your advisor, do not go jumping in the deep end.

A good advisor will be able to make a "Guesstimate" as to how much inheritance tax would have to be paid and how much the fees would be to transfer over the property and assets to the inheritors.

If you are under 70, then you can insure against this. Call us on 922730210 to find out more or to make an appointment for your "Guestimate".

The will be written in both English and Spanish, you will never see the signed copy of the will after you have visited the notary, but you will get a copia simple. The original will be sent to Madrid to the Registry office for Wills.  

You should decide who you want to inherit your assets, and who should substitute them should they decide they do not wish to accept the inheritance or if they predecease you.

Please leave your assets to a family member, if you leave it to say "Battersea Dog's Home" then your inheritance taxes will be doubled.

Only a good advisor is able to point out all the pit falls, and show you how to avoid paying too much tax. Yes it does start at the point of purchase.