Property law on the Canary Islands

Whereby is Spanish property law regulated?

The legal framework for real estate transactions in Spain is outlined in the Spanish Civil Code (Código Civil) and other specific laws, such as the Ley de Suelo. However, on the Canary Islands, additional regional laws and regulations affecting property legislation apply.

What are the peculiarities on the Canary Islands?

Property law on the Canary Islands differs in some respects from that on the Spanish mainland. However, such key aspects as legal security, notarial certification of legal transactions, and land registry procedures remain consistent with those on the mainland.

Autonomous legislation

The Canary Islands, as an autonomous community, have their own legislative powers, which entitles them to enforce special regulations, particularly in regard to construction and planning law, as well as environmental and landscape protection. Local laws can be stricter than those on the mainland, particularly those concerning coastal protection and construction in nature reserves.

Are there any particularities concerning tax on the Canary Islands?

One of the most notable differences in regard to the tax treatment is that the Canary Islands have a reduced VAT (IGIC – Impuesto General Indirecto Canario), which is lower than the national VAT (IVA – Impuesto sobre el Valor Añadido). This can affect the additional costs for those purchasing property.

What kinds of tax relief are available on the Canary Islands?

The Canary Islands offer special tax relief on inheritance and gift tax respectively, which is relevant for purposes of estate planning and the transfer of property. Tax treatment of heirs and beneficiaries on the Canary Islands can be significantly more favourable than that under the general rules on the Spanish mainland.

What does the general process of acquiring property involve?

Once you have agreed on the purchase price with the seller and it has been confirmed (by means of the land registry extract) that they are indeed the property owner, the parties will typically engage lawyers to draft a corresponding purchase deed. If both parties are in agreement, the notarial certification will take place. An initial copy of the deed is then sent to the land registry, and a preliminary note is entered. The final registration of the new owner in the land registry only occurs once the property transfer tax has been fully paid. The buyer must do this within 30 days from the issuance of the purchase deed.

Wherein lies the major difference in property acquisition proceedings?

Unlike in Germany, a private written contract regarding purchase of real estate is typically considered to be valid, but only between the relevant parties. This means that it has no effect on third parties. Private contracts also have no validity in relation to the land registry. Only public or notarial deeds can be registered there.

Please note that for the new owner to be able to enforce their ownership rights against third parties, this owner must be registered in the Spanish land registry. The land registry will only make entries if the seller of a property was registered before. Though the Spanish land registry primarily has a declaratory function and a purchase can be accomplished without registration, it is strongly recommended that the property is entered in the land registry. Without this registration it is practically impossible to sell a property.

What is the property transfer tax rate on the Canary Islands?

For used properties, a tax rate of 6.5% applies, and for new properties, it amounts to 7%. This tax is due within 30 working days from the date of certification. Otherwise, a late payment surcharge will be imposed.

What factors impact the property market?

In addition to legal differences, there are specific economic and market factors that affect the property market on the Canary Islands.

How are demand and supply determined on the Canary Islands?

The property market on the Canary Islands is greatly affected by the tourism industry. This results in high demand for holiday properties, both for personal use and for rental purposes. This can inflate prices relative to the mainland in areas attractive to tourists.

What is to be considered in regard to construction projects or construction permits?

Due to the unique geographical and ecological characteristics of the islands, construction projects are subject to stringent provisions. Permit-issuing procedures can be more complex and time-consuming than on the mainland. Particularly in the case of coast-adjacent projects or projects in protected areas, strict requirements are to be adhered to.

Att. Sascha Jung

Svetlana Evgrafova