Buyers Guide |
a guide to buying property in Menorca

Buying property in Menorca can prove a pleasant and worthwhile investment not only for your own personal use but for the rental revenue and capital growth that the property can produce for you during the lifetime of your investment.

However, to make sure that everything goes according to plan I would suggest that you carry on reading this article as it gives valuable information to anyone considering buying an apartment, villa or any type of property in Menorca or indeed the Balearic Isands.

By now you may well have established the type of property you are looking for, a holiday apartment, a secluded villa, a shop perhaps or even something else. Whatever you have choosen to buy on the island of Menorca here are a few pointers to convince you that Menorca is where you want to buy.

• Investment - property offers you a secure return on capital with a stable demand.
• Low running costs coupled with low taxation make an ideal environment
• Property Rentals - good rental opportunities wherever you buy on the island.
• There are many property management companies for foreign owners renting out.
• Climate - a pleasant and comfortable summer climate and a mild winter.
• A safe, gentle and re-assuring culture with low crime rates
• Cosmopolitan - a great atmosphere to live and work in with good modern attractions.
• Flights - there are many low cost airlines flying into Menorca from most continents.
• Low mortgage rates currently 3.25%.
• I'm sure you can think of many more

So you've found a property and decided you want to place a deposit. Have you got your mortgage in place if you need one? Don't make the mistake of looking for a property without at least having set the wheels in motion for financing your dream property.

The property market here is a little different from the UK in so much as you will normally only have 28 days to complete your purchase once you have placed a deposit (this can be extended) so it makes sense to get the mortgage in place first before putting a deposit on any property.

Getting a mortgage to buy a property in Menorca can be arranged through any one of the local Banks on the island. Normally their lending criteria is based on your disposable income at a rate of 35%

• your earnings in the UK are £25,000 + your spouse's earnings of £15,000 - total £40,000
• the bank will lend you 35% of your income for mortgage payment purposes - £14,000
• from the £14,000 you will need to deduct any UK mortgage payment and whatever is left over you have to be able to pay your Spanish mortgage out of in Menorca

As a general rule of thumb the costs involved in buying property in Menorca as in the rest of Spain are normally around 10% of the declared purchase price. This 10% will normally cover the 6.5% purchase tax, the conveyancing cost, the notary charges and translations should you need them. You would normally pay this amount to your conveyancer who would pay the appropriate people and refund you the difference at the completion of the sale together with a breakdown of costs and receipts.

example - purchase price is 100,000 euros

- Your deposit to the vendor (via the estate agents normally) = 10,000 euros
- Your payment to the conveyancer = 10,000
- The remainder by mortgage or other means within 28 days = 90,000 euros.

How can you be sure there are no problems and there are no debts on the property?
Under normal circumstances the vendor will take the property of the market once your deposit has been paid and most agents/conveyancers will keep your deposit until all legal checks on the property have been completed - ask them to make sure you know who has your deposit. Vendors are normally happy with this situation - but remeber once you have placed a deposit - if you pull out you will lose that deposit so its best to be sure beforehand.

If there is a problem, what is it most likely to be?
- financial debt - debt is associated on the property not the indiviual
- a dispute in ownership
- disagreement over what was included in the sale.

• Copy of Escritura - The escritura will show who actually owns the property and what the property consists of - if its not in the escritura you won't own it - its that simple.
• Nota Simple - This will double check the owner and will alsoe reveal any mortgages or outstanding embargoes that have been placed on the property.
• Community Fees - The community fees if any will need to be paid up to date otherwise you will inherit them.
• Hacienda - Checks that there are no outstanding taxes and that previous wealth tax submissions were made.
• Town Hall - Check that the annual Municipal rates have been paid up to date.
• Contract of Sale - Check the contract of sale carefully paying particular attention to the 'completion time', Escritura value, Furniture inclusion and other conditions of the sale.

These documents and checks will reveal -
(a) The true ownership of the property and their rights to sell. Remember if the property has a mortgage then the bank is also an owner so they too need to OK the sale and be settled at the Notary office signing.
(b) Legal Definition of the property. Exactly what is being sold - (bit embarrassing to buy a villa, and then find the deeds don't include the land it stands on)
(c) Liabilities and debts. The extent of any borrowings or liabilities, if any, guaranteed by the property and any outstanding debts on the property.
(d) Running Costs. The value of Community fees, rates and wealth tax submissions.

Relatively straightforward as long as everything has been checked and applied for in good time. You will accompany the conveyancer or soicitor to the notary - the vendor and his legal representative if he has one will be there together with the bank representative if there is a mortgage on the property.

Everyone wil sign their rlative turns with the Notary and then the cheques will be handed out, one to the bank to clear off the debt, one to any of the other pointers above ie the Community, Rate etc with the final cheque being handed to the vendor for the remainder - this way you ensure that everything has been paid and you don't get a nasty surpirse in a couple of months time.

NB: its a good idea to pay by Bank Certified Cheques as this saves you carrying cash and speeds up the process. Banks will normally require a couple of days notice to issue them and there will probably by a charge so check with your bank.

Moving In
Thats it - when you have signed at the Notary, you will receive the keys and you can move into your property. Ensure that you have set up direct debits etc t pay your mortgage, rates, community fees etc as failure to pay them on time may result in you becoming blacklisted or even worse repossessed and after all you have done to ensure the purchase went smoothly thats the last thing you want.

For further details on buying property in Spain and Menorca visit our parent site Property Abroad - Buyers Guide