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ANTICIPATED COSTS

WHAT ARE THE COSTS WHEN BUYING A BUSINESS IN LANZAROTE?


We are often asked by our clients to give them an accurate overview of the costs involved when buying a business in Lanzarote. Each business purchase will be different and there are big differences between the costs of buying a leasehold business in Lanzarote and buying a freehold business in Lanzarote. We always recommend our clients over-estimate the costs that are involved to ensure that they have enough money to open their new business and not just buy the lease.

The following will explain the total cost you can expect to pay when purchasing a business in Lanzarote these numbers are calculated in respect of leasehold businesses which more over 80% of all businesses for sale in Lanzarote. When you purchase a leasehold business in Lanzarote you will purchase a number of years occupation, the rights to sell the business on to a third party at anytime and whatever price and be able to retain the profit gained. It is important to always check what rights you have on selling the business when buying any business in Lanzarote we will always go through this with you on any purchase and ensure that your rights are protected.

Freeholds are considerably more expensive purchases to make and attract other expenses similar to the expenses when buying a residential property in Lanzarote. These higher expenses which most people will estimate at 10% of the sales price include Notary fees, property registration costs, mortgage arrangement fees, taxes, lawyers fees and more. Generally prime freehold commercial property is hard to come by as much is owned by the families that have been on the island for many years, however Business Finder Lanzarote always has a good selection of freehold commercial property available from 100,000 Euros through to several million Euros.

The main cost before anything else is the business purchase price - remember with most purchases this can be negotiated with the vendor but you must be in a position to purchase before starting negotiations!

Apart from the cost of the business purchase you need to calculate in the following costs:

INITIAL SET UP COSTS:

Lawyers fees: 1500 Euros
This is based on the average cost charged by lawyers in Arrecife (it is optional to use a lawyer on a leasehold purchase)

Legal fees for a couple: 1500 Euros
If you are purchasing the business in two names you will need to be set up legally on the island this cost includes the accountants fees

Two months rent deposit: 2000 Euros
This is based on an average monthly business rent in Lanzarote of 1000 Euros

First months rent on business: 1000 Euros
All business rental contracts require the rent to be paid monthly in advance

Drinks stock: 500 Euros
Most business sales can be negotiated to include some stock however this is the average drinks stock a bar would require

Food stock: 500 Euros
Again depending on the negotiations on stock an small opening food stock for a business would come in at about this cost

TOTAL 7250 Euros

Notes: It is optional to use a lawyer when purchasing a leasehold in Lanzarote, we recommend all of our clients seek some independent legal advice whether through one of our recommended lawyers or through a recommended gestoria. It is normal for a landlord to request a two month returnable deposit and is a legal requirement on any rental contract created in Spain. However sometimes the rental deposit can be more or less months and so it is important to check this before working on your budget. Businesses are usually sold with an existing running stock included but most sellers will run down their stock at point of sale hence we have added the calculation for adding stock to your budget this figure of course can vary dependant on the size of the business being sold.


RESIDENTIAL SET UP COSTS:

Despite what you may hear from owners or other agencies it is illegal in Lanzarote to live in commercial properties. The only exceptions to this is where properties have separate entrances to access the living quarters and the lease contract states categorically that this part of the building is registered as residential. Most people will need to rent an apartment or a house. There are many agencies in Lanzarote who can offer to find you accommodation for a cost or we can also suggest areas to find classified advertisments to find your accommodation if you don't wish to pay these fees (usually one month rent for finding the property, making the contract and supervising any problems during the rental period).

Two Bed Apartment example:

Two months returnable deposit: 1600 Euros
Two months returnable deposit is usually required as a security

First month rent in advance: 800 Euros

Agency Fee: 800 Euros

TOTAL 3200 Euros


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