BUYING off-plan is when you purchase a property before it is built.
This model has several advantages in Spain, like having more time to save and knowing the property is brand new.
However, it is not without its difficulties, including having to wait to move into the house and certain associated risks, like the development being cancelled.
It is therefore crucial to be fully aware of the implications and details of this type of real estate transaction before taking the plunge.
In the last real estate crunch in Spain, between 2009 and 2012, hundreds of complexes were left unfinished and thousands of buyers lost their investments because developers failed to provide bank guarantees, breaking the law. Below is a checklist for anyone wanting to buy off-plan in Spain.
1) LAND AND BUILDING LICENCES
Make sure the land where the project or
development is going to be built belongs to the developer and hasn’t got any debts, embargoes or encumbrances.
At the same time, ensure the development has the building permit with the local town hall and that the property will be registered at the Land Registry at the end of construction.
2) PAYMENTS
It is essential to have a clear knowledge of all the costs that will be incurred, including VAT, notary fees, registration fees, agency fees and whether additional items such as a storage room or parking space are included.
Please be aware of the payment schedule as this will help you better manage your finances.
3) CONSTRUCTION TIMING AND FEATURES
Knowing the construction stages can help you plan accordingly, and keep in mind that there may be unforeseen delays.
You will need a detailed floor plan and specifications to understand what you’re buying.
Ask for information about finishes, appliances and other features.
4) BANK GUARANTEES
This is the most important point, as it makes sure your money is not lost if a development is cancelled or fails to finish.
To cover such risk, Spanish law requires that the following rules are complied with:
● Property developers are required to guarantee the refund of any amounts paid, plus the annual legal interest, in the event that construction is cancelled or unfinished. This is done via an insurance contract granted by an insurance company or a guarantee by a bank or savings bank. The money must be deposited in a designated account of the development.
● Contracts signed with the development company must include the obligation of the developer to return to the future buyers any amounts received from them plus the annual legal interest in the event that the construction work does not commence or conclude in accordance with the time limits agreed to in the contract, or in the event that the licence of first occupancy is not obtained.
● If the commencement of the construction work or the delivery of the dwelling does not take place within the time limits agreed to, the future buyers may opt to terminate the contract and enforce the guarantee or grant an extension to the development company, specifying the new period with the conclusion date of the construction work and the delivery date of the home.
● The guarantees created by the insurance company or guarantor are cancelled once the licence of first occupancy is
notary and the keys are handed over.
In any case, I would recommend you engage a lawyer to check before signing any contract with a developer.
They can guide you through the whole process of construction until the property is built and it can be registered in your name with all the legalities.
Fairway Lawyers will be able to assist you on this matter or any other issue related to any property transactions all over Spain.
- This article originally appeared in the Olive Press newspaper (4-17 September 2024)
