One of the ways to acquire a property in Spain is to purchase a property under construction directly from the developer. In this case, a private agreement is entered into between the buyer and the developer and a payment schedule is established. In this case, a private agreement is entered into between the buyer and the developer and a payment schedule is established.

It is particularly important to ensure that the legally required bank guarantees and other guarantees are in place. On the one hand, this type of property purchase offers advantages such as the possibility of customising certain parts of the property, acquiring a completely new property or paying the purchase price in several instalments.

On the other hand, this type of purchase also involves certain risks, which Spanish construction law can significantly minimise when correctly applied. The main risk arises from the fact that several advance payments are made while the property itself is not yet available as security. It is therefore important to take certain precautions to ensure that, if the property is not completed or is completed late, you can recover your advance payments without difficulty.

Since 2016, the developer has been legally required to provide an insurance policy or bank guarantee covering the advance payments to be made. Furthermore, all advance payments must be paid directly into a special bank account and may only be used for the construction of the property.

Guarantees that the developer should provide:

-All advance payments must necessarily be guaranteed in full by a bank guarantee. This guarantee covers all amounts paid in advance, including taxes and interest accrued since payment.

-If the property is not built, the buyer may claim reimbursement of the advance payments from the insurer.

-The advance payments may be reclaimed within two years.

-The guarantees cannot simply be withdrawn by the developer.

-If the developer does not have the required guarantee in place from the outset, the developer may incur liability and may be subject to a fine of 25% of the amount that should have been guaranteed.

 

The legal review (Due Diligence) of the property to be purchased should therefore include a thorough analysis of the following essential aspects:

 -Legal and financial analysis of the developer (Commercial Registry, representation, annual accounts, liquidity, etc.)

 -Legal analysis of the land (Land Registry, ownership, mortgages, etc.)

 -Building permit

 -Plans, building specifications, prices, payment options, deadlines, etc.

 -Purchase agreement

 -Analysis of potentially unlawful clauses (choice of notary, deadlines, advance payments, etc.)

 -Responsibilities and liability of the developer.

 -Tax aspects.

Our law firm will be pleased to assist you in analysing your individual circumstances, handling the necessary administrative procedures on your behalf and assisting you with the filing of the corresponding tax returns. Should you be interested in our services or have any specific questions regarding this matter, please feel free to contact us by email or telephone in German.

Author: 

María Santos
Lawyer
CEO, Partner, Legal Director
info@sspartners.es
Tel: (+34) 951 12 13 06
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