Buying A Property Off Plan
Buying off-plan property inevitably involves higher risk than buying re-sale property. If you are considering buying off-plan in Spain there are a number of points to consider.
Make sure you have a bank guarantee (aval bancario) to cover your stage payments. Developers of off-plan properties are legally obliged to secure all deposits with a bank guarantee. However, bear in mind that this obligation only comes into force once the developer has obtained planning permission for the development so you should ask to see this before making any payments. You can also check this at the Land Registry, because if the description of the future building is registered, the registrar will have seen evidence that the licence exists and work has begun in accordance with the approved design.
You should ensure that the bank guarantee is individual and not a collective guarantee covering the whole development, which does not give the same protection. You should also request proof that your payments are deposited in a special escrow account, which can only be used for the construction of the specified development.
Make sure the developer is registered with the Mercantile Registry and the person who is going to sign on the developer’s behalf has the legal power to do so. You can visit any Mercantile Registry office or use the registradores website.
Check with the Land Registry to make sure the land which is going to be built on is registered to the developer you are doing business with.
Make sure you obtain a copy of the Cadastral certificate giving the exact boundaries and square metres of your land.
Ensure the developer has insurance covering damage caused by structural defects to the building. This insurance should be included in the property manual (libro del edificio) that the developer gives you.
It is also advisable to obtain a certificate regarding the planning situation of the plot you wish to buy from the Town Planning (Urbanismo) department of the town hall. This will include other information such as whether the plot has any building restrictions, is in a green zone, includes a public footpath or if there are any current plans to build a motorway etc.
Once construction has finished, and before you sign the title deed, ask for proof from the seller that the construction has been finished in accordance with the description given in the plans. This is issued as a certificate (certificado final de obra). You can also check this at the Land Registry.
Make sure you have the licence of first occupancy (licencia de primera occupación) which is issued by the town hall for new buildings and certifies that the property is habitable. You will need this document to connect to electricity and water companies. Developers cannot force you to complete without this licence.
Consider asking a chartered surveyor to check the property. This is not obligatory but it is wise to obtain a professional opinion on the property before you complete. The Royal Institute of Chartered Surveyors (RICS) exists in Spain and there are residential chartered surveyors working across the peninsula and the islands. Members of the RICS are qualified and experienced professionals offering independent and impartial advice.
The Spanish College of Architects in each province also offers a list of independent specialist surveyors.
Should the developer not build your property within the timeframe stated in the contract, or services and utilities are not completed and connected to standard, or the habitation certificate cannot be issued, you are legally entitled to either:
- rescind the contract and have the deposits returned plus interest
- or extend the deadline, allowing the developer to complete the property
If you want to rescind the contract, it is advisable to seek independent legal advice. Once you have consulted a lawyer, the first step is to write to the developer to explain that due to non-compliance with the contract, you want to rescind the contract and request that the deposits paid so far are returned, as well as the accrued interest. You should include any relevant documentation (e.g. a copy of the contract, copies of payments made, copy of the bank guarantee) and state a timeframe by which you want the amount to be reimbursed. It is advisable to write to the developer via Burofax, which enables you to prove that you have sent a specific document, and that the recipient received it.
If the developer does not respond to you within the specified timeframe, you should contact the claims department of the bank or savings bank responsible for the guarantee to request a refund of the payments made. Again, it is wise to make contact via Burofax and attach copies of all relevant documentation, including a copy of the bank guarantee, a copy of the complaint submitted to the developer, a copy of the developer’s response (if any) and copies of any documents which indicate that the developer has not complied with the contract.
Should the bank not comply, the only remaining course of redress is to instruct a lawyer to take a civil case against the bank.
If you believe you have been a victim of fraud and you have neither a bank guarantee nor an insurance policy from the developer, you should seek independent legal advice regarding taking criminal legal action through the courts and register a statement with the police.