Useful information


on 27. April 2021

In Spain buying a property under development has many benefits that make it particularly attractive. However, one also runs a greater risk than buying a house that is already finished, where the buyer pays the price of the house when they have already seen it completed, and can live in it.

The law still provides guarantees for the buyer of a new home, with the understanding of the risk that the work may stop and that the building will not be completed. These guarantees consist of an obligation from the developer to provide the buyer with a bank guarantee or insurance that covers the return of payments made by the buyer during the construction phase of the house and until it is completed, that they have all permits from the local authorities to engage electricity and water on behalf of the buyer so that one can live in the property.

The content and period of validity that the guarantee must have, in case the home is not completed so that the bank or insurance company returns the money that the buyer has paid, is an important element in the purchase contract. The control of the guarantee is also an important part of our commitment when we assist a client with the purchase of a house under development.

Other important aspects that need to be considered when buying a home that only exists on paper are:
Information about the seller, i.e. to verify that there is a company established and registered in the Mercantile Register in Spain to verify who has the legal capacity to sign the sales contract on behalf of the company.

Information about the property in the Real Estate Register and encumbrances it may have. That is, whether the person signing the contract is the owner according to the register, or whether the property belongs to another company, and whether there is a mortgage on the plot as a guarantee in favour of the bank, which may have financed the purchase price of the plot or construction costs.

Information from the city council concerned, to find out if it has a building permit to complete the structure, when it was issued, what is the period that the city council has given for completion of the work, or if the city council has given the seller the license provided that it not only performs the construction work, but also other public infrastructure such as sidewalks, lighting, etc.

Concerning the contract itself, it must be scrutinised carefully. It must identify which bank or insurance company will guarantee a return of the amounts if the home is not completed, for example, due to the client’s insolvency in times of crisis. The contract must specify the terms of each payment. It is very important that the contract states the date of delivery of the house, what will happen if the purchaser can not complete the purchase of the house or he regrets it or what rights he has if the completion is delayed.

Likewise, it must be checked whether any of the clauses that the seller has included in the contract are infringing on the buyer or what are the consequences of delivering the property after the agreed delivery time. This must be balanced in the contract.

All possible risks and uncertainties that the purchase of a home “off-plan” involves, can be avoided with the right advice. So, getting a new home does not have to be a bureaucratic or financial nightmare. With good impartial advice, it is quite possible to buy this type of home in a simple way.