It is now well over nine months since the pandemic was declared and just about every aspect of daily life and economy has been affected. Off-plan purchases in Spain are no exception. In this article, we look at COVID-19 clauses in off-plan contracts and ask whether developers are applying them. And examine why the buyer’s contract should also include one.
Off-plan Developments Hit by COVID-19
COVID-19 has had dual effects on the construction industry in Spain. The first happened in mid-March when Spain entered seven weeks of lockdown. During this time, almost all non-essential industrial activity came to a halt. Among the sectors directly affected was construction and as a result, many developments have been delayed or had their schedules altered.
The second effect is financial. The Spanish economy has suffered hugely in the light of the COVID-19 pandemic, and the property market has contracted. Analysts expect the slowdown to last for the rest of the year and probably well into 2021.
Developers Introduce COVID-19 Clause
In light of the current situation, many developers have introduced a COVID-19 clause into contracts for off-plan purchases in Spain. The clause safeguards the developer should there be a further lockdown or any restrictions that impede the usual progress of construction and purchases.
Buyers Should Do the Same
Since developers are taking COVID-19 into account, buyers need to do the same. To ensure you sign a balanced contract for an off-plan purchase, you should demand that it includes a COVID-19 clause in your favour. This will protect your interests in the case of circumstances caused by the pandemic or its collateral effects.
Ask your independent lawyer to negotiate this clause for you in the contract before you sign anything.
Have you bought off-plan in Spain and then discovered the property is illegal? Find out how you can get your money back.
Force Majeure in Contract
COVID-19 and its consequences are clearly ‘force majeure’. If you signed an off-plan purchase contract prior to the pandemic, it may not include a clause allowing for ‘force majeure’. However, it does apply by virtue of being a Principle of Contract Law provided that the necessary requirements are met and proven.
But it is worth noting that if a dispute arises over a contract that does not make provision for ‘force majeure’ a victory for the buyer in a court case is not necessarily a given. This is because Case Law complicates the application of this principle.
2015 Law Protects Buyers
All off-plan purchase contracts signed after 1 January 2016 come under the protection of Law 20/2015. This law was introduced to offer further safeguards to the buyer and has helped reinforce consumer protection.
Law 20/2015 includes several modifications on the previous law, but one is of significant interest to the off-plan buyer.
This is the clause regarding bank guarantees or insurance policies to protect off-plan deposits. These are only valid from the date that the developer obtains the building licence from the local planning department.
Because of this clause, you should not hand over any money for an off-plan deposit until your lawyer confirms that they have received a copy of the building licence from the developer. Or allow your lawyer to pay any money to the developer on your behalf before getting a copy of the building licence.
If you make payment for a deposit and there is no valid building licence, your money is not protected by any bank guarantee or insurance policy.
Get expert help and advice
Costaluz Lawyers have years of experience of successfully helping foreigners buy Spanish property.
Using our expertise, we act in your interests and yours alone ensuring that any contracts you sign are fully protected by Spanish law.
Off-plan contracts are a particular speciality of ours, and we have successfully helped dozens of clients claim against Spanish developers.
Our conveyancing services also include two valuable extras:
- An after-sales bonus, valid for 4 years, for any out-of-court disputes involving the property (e.g. claims from the Spanish tax authorities, local council or community; complaints you need to make against the developer etc.).
- 20% discount on our fees should any dispute on your property involve litigation or go to court.
If you’re thinking of buying off-plan in Spain, get in touch now for a no-obligation quote and complete peace of mind.