At Costaluz Lawyers, we are pioneers in fighting for off-plan investors’ rights in Spain. Since 2007, we’ve won myriad cases for buyers and celebrated better legislation protecting them. So, it’s very disappointing to see abusive clauses in contracts around and developers getting tricky again.
With this in mind, we’ve put together some top tips for off-plan investors in Spain. If you’re thinking of buying a new build, read them carefully and take note. But remember, they’re no substitute for expert legal advice, essential in any conveyancing in Spain but absolutely vital when buying off-plan property.
General tips for off-plan investors in Spain
- The 2015 law applies to principle and second homes, so make sure this is expressly stated in the contract.
- If you buy through a company or any other vehicle that appears to be a non-residential purchase, ensure that this is stated in the contract.
Tips for guarantees
Guaranteeing your payments in an off-plan purchase is one of the most aspects of the conveyancing process. It’s also one that produces the most problems and headaches for the buyer. With this in mind:
- Don’t buy without a guarantee. We have seen some developers promising refunds with added penalties of up to 20% extra to persuade clients not to ask for a guarantee. Accepting this is risky because you leave yourself and your money in the hands of the developer’s solvency, which may be just a SL company requiring a mere €3,000 of capital to set up in Spain.
- Request an individual certificate of guarantee from a bank or insurance company. This document is all that is needed if you have to claim a full refund of your money if the project fails because you can exercise your rights with an executive instrument.
- A general guarantee is sufficient to claim against the developer but without an individual guarantee, you’ll probably have to go to court.
- If the guarantor is an insurer, check that it’s authorised to issue guarantees in Spain.
- Paying sums to the escrow account is a guarantee but it’s better to make the payments yourself (not through a third person) and include full details of the unit you are buying.
- It’s also essential to have a certificate where the liabilities derived from the special character of the account are acknowledged by the Bank holding sums until the guarantee is issued.
Tips for changes in the project
Look carefully into clauses regarding changes in the project. If these changes are substantial, you, the buyer, must approve them even if they are required by licence or building regulations. For example, you must approve changes such as those affecting views, the privacy of essential features of the property and any reduction in size over 10% in rooms and/or external elements such as a terrace or solarium.
Tips for Force Majeure events
If something happens that delays construction – for example, the recent lorry drivers’ strike in Spain – the developer must tell the buyer as and when it occurs. You and the developer then need to agree on new dates of delivery and an extension of your guarantee. Make sure the Force Majeure clauses includes this legal requirement.
Tips for delivery date
Your contract should contain a clear date for delivery. If the developer can’t provide a specific date, the contract should say the semester and year, e.g. second half of 2022.
You need this date so that you know when the contract can be cancelled and you can exercise your guarantee.
Tips for delay on delivery
- If there’s a delay but the project is still going ahead, you may agree to an extension of the delivery date and are eligible for compensation for the delay. However, the provision for your agreement to an extension and compensation must be included in writing in the contract.
- If there’s a delay, don’t forget that your guarantee needs to be extended as well.
- If the project is delayed, you can cancel your contract at any time before the new date of completion. In this case, you may claim a full refund of all monies paid plus legal interest at any time. However, your contract should include a provision for this – make sure it does.
Tips for mortgages in off-plan investment
If you’re taking on the developer’s mortgage, the notary’s fees for the deeds must be paid by the seller. We’ve noticed that developers are imposing this expense on the buyer.
Take professional advice
We hope that the above tips help you avoid the pitfalls that some developers would like you to fall in. However, if you want the best possible contract to protect your investment, take professional legal advice.
At Costaluz Lawyers, we specialise in conveyancing and have a long track record in drafting and revising contracts for off-plan purchases. Get in touch now to find out how we can help you.