Buying Property in Spain

A comprehensive practical guide to buying a property in Spain

5. Buying a new built property

This has become a very popular choice when deciding to buy and invest in Spain,as new properties may have more potential for re-sale,rental and living purposes. Terms of payment are more flexible and there are often mortgages already in place for buyers. Furthermore,new Spanish laws exist to protect the rights of the buyer of new built properties.

5.1 The law

The purchase of a new built property is, by nature, a more complex transaction than the purchase of an existing one. However,today,buying a new built property in Spain is,legally speaking, safer than ever.The Spanish law has established certain rights and guarantees to protect the interest of those buying a new built property whether under construction,off-plan or newly completed.

Buyers should be aware of the rights and guarantees available to them under the Spanish law and take advantage of them. Unfortunately, the increased demand of new built properties in Spain has placed developers in a stronger position than ever and this can be seen in the way standard purchase contracts are drafted by developers.

Before committing yourself,you need to consider the following main issues/peculiarities of buying a new built property. Particular attention must be paid to planning permission,building regulations consent,structural guarantees,easements and reservations,advance payments securities,compensation for delay and existing mortgages.

5.2 The purchase process

The process of buying a new built property in Spain is almost the same as a re-sale transaction. There is a contract to buy and sell the property setting out the parties, a description of the property,the purchase price,terms of payments and estimated completion date. Completion will take place at the Notary Public Office where the Title Deed (Escritura)will be signed in order to transfer and convey the new property to the buyer. Afterwards,taxes need to be paid to the relevant tax authorities and the Title Deed (Escritura)presented to the Land Registry for registration.

5.3 The deposit

As with a re-sale transaction,you will normally be asked to pay an initial reservation fee to secure the property. Both the buyer and the developer will sign a preliminary document,which sets out such matters as the price, a schedule of payment terms and a brief description of the property.The property will then be held for the buyer until the purchase contract,detailing full particulars of the transaction,is signed,normally a few days later.

Remember,before committing yourself to buying the property,see your solicitor first.Your solicitor should then make provisions to protect you if you decide not to proceed and he will be able to advise you on a number of preliminary issues .A short meeting may be sufficient to have a clear picture of the transaction and it will save you a lot of worry and sometimes money.

5.4 The purchase process

Before signing the contract,the buyer or the buyer´s solicitor should be carrying out various searches, including,full detailed planning permission granted,and the solvency of the builder and developer.

Most developers have their own standard purchase contract drafted by their own legal team,setting out full terms and conditions of the sale.Very often,these standard contracts are written strongly in their favour. The buyer or the buyer ´s solicitor may therefore wish to re-negotiate to protect their interest.

A purchase contract should be drawn up in good faith, keeping a balance of each party ´s rights and obligations. The contract should then contain all the agreed terms as well as ensuring that each party pays the correct purchase costs according to the law.

If the developer is reluctant to negotiate the terms of the contract,or is not willing to make any changes to unfair unfair clauses, the law allows the buyer to withdraw from the transaction requesting all the funds be refunded to the buyer,leaving the developer without the right to claim breach of contract.

5.5 Buyers right

Sometimes,where there is a great demand for a particular property,the buyer may not have many options to negotiate the terms of the contract,forcing the buyer to exchange contracts so as not to loose the property.If this is the case,the buyer should be aware that Spanish law protects their interest as follows:

• If the contract contains unfair clauses,these will be considered null and
•void even though at this stage, the buyer has signed the contract.

• In case of doubt,as to the interpretation of unclear clauses, the benefit
• will be given to the buyer.

• All the promotional and advertisement material relating to the property
• will form part of the purchase contract.

• Any breach of the Consumers Protection Act by the developer will be
• considered as an administrative breach, sanctioned with a fine.

In practice,these rights may not be easy to claim and the buyer may have to sue the seller to prove their case. Therefore it is advisable that all these issues be dealt with by your solicitor well in advance.

5.6 Unfair clauses

We set out below an example of some common unfair clauses heard by Spanish Tribunals,used by developers in their standard contracts.The list is not exhaustive and you should consult your solicitor for further explanation.

• Clauses stating estimates or a mere indication of a date for completion
• or completion dates subject to the developer ´s discretion. Developers
• often only give estimated dates for completion. These are not
• guaranteed dates.

• Giving the developer the right to change the contract terms without
• obtaining the buyers consent.For example, a significant change in
• materials or layout of the property.

• Requiring the buyer to take over the developer ´s mortgage. Very
• often,the developer ’s contract states that the buyer must take over the
• current mortgage. Sometimes the contract states that if the buyer does
• not want to take the mortgage,then redemption expenses must be paid
• by the buyer.

• Making the buyer liable to pay some administrative or bank expenses
• not requested by the buyer,for instance,if the developer requests some
• of the payments to be done through bank bill of exchange,(similar to
• post dated cheques), there will be some expenses and taxes arising out
• of the bank documents that may often be paid by the buyer.

• Denying the buyer ´s right to choose a Notary Public. Very often the
• developer states in the contract that completion will take place at a
• Notary Public of their choice. 

• Obligation to pay for changes to the property when under
• construction,that have not previously been agreed or requested.

5.7 Building construction guarantees

Spanish law makes the builder and the architect of a building responsible for a period up to a maximum of 15 years,should the building fall down or suffer from serious latent defects or hidden weaknesses. Spanish legislation protects the buyer with regard to the construction as follows:

One year,for damages caused by defects on finished building specifications.

Three years for damages caused by defects on building construction materials or installations such us health, environmental,insulations,energy saving,noise insulation. Ten years for damages caused by latent defects on the building structure.

5.8 Purchasers right to obtain information

By law,the buyer of a new property,has the right to be informed of the following details:

Full details of the seller,builder and the architect. Description of the property with lay-outs of the living area.Full description of the building,common areas and other services included. Copies of the Community Owners Rules, every buyer of a property in a community should insist on a copy of the rules.If you do not speak Spanish, you should have them translated or,at least, summarized in English. Details of electrical installation, gas,water,heating, security and fire precautions, specifications and quality of materials used on the construction and installations.

The buyer should also be provided with copies of compulsory licences for building and living purposes, Land Registry details of the property,purchase price including estate agent commission and VAT,form of payment,completion date, copies of the terms and conditions of the standard contract and the document proving that any money paid in advance during the construction period are guaranteed.

The buyer should also be provided with copies of compulsory licences for building and living purposes, Land Registry details of the property,purchase price including estate agent commission and VAT,form of payment,completion date, copies of the terms and conditions of the standard contract and the document proving that any money paid in advance during the construction period are guaranteed.

5.9 Advance payment guarantees

The law makes the seller of a new property liable to have an insurance or a bank policy to guarantee the buyer that all the payments made,plus interest,will be recovered in case the building construction does not commence or will not be completed on the agreed dates.

It is therefore mandatory for the buyer,or his solicitor,to make sure that the seller has in place the insurance policy to comply with the law.As the policy may take a few weeks to produce,it is also relevant to take care that the payments are made to a special bank account or ask the seller to provide a copy of the payment into that bank account.

The above policy does not just guarantee that the money paid will be refunded in the unlikely circumstances named,but it does mean that the insurance company or the building society has checked the value and approved the viability of the building project,giving you additional security. If this certificate is not in place,you are not liable to complete.

5.10 Completion

Completion should take place at the Notary Public of the buyer ´s choice.At this stage,the developer requests payment of the balance of the purchase price.It is always advisable to do a pre-completion inspection of the property and prepare a “snagging list ”of the work still required.You should obtain the developer ´s commitment in writing for the work to be carried out within a reasonable period of time.

It is not sufficient for the developer to say the property is complete.The architect dealing with the project needs to certify that the building construction is finished.The developer should then submit an application to the local authority to carry out an inspection in order to con firm that the property is habitable,in order to obtain the relevant certificate. If this certificate is not in place, then you are not liable to complete. You should consult your solicitor on this matter.

 

Mijas costa

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Marbella

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