When buying a new build property in Spain, there will be a contrato de compraventa, but this will be a “promissory contract" for the purchase in the future, when the building is completed. This contract will normally provide for advance payments (pagos adelantados). This is acceptable, so long as the contract also provides the guarantee (required by Law 57/68) for the return of any money paid, which is normally through a bank guarantee backed by a bond which the builder has deposited (aval bancario), or an insurance policy (garantia de seguro).
In the event of non-completion, the buyer is entitled under Spanish consumer protection to the return of all money paid during construction plus interest. It is a legal requirement that builders / developers include such a guarantee (certificado de garantia) in their contracts which specifically provides for the return of all money paid plus interest. The builder may not charge the buyer for providing this guarantee.
The big difference compared to the system in the UK is that, as you do not own the property, you cannot arrange a mortgage to finance these advance payments.
Normally, builders in Spain obtain mortgage finance for the project from their bank. When the property sale is finalised, and the project split up into the individual parcelas, the buyer has the right to “subrogate" (i.e. take the place of) the builder in the mortgage for his particular plot. The buyer will have to complete an application similar to that for a new mortgage, and go through a similar approval process. If the buyer requires a larger loan than that available by subrogación, this would be treated by the lender as a separate second mortgage.
Because you are buying from a developer, it is even more important to carry out the relevant “pre-contract" checks; in particular, you still need to:
1. Prove that the developer does own the land – you need to see his escritura.
2. Check that there are no loans outstanding – you need to obtain a nota simple.
3. Ensure that the developer has paid his IBI – you need to see receipts.
4. Obtain a certificación catastral and check the plan parcial to ensure that the urbanización itself is registered and to check that the property is as described to you.
5. Check with the Urbanismo, the town planning office, to ensure that the development is in an area zoned for building and that planning permission has been granted, and that there are no other developments planned nearby that could affect your new property.
6. Check that the builder has obtained a Licencia de Obra (Building Permit).
7. Check that he has obtained a Certificado de Fin de Obra (Completion Certificate), and a Licencia de Primer Ocupación (Licence of First Occupation). If the building is not yet completed, make sure that the contract includes a warranty from the developer that he will obtain and pay for these certificates, and provides penalties if these are delivered late.
At Tabaira Real Estate our property experts will help you find your perfect Spanish property whether you are looking for luxury first line properties, best new build villas in Moraira, villas with pools, apartments in Moraira, property in Benissa, fincas and country estates, we market some of the most desirable properties in Moraira and surrounding areas.
We invite you to explore the catalogue of properties of our website. You will easily find the property that best suits your needs. Contact us today.
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