Buying a new property (off plan)

Our team of Spanish Lawyers experts in Spanish properties will guide you in the process to buy a Spanish property either in Alicante, Costa Blanca, Almería, Murcia, Cosat del Sol, Málaga, or Catalonia.

The process of buying   new Spanish properties is very similar that to buy resales, but there are important differences to consider. Our team of Spanish lawyers have prepared a practical guide with the main aspects involved in the acquisition of Spanish propeties, in the conyenace process.

For example:

- Buying off-plan: In the majority of the cases, the first agreement for the purchase of the Spanish properties is done when the construction is projected, and the works are not started yet.

It creates insecurity in the investor, specially when they have to deposit some money and to assume obligations towards a property which is only a “project”, and they do not know in a high number of cases the Builder´s reputation and the economic situation of the Construction company, and the most important who gives guaranties and payment protections to the required payments?

- Legal and Administrative construction documents: When buying a new property, there are several documents which must be studied and properly checked in order to control the legal situation and the proper development of the construction.

This is a task which must be done ny the Spansih solicitors, in every step of the evolution of the construction till the end. So, any time that the buildings advance, there are documents which must be studied by the purchasers, or by their lawyers, in order to guarantee that all the legal and administrative requirements are fulfilled properly.

- Expenses, taxes and other costs: Although in general, the process is nearly the same than a Resale, there are determinate costs, taxes and expenses which have a different concept and treatment.

ASPECTS TO CONSIDER WHEN YOU ARE BUYING A SPANISH PROPERTY:

1.- CHECK YOUR PROMOTER/DEVELOPER

One of the most important decisions when someone buys off plan is to pay the initial deposit and the following payments of the purchase over a property which is not built yet.

In the majority of the cases, the first agreement for the purchase of the property is done when the construction is projected, and the works are almost not started yet.

It creates insecurity in the investor, since they are invited to deposit some money, and to assume obligations towards a property which is only a “project”, and they do not know in a high number of cases, who is the builder, what is the reputation and the economic situation of the construction company, and, the most important, how many guaranties the investor has to protect the payments required.

We will check that the developer is a legal company, duly inscribed in the Companies Legal Registry, and that they own the land in the right conditions.

2.- POINTS TO CHECK

If you are buying from a Developer, it is even more important to carry out the relevant pre-contract checks  in particular you need to instruct your Spanish lawyer to:

1. Prove that the Developers own the land: you need to see his escritura de compra.
2. Check that there are no loans otstanding: you need to obtain a nota simple from the LAND REGISTRY.
3. Ensure that the Developer has paid his Impuesto sobre Bienes Inmuebles (IBI): If it is unpaid, this tax is attached to the property so the new owner will become liable. You should ask to see the receipt for the last year, the period for which liability for unpaid taxes can be transferred to the new owner. If the current vendor can not obtain this, you must ensure your lawyer gets confirmation from Recaudación Provincial (the Provincial Rates Office).
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 Department to ensure that the development is in an area zoned for building and that planning permission has been granted and  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)

If every point indicated above is right then you can proceed to the contrato de compraventa, you should ensure with your Spanish Solicitors that this contains the following points:

1. The total price of the building, completed and ready for occupation, including obtaining the Licencia de Obra (Building Certificate), Garantía o Aval Bancario (Bank Guarantee), Declaración de Obra Nueva y Division Horizontal (Declaration of new work and Horizontal Division) Seguro Decenal (Ten Years Insurance), Certificado final de Obra (Construction Completion Certificate), Licencia de Primera Ocupación (Licence for First Occupation). These documents are essential, as without them you will not be able to obtain and escritura or register for utilities. The Builder or Developer should be responsible for obtaining these and for paying for them.
2. Arrangements to pay an initial deposit  and payment schedule: The contract should provide the payment specifications with the correspondent V.A.T.
3. The Bank Guarantee (Aval Bancario – Certificado de garantía) Any stage payments  made are covered by an equivalent bank guarantee or insurance bond in the event of non- completion. The buyers are entitled to the return of all moneies paid during construction + legal Interest .
4. Completion date for the building: Completion should be specified as when the whole building and infrastructure has been completed, and all the necessary certificates obtained. A penalty should be provided for late completion. Equally, there will be a penalty clause to protect the Builder or Developer that if you fail to make the payments specified, the contract becomes null and void, and any rights or obligations provided by the contract will lapse.
5. A detailed plan of the property must contain dimensions and specifications of the fixtures and fittings: this is often annexed to the contract and it is called memoria de calidades = quality specifications.
6. The Builder or Developer is responsible for the installation of gas, electricity and water and sewage: The buyer should be responsible only for payments of the installation of any meters and for the current gas cylinders, if mains gas supply is not available.
7. The “cuota de participación” (share of the total costs) in the comunidad de propietarios (Community of Owners): Even if this has not been formed yet  and no subscription has been calculated  yet your share will be determined by the size and facilities of your property and this will be known. If the comunidad has already been formed, the contract should specify either the current fees or the generally expected level of fees for next year.
8. The Builder or Developer is responsible to pay off all debts of the land, specially the IBI, until the escritura is signed.
9. The Buyer will only be responsible for the payment of the costs of the escritura de compraventa, not for the segregación or division horizontal and the declaración de obra nueva. Both of these documents must also be done in a public Notary in order to make them legal and before signing the escritura de compraventa, you should ask for proof of evidence that these have been registered. The fees should be paid from the Builder or Developer.
10. Seguro decenal: Spanish´s building law called the L.O.E. Ley de Ordenación de Edificación makes Builders legally responsible for 10 years for any damage resulting from the foundations, load-bearing walls and other structural elements. The builder must have insurance cover for this. The policy details  must be given to the notary as must be included in the escritura. Without this the sale transaction can not be Notarised. Furthermore the Builder is responsible for 3 years for damages causes by construction material defects and for 1 year for the state of finishing elements=snagging list. In the last two cases insurance cover is not required, but obviously if the Builder can offer this as an additional guarantee, it will be better.

Once you have bought the property and had the escritura (Title Deed) notarised, you need the copia simple in order to register the property at the Recaudación Provincial for the payment of the IBI, in order the to be able to register for water and electricity supplies. Do not forget to bring with you, your original Passport,  Residency Card and original NIE at the Notary, under no respect you will not be able to sign the escritura.

3.- DOCUMENTS INVOLVED

* Licencia de Obra (Building Permit ): It is an administrative certificate in order to guarantee the construction defined in the work project totally adapts to the effective city-planning norm. * Garantía o Aval Bancario (Bank Guarantee): The purpose of a B. Guarantee is to secure the full amount of deposits paid by off-plan purchasers. The aforementioned guarantee is issued against the Developer’s bank account, which means that all payments made on account of the purchase price remain blocked in the account until completion. In case that the Developer fails to finish the construction for whatever reason , the Bank will reimburse all amounts paid on account plus a 6% annual interest as compensation or the legal interests on the amounts secured. * Declaración de Obra Nueva y Division Horizontal: Declaration of new work and Horizontal Division. This is the certification which confirms that in the Land Registry the construction is duly inscribed with the different units which will form part of the construction, independentely of the initial plot in which the building is projected.                                                                                                                                                     When you go to make your declaration of new work and register the house, you will need :

• The Certificado Final de Obra (issued by the Architect).
• The Licencia de Obra – Building permit (issued by the Town Hall).
• The licencia de primera ocupacion-Licence for First Occupation (issued by the Town Hall).
• The 10 year insurance policy.

* Seguro Decenal (Ten Years Insurance): The building law called L.O.E. Ley de Ordenación de Edificación makes Builders llegally responsible for 10 years for any damage resulting from the foundations, load-bearing walls and other structural elements. Furthermore the Builder is responsible for 3 years for damages causes by construction material defects and for 1 year for the state of finishing elements. In the last two cases insurance cover is not required, but obviously if the Builder can offer this as an additional guarantee.

• Whithout this the sale transaction can not be Notarised.

*Certificado o Acta Final de Obra (Construction completion Certificate ): It is the document is issued by the Builder´s Architect  he declares that the development  is finished and it adapts to the work project, by virtue of which they obtained the Building Certificate. *Licencia de Primera Ocupación (Licence for first occupation): This is a certification that the Town Hall issues after an inspection of the finished work.They check that the CONSTTRUCTION is made according to the building project and that the property has all the necessary security and health ítems to be occupied. *NIE : Non-residents in Spain need to apply the foreigner´s tax identification number NIE, which allows you to pay taxes and is used to track your activites in Spain. When you are in the process of buying a property the application for this number must be done previous to the signing of the title deeds.ON COMPLETION YOU HAVE  TO BRING YOUR ORIGINAL N.I.E. TOGETHER WITH YOUR ORIGINAL PASSPORT. *Contrato de Compraventa (Purchase Contract) Is a legal agreement between two or more parties with legal capacity to purchase / sale a property .It is based on legal consideration which has all the general and specific conditions which regulates de purchase/sale. *Escritura: Is the Contrato de Compraventa formalised by the Notary in a legal document, which become the Title Deeds of one  property. Once this document is signed, the Land Registry is able to authorize the change of the owners name over the property.

4.- EXPENSES FOR THE BUYER

• Notary Fees: For the formalization of the title deeds.
• Land Registry Fees: For the inscription of the deeds, making the change of owner’s from the property.
• V.A.T. (I.V.A. in Spanish): Currently, this is the 8% over the total price of the property.
• Stamp Duty: Usually is the 1 % over the total price of the building, in Murcia, Valencia Region, and Andalucía. This tax can be reduced substantially if the purchasers are buying with the intention to use the property AS MAIN RESIDENCE.
• Others: Spanish Solicitor´s Fee, mortgage expenses, contracts of water, electric, and gas, Plusvalía, etc

As you can see, there are innumerable points to control and to consider at time to buy an off plan Spanish properties. These are matters that can be out of your acknowledge, and that, in the majority of the cases, cannot be understood by you. So, we strongly recommend you to use the services of serious and reputable Spanish lawyers, who can guaranty you the success of the conveyance process, assuring and protecting your investment.