Construction in Rustic land – How to build a house in rustic Spain

First step.To know if your project can be developed

The “Building License”, or “Building Permit”, or “Construction License” (Licencia de Construcción, o Licencia de Edificación, o Licencia de Obra Mayor).

As we pointed before If you find a plot in one of these areas, a rustic land, or “suelo no urbanizable, and you have the aim to build there a determinate construction or project, you should first check with the legal authority (mainly the Town Hall or Council = “Ayuntamiento”).

For example: You can find a determinate land and you wish to build there a determinate construction. What you have to do is to pass your idea of the building to a project and then present it to the “Ayuntamiento”. Then, they will study the regulations and limitations of the area, and then they will approve your project, with the proper Building License, or Building Permit, or they will refuse it, asking to modify the project (for example, asking you to reduce the floors from three to two spaces.,).

WATER AND ELECTRICITY SUPPLY:

As explained, the water and electricity supply, and the sewage service, are items that are guaranteed to citizens who lives in urban areas “suelo urbano”. But in rustic land is out of urban areas, and frequently out of the main points of connection to water and electricity.

In fact, the Town Hall has not any obligation to supply main water and electricity in rustic land. Only in urban. So it is very important to study carefully the possibilities to get water and electricity in the plot.

For example: If there is main water and electricity supply near the land, and it can be connected then, there is not any problem.

But sometimes it happens that the closest of the electricity or water connection is far away, and for being connected to you need to pay the expenses to bring the supplied to the property. So you must have this into account from the beginning, before to take any decision.

Of course, there is always possible to get water from an internal deposit tank and of the typical Spanish “POZOS” = WELLS, and the electricity  from solar pannels, or eolic ” wind power”.

Also sometimes, the land used to have irrigation water, as it is for agricultural purposes, which duly filtered, can be use to waste water.

So, We advice that before to BUY the plot, or to make any decision over the transaction, bear in mind to have a PRELIMINAR MEETING with the architects or the construction technical staff from the Building Department (Departamento o Concejalía de Urbanismo) from the Town Hall. This will make more secure the investment, because  after all  you will have a concrete idea and acknowledge about the conditions and limitations to build in that plot, before to proceed to buy the land. It is more than recommendable that this meeting is done together with a Solicitor expert in construction and if it is possible, with the architect who will develop the project and the construction. You need to instruct your architect and your Spanish Solicitor to inspect the Plan General de Ordenación Urbana (PGOU) –  named  the Town Plan.

In this meeting  you will discover what other developments are planned for the area, for example a new roads, highways, train line, an industrial state zone, a commercial area, or even an urbanization. Maybe you can build a construction in the land you are looking for, it is very important that the land is not affected to any future developments, or that in the area there is projected to develop a commercial, or industrial state, etc.

This information can be obtained in writing, with a certification obtained by the Town Hall confirming the exact possibilities and regulations to build on it, it is called “CÉDULA URBANÍSTICA”.

Once you know exactly the type of building authorized to be built in that land, and you are happy with it , then you must contract the services of an architect to develop the PROJECT OF CONSTRUCTION, or BUILDING PROJECT.

In the building project, your Spanish architect, must adapt your needing and preferences from the type of building you choose to the specific regulations of the Town Hall in that area. So, your architect will guide you through in this process, informing you about the different possibilities to transform your “ideal house” in a construction fulfilling the regulations of the area. The most important thing is to have every detail specified. If you care a lot about door hardware, know exactly what you want. Have your architect go through the plans in as much detail as you can stand. Try to visualize what the views from different windows will be, and what size beds the guestrooms can handle.

Try to furnish and live in the house while it’s still on paper. You may not be on-site to catch things that could annoy you for years to come, like a window that’s off centre in a bedroom, or skylights that aren’t exactly above where the bathroom sinks will be.

Once the project is complete, then your Architect must be present to the Building project to your Town Hall in the Building Department (“Departamento de Urbanismo” or “Concejalía de Urbanismo”). With the application of the Building License, you have to pay an extra municipal tax, Impuesto sobre Construcciones, Instalaciones y Obras, which is applicable to all developments which need a building license (whether one is applied for / granted or not). This tax can vary from 2% to 4% of the cost of the construction, depending on the Town Hall of your area.

Then, they will study how suitable is your project to the specific conditions or limitations in the area. If your project of construction is OK, and fulfills with the regulations and requirements to build on in that area, then they will authorize you to build there with the proper “Building License” or “Building Permit”, so you will be entitled to build there exactly the same property as presented to the Town Hall with the project.

Second Step.- Construction of the house:

Once you have the building permit, you must contract the services of a builder or constructor, to execute the project, and to build the house.

This builder must follow the instructions of the architect in order to execute the construction in a  strictly projected.

  THE ARCHITECT:

At this point, is very important to pay attention to the work of the architect. When the services of a Spanish architect are contracted to make the project of construction, he will complete his work once the project is obtained. But, you can also contract his services to “control” the works made by the builder, and to guarantee that all the steps of the construction are done as the project specifies. In Spanish, this is “Control de Obra”, or “Supervisión Técnica de la Obra”. Of course, the fees from the architect will be higher if the architect assumes this work, but the guaranties of the construction will be higher, because the works of the builder will be periodically inspected by the architect.

It is very important that the architect must be registered in the Official College of Architects of the Region.

Then you need to appoint an architect, and to agree a contract with him that specifies exactly what he is responsible for, timescales, and costs of the buildings. The architect’s fee includes the preparation of the “memoria de calidades” (Quality specification list of materials). It has to be in detailed, including for example the formula for the concrete, the type of materials, and the size of pipes.

The architect will instruct an aparejador, a qualified architectural engineer, who will supervise the building, carry out on site inspections, and ensure the building is to the required standards. He will issue the architect’s certificates which are necessary to obtain the Spanish Certificado de Fin de Obra (Completion Certificate), and the Licencia de Primera Ocupación (called the First Occupation Licence or Certificate of Habitation).

You will need to prepare an exact specification for the building, and then find a reliable builder. Your architect may accept responsibility for this, and for supervision. You need to agree a completion date, with a penalty clause in your favour  for late completion. This needs to be incorporated into a legally binding contract with the builder.

  “SEGURO DECENAL” OR TEN YEARS INSURANCE:

Also, in this point is very important for you to consider what is called SEGURO DECENAL or TEN YEARS INSURANCE.

When you buy off-plan from a Spanish builder or developer, or you build a new property (which this is the case now ), the builder or developer, together with the architect, must guarantee you that the essential and most important parts of the construction will be secure at least for ten years, following the Spanish laws.

In order to confirm this responsibility, the Spanish regulations forces to the developers of new buildings to insurance the most important parts of the construction, as the foundations, internal structure, bines, etc. Other defects affecting the habitability of the property are covered for 3 years. Other minor defects are covered for 1 year. In the last two cases insurance cover is not required, but obviously if a builder can offer this as an additional guarantee, it will be better.

Also, it is an additional guarantee for the construction, because the same insurance company will force the builder to pass determinate quality inspections, to check the quality of the materials and the works made in the property, in order to give the proper policy.

   Spanish Ten Years Insurance (or “Seguro Decenal”) is obligatory and compulsory when the pr  omoter is a company with the activity to build houses for sale.

But, it is voluntary when the developer is a particular, usually the owner of the plot. This is called in Spain “Autopromotor”, translated as “Self-Promoter”, or “Self-Developer”. This is the case in which a particular buys a land in Spain with the intention to build a house for him, but he has not the activity of buying for sale. In these cases, the Spanish law give the option to these particulars  not to apply for this insurance, because the Spanish Government understand that, if a particular is building something to live inside, he will take the necessary care to build in a safe and secure way. So, the particular can choose whether to save costs avoiding to pay this insurance; or in instance, to contract this insurance to have a better protection against  construction problems and defects.

But, if you as self-promoter chose not to apply for this insurance, when you sell the house in the future to other buyers, the Spanish Laws forces you to inform them that the construction is not covered with this guaranty, and they must accept this condition from the sale. From the point of view of an eventual buyer, it will be always a better option to buy a property with this insurance. So, they must be duly informed, and they must confirm, that the property is not with any insurance in this way.

  THE BUILDER:

As promoter of the construction, you must contract the services of a builder to execute the construction of the order to develop the project following the instructions made by the architect. One of the most important elements of constructing a property is the building contract with the builder. The builder will always try to protect its interests and if you are not experienced with these type of contracts your property can end up being of a fare less quality than expected, take twice as long as promised or even worse.

  To protect yourself always make sure that your Solicitor draws up the contract or goes through the contract proposed by the builder.

The most important elements of the contract are to make sure that;

• The full name and CIF number of the constructing company and the owner are included.
• The construction is made from the plans and building description (memoria de calidades) provided by the architect.
• Extras such as garage or pool are included the price
• Starting and termination date including penalties for late completion.
• Payment terms (new properties pay more than 20-30% before the starting date of the construction and fix all the rest of the payments to different stages of the construction. It can also be recommended to retain 5-10% of the price to repair any defects after the building is finished)
• The certificates from the architect, electricians and the town hall have to be given on the last payment.
• Taxes involved in the transaction, explaining and detailing how much is for IVA (VAT), and Stamp Duty (Actos Jurídicos Documentados), Notary, Land Registry fees, etc.

Other aspect we recommend to agree with the builder:

• Is to guarantee that the builder will organize the final steps of the process regarding documentation, like the Certificate of Final Works License (Certificado Final de Obras), or the Declaration of New Building, or Horizontal Division (Declaración de Obra Nueva o de División Horizontal), and, the most important, the Certificate of Habitation Licence (Cédula de Habitabilidad). These items are extremely important in rustic land, in which is not common to find enough electric or water points of connection to the main supply.
• To guarantee that, once you have paid the final payment for the price of the construction you will have the water and the electric meter connected, and with the contracts signed on your private names.

  Why ask these things to the builder?.

Because it is very common that the builder leaves the work once he has complete the construction, once he obtains the Final Works License – CFO (Certificado Final de Obra), and the New Building Declaration-DON (Declaración de Obra Nueva).

With these certifications, the builder declares that the new building is finished (with the CFO), and that the construction is complete and already declared in the land registry the (DON).

At this stage, the final administrative declaration of the building is not complete. It rests to obtain the Certificate of Habitation – CH (Cédula de Habitabilidad o Licencia de Primera Ocupación). This document is very important because, you need it to pass the supply of the water and the electric contracts from “Works” supply to “Home” use.

We are going to explain  this concept in a better way :

With a strict interpretation of the Contract with the builder, he finishes his service in the moment in which the property is physically finished, and appears as a house in the land registry (Registro de la Propiedad). This is obtained with the two documents named above: First, the Final Works License (Certificado Final de Obra), which is a document in which the architect who projected the construction certifies that the building is already finished, with the compliance of both, project and Building License; and Second, the New Building Declaration-DON (Declaración de Obra Nueva), which is the process of inscription of the new building in the land registry (Registro de la Propiedad) over the existing plot.

In this moment, you as promoter, have the house complete, and duly inscribed in the land registry. Also, in the property, there is electricity and water. So, you can think that the property is ready to live inside….. BUT… NOT. For your information, the property is not ready yet ,  for you to live there, the property is not a “house” yet, it is a “construction” because, to be a “house” you need the following items:

  Certificate of Habitation – CH (Cédula de Habitabilidad o Licencia de Primera Ocupación):

 This is the confirmation from the Town Hall that the property is ready for habitation, and it is applied once the property is finished with the Final Works License (Certificado Final de Obra), and inscribed in the land registry with the New Building Declaration-DON (Declaración de Obra Nueva).

You need this document to obtain the permission of the Town Hall to live live in the house. Before you get it, what you have a is a construction, but not a “house”.

This document will be necessary to obtain the individual supply of the main utilities on your name, and with the consumption use for a “house” .

  Electricity and water contracts on individuals name:

 Before the builder obtains the certificate of habitation, there could be water and electricity supply in the construction, because, is normal that the builder obtains this supply to make the works of the house (for the tolls, machinery, etc.). But the supply obtained from the builder is a supply for “works”, but not for “house” use consumption.

Sometimes, buyers or promoters are left in their properties with electricity and water supply for works use for many years, because the builder did not obtained the proper CH (Certificate of Habitation). They have water and electricity, but in a very poor conditions, and expensive than the normal supply for a house.

In order to guarantee you, as buyer or promoter, that the builder will obtain the proper CH, it will be recommendable to leave a part of the payment of the price when the CH is obtained. It will force the builder to work right and to do his best to get this document asap.

  Certifications of Installation from water and electricity (Boletín de Instalación Electrico, y Boletín de Instalación de Agua).

These documents are certifications made by the Authorized installers of the electric and water supply, which certifies that the installation is secure, and fulfils with the regulations of supply of these elements to a “house”.

We highly recommend you, as promoter or buyer, to guarantee that the builder will hand over the property to you being habitable with the CH, with the proper water and electric supply for a house, and with the security that you will not have any problems in the future with this.

Why to ask this to the builder?, because he knows the area, he knows the architect, also the Town Hall, and he will obtain these documents three times faster and cheaper than you. And, if he wants to be contracted by you, he must just obtain these items. If he refuses to do it, it will be a reasonable argument to look to another.

Third Step.- The house is built: Documents:

  Final Works License – Licencia o Certificado Final de Obra

As explained before, once the works are finished, then it is necessary that somebody confirms that the job is complete. This is the work of the architect. He has the obligation to go to the construction and inspect that the works are completely finished always  following the instructions and specifications made in both, his project, and the building license obtained.

But, meanwhile, the construction is not declared in the land registry. So, there is a process to inscribe the construction in the land registry, which is called: Declaración de Obra Nueva. This process will get the construction declared in the land registry.

  New Works Declaration – Declaración de Obra Nueva:

This is a process done in front of a Spanish Notary, who will prepare the deeds of the house over the pre-existing land or plot.

To make the DON, for new houses, it will be necessary to obtain the Certificate of Habitation (CH) from the new Spanish Regulations of 2007 (Ley del Suelo de 2007) Land Law. Before 2007, new houses could be inscribed in the land registry without the CH.

The result of the DON will be to obtain the deeds from the house, duly described in the proper title deeds.

So, which documents will you need to complete the house in the land registry?:

• The Building Project from your architect.
• The Building License
• Final Works License – (CFO) Licencia o Certificado Final de Obra
• New Building Declaration-DON (Declaración de Obra Nueva).
• Ten Years Insurance (Seguro Decenal) – If you have finally chosen to contract this insurance. If not, you must indicate to the notary that you have not proceed in this way, in order to inform the buyers and obtain the confirmation that they agree.

  Certificate of Habitation from the Town Hall:

Then, once you have all these documents, you need to bring them to the notary. The notary will prepare the title deeds of the construction, and you will sign them. This process is called Declaración de Obra Nueva. This will declare that, over the pre-existing plot, there is now a construction, which is a house. Then, you will need to bring these documents to the Land Registry to make the proper modification of the inscription of the land, now including the house, and the house will be legally complete.

  Expenses and taxes

At this point, is very important to differentiate two figures which are the most widely used in the market when somebody is buying an individual property off plan:

To buy from a promoter or a developer the final building. Then, acquiring the position of a normal “buyer” off plan. It means that the builder, or the promoter, who are the owner of the plot, or they have the rights to build on there, they offer the project to you, and you accept to buy once in finished and ready to sell, paying the price by steps.

Then, when the property is finished, they offer you the property, and you pay the final price of the property, with the following expenses:

• 10% VAT over the price of the sale.
• Notary and land registry fees for the sale.
• 1-2 % Stamp Duty over the price of the sale.
• To be in the position of a “self-promoter”. It means, that you assume the position of the developer, so, you have to pay the following expenses:
• The price of the land
• The fees for the project of the architect
• The fees for the final works license of the architect
• The builder fees and materials
• The notary fees for the acquisition of the land
• The notary fees for the Declaración de Obra Nueva- DON
• The land registry fees for the Declaration of the building “in construction”
• The land registry fees for the inscription of the DON

  Taxes for:

• Taxes for:

  • Building License: 3-5 % over the budget of construction. This budget is fixed in the same project made by your architect
  • Certificate of Habitation: around € 200-1.000 (depending on the area).
  • Taxes on the land:
    • If the land belongs to a particular, and not to a company, then, 6-10 % Transfer Tax, over the price of the land. This is to be paid when the deeds of the land are passed into your name.
    • If the land belongs to a company, then, 21 % VAT.
  • 1-2% Stamp duty, over the price of the house construction. This is to be paid when you declare the house “in construction”.
  • 1-2% Stamp duty, over the total price of the construction. This is the budget of the house when declared for DON. And it is required when you bring the deeds of the DON to the land registry to inscribe the house over the land.
  • VAT (IVA)  for  fees for  the builder,  the architect and for materials. 
    • Architect: 21 % VAT
    • Builder: 10 % VAT
    • Materials:
      • If you bought materials directly by yourself: 21 % VAT.
      • If the builder supplies materials: 10 % VAT

As you may note, the differences between the buyer off-plan, and the self-promoter are very high, from the moment in which, in the first case, the buyer only pays the taxes and expenses of the acquisition of the property already complete, because the promoter has paid the previous expenses and taxes before. In instance, in the second case, the self-promoter is the responsible of the payment of all these payments and expenses before the property is complete.