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LEGAL TIPS FOR BUYING A PROPERTY IN SPAIN (“OFF-PLAN”)

Buying off-plan property inevitably involves higher risk than buying re-sale property. If you are considering buying off-plan in Spain there are a number of points to consider.

1.- Must-have documents during the development phase.

Make sure you have a bank guarantee (“aval bancario”) to cover your stage payments. Developers of off-plan properties are legally obliged under law 57/1968 to secure all deposits with a bank guarantee. You should also request proof that your payment has been deposited in a special escrow account, which can only be used for construction of the specified development.
Check with the Land Registry to make sure the land which is going to be built on is registered to the developer you are doing business with.
Make sure you obtain a copy of the Cadastral certificate giving the exact boundaries and square metres of your land.
Ensure the developer has insurance covering damage caused by structural defects to the building. This insurance should be included in the so-called “property manual” (“Libro del Edificio”) that the developer gives you.

Check the project has planning permission. Make sure the planned building has been authorised by the town hall through the correct licensing procedure. You can check this at the Land Registry, because if the description of the future building is registered, the Registrar will have seen evidence that the licence exists and work has begun in accordance with the approved design.

If the building’s description is not yet registered, visit the local Town Hall to find out whether the land is classed as suitable for development. If the property is to be built on rural land or land not classified for residential construction, you should exercise caution and obtain additional confirmation from the Regional Government as that the development is authorised. It is also advisable to obtain a certificate (“Cédula Urbanística”) regarding the planning situation of the plot you wish to buy from the Town Planning (Urbanismo) Department of the Town Hall. This will include other information such as whether the plot has any building restrictions, is in a green zone, includes a public footpath or if there are any current plans to build a motorway etc.

2.- Completion of works

Once construction has finished, and before you sign the title deed, ask for proof from the seller that the construction has been finished in accordance with the description given in the plans. This is issued as a certificate (“certificado final de obra”) which is then incorporated into a notarial deed. You can also check this at the Land Registry.

Make sure you have the licence of first occupancy (licencia de primera occupación) which is issued by the town hall for new buildings and certifies that the property is habitable. You will need this document to connect to electricity and water companies. Developers cannot force you to complete without this licence.

 

 3.- If things go wrong…

Should the developer not build your property within the timeframe stated in the contract, or services and utilities are not completed and connected to standard, or the habitation certificate cannot be issued, you are legally entitled to either:

• Rescind the contract and have the deposits returned plus interest.
• Or extend the deadline, allowing the developer to complete the property.

If you want to rescind the contract, it is advisable to seek independent legal advice. Once you have consulted a lawyer, the first step is to write to the developer to explain that, due to non-compliance with the contract, you want to rescind the contract and request that the deposits paid so far are returned, as well as the accrued interest. You should include any relevant documentation (e.g. a copy of the contract, copies of payments made, copy of the bank guarantee) and state a timeframe by which you want the amount to be reimbursed. It is advisable to write to the developer via Burofax, which enables you to prove that you have sent a specific document, and that the recipient received it.

If the developer does not respond to you within the specified timeframe, you should contact the claims department of the bank that issued the guarantee to request a refund of the payments made. Again, it is wise to make contact via Burofax and attach copies of all relevant documentation, including a copy of the bank guarantee, a copy of the complaint submitted to the developer, a copy of the developer’s response (if any) and copies of any documents which indicate that the developer has not complied with the contract.
Should the bank not comply, the only remaining course of redress is to instruct a lawyer to take a civil case against the bank.
If you believe you have been a victim of fraud and you have neither a bank guarantee nor an insurance policy from the developer, you should seek independent legal advice regarding taking criminal legal action through the courts and register a statement (“denuncia”) with the police.



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