Buying off-plan in Spain: how to protect your money

In short: everything you pay the developer before completion must be guaranteed by a bank guarantee or an insurance policy, and paid into a special account. Before signing, ask for the building licence and the guarantee document, and check the deadlines in the contract.

Buying off-plan means buying a home that is still under construction, or not even started. Many people do it because the price is usually better than a finished home and you pay in stages. But it is also where most worries come up, and rightly so: you are handing over money for something that doesn’t exist yet.

What the law says

In Spain, the Building Act (Law 38/1999, first additional provision, amended in 2015) requires developers to guarantee every amount you pay before completion. They can do it in two ways: with a bank guarantee or with an insurance policy in your name. It covers what you paid, taxes included, plus legal interest.

If construction doesn’t start or isn’t finished by the agreed date, you can ask for all of it back. If the developer doesn’t refund you within 30 days, you claim from whoever issued the guarantee or the policy.

One important detail: the guarantee expires if two years pass after the breach without you making a claim. Don’t let it slide.

What I check before a client signs

• The building licence. The duty to guarantee starts once the developer has the licence. Without it, I don’t sign anything that involves paying.
• The individual guarantee or policy. A document in your name for each payment, not just a promise in the contract.
• The special account. Payments must go into an account for that development. The bank that runs it has a duty to monitor it.
• The deadlines. Completion date, what happens if it is late and from when you can ask for a refund.
• The specifications. Exactly which materials and finishes you are buying.
• The developer. Which other projects they have delivered and how they turned out.

How payments usually work

Typically there is a reservation deposit, a payment when you sign the private contract, instalments during construction and the rest when you sign the deed, which is usually when the mortgage comes in. Each developer has its own schedule, and it is worth comparing them.

How I work

I work with several developers between Rincón de la Victoria and Fuengirola, and I don’t recommend a project to a client unless I can answer every question on this list. Buying off-plan can be a good decision, but only with the paperwork in order.

If you are looking at a specific project, get in touch and we will review it together.

Source: Spanish Building Act (Law 38/1999), first additional provision as amended by Law 20/2015, and the Bank of Spain’s Banking Client Portal. For guidance only; for your case, speak to a lawyer.