If you’ve dreamed of owning a property in Spain, you’ve probably considered various scenarios. If you’re after a new-build home, you will either be thinking about buying one that’s ready to move into or buying one off plan, which hasn't been fully built yet.
The second option gives you more flexibility as you can usually be part of the process and select different fittings and finishings, so you can put your stamp on the property. In Spanish this is known as Vivienda sobre plano.
But it can also be a riskier option because you there may be set-backs with the building process and it could take longer to complete than you anticipated, the development could be cancelled or the property developers could even go bust, perhaps leaving you out of pocket with no home to show for it.
Although prices may vary depending on the area and the project, in general, buying an off plan can be cheaper than buying a new-build which is already finished.
According to real estate and investment firm BCN Advisors, an apartment in Barcelona for example can be between 10 and 20 percent cheaper than one already built. But they warn that it is essential to take into account the capital gains and the projections of the real estate market.
Before you even consider putting down an initial payment for an off-plan property in Spain, there are several things you need to know or find out.
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Firstly, you’ll need to know how much you have to pay and whether you pay all that money up front, in installments or when the property is completed. If there is a payment schedule, you’ll need to know all the specific dates, so you can get your finances in order at the appropriate times. According to property website Idealista you should pay between 10 and 30 percent as an initial deposit.
Secondly, you need to know how long the construction will take so you know when you are likely to move in. There may be delays so it’s important you keep asking the developers if they’re on schedule. If there are any, there could be penalties for the developer to pay, so you need to find out.
One of the most important things to check is if the developer has all the mandatory permits and licences to begin construction. There have been several issues in Spain with companies building on coastal land which wasn’t allowed to be built on or others that never actually got the official permits and go-ahead from the Town Hall.
Ensure that you also consult the company on your specific property and see if it is customisable in any way. Obviously this is one of the main advantages of buying off plan so you’ll need to know if you can choose extras such as bathroom tiles, kitchen units, and even the colours of the walls.
READ ALSO: A Spanish architect's step-by-step guide to building a home in Spain
If the property is part of a development of other houses or apartments, which it’s likely to be, then you’ll also want to know what the communal and shared areas will be like. Is there a garden? A shared pool or gym? Ask if you can see mock-ups or images of what these will look like too, as this is an integral part of where you’re going to live.
It’s important to also know what warranties the developer covers, with regards to structural defects or damage to any fixtures and fittings. According to the Spanish Building Law, new builds must provide guarantees covering both the work and the materials against defects and faults. Typically work is covered for 10 years for structural issues like foundations or beams. It should also be covered for three years for defects affecting whether you can live in the property or not and one year for flaws in the finishes.
Finally, you must find out what the cancellation policies are in case you need to walk away from the home due to unforeseen circumstances or if you change your mind part way through. Equally you should find out what happens if the developers cancel the project or if they go bankrupt and fold. Do you get your deposit back or will you lose it?
According to Cum Laude Legal firm, there are several essential documents you need to get during the construction phase.
The first is the bank guarantee or aval bancario. According to the law in Spain all developers of off-plan properties must secure your deposit with a bank guarantee. It should also be deposited in special escrow account so that it’s not just in the developer's account, should there be any financial problems.
The second is the cadastral certificate which shows exactly what you own, for example the boundaries of your land.
If you want to be sure that the developers have the correct permission and permits to build, you may also request a cédula urbanística from your Town Hall or Ayuntamiento.
When the property is complete, you will need to obtain a licencia de primera ocupación or a first occupation licence to show that the property is habitable. You will also need this in the future if you plan on selling it on.
The law firm warns that if there is a problem with the developers such as delays to the building work or utilities are not connected and working, you will not be able to get this certificate and you have the right to rescind your contract and have your deposit plus interest returned or extend the deadline.
If you do plan on buying off-plan it’s important to get a lawyer who is experienced in this type of property, as they will ensure that everything is in order and do the necessary checks.
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