Buying a newbuild property in Spain comes with some risks. After all, you are buying an unfinished apartment or villa in a foreign country. Therefore, this article explains in five steps the buying process of new construction in Spain and points out some pitfalls.
Step 1: Reservation of an off plan property in Spain
Once you have found a flat or villa you wish to buy, the first step is to sign a reservation contract. Unlike a resale, the reservation contract is summarily drafted and usually covers one page. On such a reservation contract, you will find the promoter’s company details, a general description of the project, identification of the specific property and the payment schedule. Main terms and conditions in a reservation contract in new construction are:
- you take the property off the market for a period of typically 30 days;
- you pay a reservation fee of between 6,000 and 11,000 euros.
The reservation deposit for new builds in Spain is non-refundable.
Read more about the reservation contract.
Step 2: before signing the private purchase contract for your newbuild property in Spain
To buy safely, there are three points between the reservation contract and the compromise that we check for you.
First, we check whether planning permission was indeed granted (La Licencia de Obras). This is not only about the building permit of the property you are buying, but also of the urbanisation and certain parts of it. For example, a swimming pool needs to be licensed separately.
Note: if you want financing for the purchase of a buy on plan, your bank will possibly request the building permit before releasing the funds.
We should then examine whether the permit actually corresponds to the plans, quality requirements and materials chosen (Plano de la Vivienda, Plano de la Urbanizacion and Memoria de Calidades). Should there be differences between the approved project and the actual delivered project, this will lead to additional regularisation costs at a later stage.
Finally, we check – if it is a buy on plan – whether the promoter is sufficiently solvent. Does one own the land? Does the promoter offer a bank guarantee?
With a bank guarantee, you secure future payments to the promoter. In case of late delivery, default, or bankruptcy of the promoter, you can recover the payments. A bank guarantee is required by law in Spain, but in practice we see that promoters do not always offer this.
Read more about the bank guarantee in a sale on plan.
Step 3: the private purchase contract and interim payments
Once the investigations in step 2 result in a positive opinion, we make the compromise (Contrato Privado de Compraventa). You can then sign the compromise for new construction in Spain, knowing that the project is in order.
The compromise details the terms and conditions of purchase. For example, consider the amendment clauses. The private purchase contract is a legally binding agreement with which you definitively buy the property.
From the signing of the private purchase contract, interim payments start. Usually this is done by bank transfer. However, you can opt to make the payments to a third-party account. We will then request the bank guarantee. You can request a bank guarantee after each individual payment, including for the reservation amount. That way, you are completely safeguarded.
Should you decide to abandon the sale after signing the private purchase contract, all payments already made will be lost.
Although that the average duration from start of construction to completion is several years, the private purchase contract usually mentions a deferral clause. If the works are delayed, the promoter can extend the contractual execution period by 2 to 6 months. Know that most projects are delayed in Spain.
Read five tips on buying on plan in Spain.
Step 4: completion of new construction in Spain
Once the works are in a state of completion, we check four more points before the notarial deed is drawn up.
The first step is delivery by the architect. The competent architect certifies that the project was built in accordance with the approved plans (Certificado de final de Obra). Based on the completion, we can apply to the municipality for the certificate of conformity specifically for your premises (Declaración Responsable de Primera Occupacion). Without this document, the deed cannot be notarised and you cannot later rent through online channels.
The second step consists of checking the 10-year liability insurance policy (Seguro Decenal). It is mandatory for the promoter to take out this insurance. We check the policy so that you can be sure there is insurance cover for defects in the structural components of the structure.
Read more about ten-year liability insurance in Spain.
The third step is to check the correct connection to utilities such as water and electricity (Boletin de Agua y de Luz).
Finally, the last step consists of the first registration of your property in the land register (declaration 902N). However, the first invitation of payment for municipal tax (IBI) may take several years because the municipality needs time to process the new construction administratively.
Here you will find detailed information on the completion of a new building in Spain.
Step 5: execution of the notarial deed
Once the above steps were carried out, the new construction in Spain was formally completed (Final de Obra). You can then go to the notary to sign the notarised deed of sale, taking delivery of the keys. You will also make the final payment, usually by bank cheque. Note: the deed date is not necessarily the date of commissioning.
The final steps are then registering your new property titles in the land registry and taking out water and electricity contracts in your name. You will then be a registered owner.
Are you planning to order extras or additional works? If so, it is advisable to include these works in the deed of purchase. This way, you can also enjoy the VAT rate of 10% on these works. Find out more here VAT on new construction in Spain.
Co-owners’ association
The Co-Ownership Association will also be created (La Escritura de Obra nueva y Division Horizontal). The trustee is usually chosen by the promoter. However, at the first general meeting, the co-owners can appoint another party by a simple majority vote.
Read more about co-owners’ association in Spain.
Other points: NIE number and Spanish bank account
Before you can sign the notarised deed of sale, there are two more points you need to sort out.
First, you will need an NIE number. This is your (tax) identification number for the Spanish government. This number is required to pay your purchase taxes.
Learn more about applying for a NIE number here.
Depending on the region, you will also need a Spanish bank account. This is to make your final payment at the notary. In addition, the Spanish bank account serves as a current account for fixed costs at the property (water, electricity, IBI tax, etc.). However, for the Costa Blanca, for example, you can make payments through a Belgian bank account.
Learn more about opening a Spanish bank account here.
Did you questions About buying a new building in Spain? Feel free to make a no-obligation appointment via the contact form below. Then we can together discuss the next steps.
