Thinking of Buying an Off-Plan Property in Spain? You Should Read This First
Off-plan properties, often called new build properties in other countries including the UK, are growing in popularity in Spain as the country attempts to fill its housing shortages by constructing new homes.
There are many benefits of choosing a property in Spain that is newly constructed. These properties are often more energy efficient, modern, and can be tailor-made to your specifications to a certain degree. It's a great feeling to move into a brand-new home knowing it was made just for you.
But it's also important to know that buying a property that hasn't even been built yet, buying a property off plan, can mean a lot more work for you than buying a second-hand property. Because you'll be more involved in the construction process, you'll probably be given the option to select different fittings and finishings, so you can put your stamp on the property. In Spanish this is known as vivienda sobre plano.
In this scenario you'll need to be prepared to ask plenty of questions, work with your developer, and put in a little work. Here's everything you need to know about buying an off-plan property in Spain.
What are the pros and cons of buying an off-plan property in Spain?
Buying a property off plan in Spain is exciting, but it's important to go into the process with your eyes wide open. There are both pros and cons of this kind of investment.
One of the main cons is that buying off plan can be considered risky. This is because there may be setbacks with the building process, and it could take longer to complete than you anticipated. There is also the risk that the development could be cancelled or the property developers could even go bust. Although this doesn't happen regularly it does happen, and is something you need to take into account.
The pros of buying an off-plan property are that you can be more involved in the design and development process, creating a home that's exactly what you want. Another big pro is that although prices may vary depending on the area and the project, in general, buying off plan can be cheaper than buying a new-build which is already finished. In fact these types of properties can be between 10-20% cheaper than those that are already built.
So how do you go about buying an off-plan property in Spain? And what do you need to know?
Things to know when buying an off-plan property in Spain
First things first, it's time to think about money. You'll need to know what the payment schedule will look like and how much it will cost. Some developers ask that you pay all that money up front, others ask that you pay in instalments, while you could be asked to make your payment when the property is completed.
Having a payment schedule is very common, so be sure to make a note of the specific payment dates to ensure the payments are made promptly. You'll also need to ensure you have between 10%-30% of the property purchase price available as a deposit.
The next thing to be aware of is the construction schedule. Keep track of this and ensure your developers remain on schedule, alerting you to any delays. If there are any, there could be penalties for the developer to pay, so keeping track of this could be a financially valuable decision too.
You can't trust that your developer will be responsible for checking they have all the right permits. 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. So you need to make sure these permits are in place.
If you're buying a property in a development, these are the most common constructions in Spain, then it's important to understand what the communal areas will be and what responsibilities you'll have for these shared areas. Examples include shared gardens, pools, or indoor facilities like gyms and laundry rooms.
You should discuss the warranties provided by your developer before you make any commitment. According to 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. But your developer may offer an extended warranty, so discuss this with them before you sign any contracts.
Finally, if you decide to walk away, what will your responsibilities be? What are the cancellation policies and how much will these cost you? Equally, if your developer walks away from the project, will you get your deposit back? All important questions to ask.
What documents do you need to buy off-plan in Spain?
If you've done your due diligence and decide to go ahead and buy an off-plan property in Spain then you will need to gather together a host of essential documents before your building is constructed.
When you pay your deposit, it is a legal requirement that your developer secures your deposit with a bank guarantee. This should also be deposited in a special escrow account so that it's not just in the developer's account, should there be any financial problems. So ensure you get a copy of this guarantee.
Then you'll need to secure a cadastral certificate. This shows exactly what you own, for example the boundaries of your land or the plan of your portion of a building. 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 (Ayuntamiento).
The building process will be lengthy and time consuming, but when the construction phase is complete you'll need to obtain a licencia de primera ocupación, or first occupation licence, to show that the property is fit for human habitation. This document is also a legal requirement if you want to resell your property, so don't miss this important step.
Buying a property off plan isn't something that you can do alone. It's important to get a lawyer who is experienced in processing off-plan purchases and can help you do all the right legal checks.
Are you thinking of buying a property in Spain? Whether you're looking to buy a home of your own or for an investment property that you can let to tenants, we're here to help. Our local property experts use their local knowledge to help you find the perfect property for you.
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