The process of buying a new-build or off-plan property in Spain differs substantially from buying a resale home, especially when it comes to signing the contracts, so today we are bringing you a brief summary of each step.
Please keep in mind this is a simplification of the paperwork process, and that should you decide to invest in an off-plan home we strongly recommend you seek independent legal advice from a qualified Spanish lawyer.
Stage 1: The Reservation contract
Once you have found your dream home, the Developers will urge you to sign a Reservation contract and make a payment to be used as the holding deposit (usually around €3,000 to €6,000). By signing this contract, the buyer agrees to initiate the purchase process and the Developer agrees to take the property off the market for a period of time, which is generally 30 days.
The holding deposit will be deducted from the total purchase price of the home upon reaching completion.
This is the time to bring in your lawyer. Make sure they work independently and do not use one recommended by the Developer, as they will likely be biased and not act in your best interests. A good, qualified independent lawyer will scrutinize every aspect of the Reservation contract offered to you and advise you accordingly. Only sign the paperwork once you are 100% sure you understand everything.
Stage 2: Private Purchase Contract
Before the 30-day reservation contract expires you will be expected to sign the Contrato Privado de Compraventa.
This contract will be much more complex than the Reservation one, as it will include personal information of both parties, a full description of the property being transferred, price and all other terms and conditions relating to the sale.
Your lawyer will usually send you a summary of all that is included in the contract as well as the due diligence they have carried out on the property.
Following general practice, upon signing the Private Purchase contract you will be expected to pay 10% of the purchase price that, in addition to the holding deposit, will be deducted upon completion. Bear in mind that this money is non-refundable if you decide not to proceed with the purchase after this stage.
After this point you will be expected to make the agreed upon stage payments which are usually around 35% of the final amount and will also be deducted upon completion. Make sure all payments made are secured by a bank guarantee to protect your money should completion not be reached or the Developer go bankrupt.
Stage 3: Title Deed
This is the final stage of buying an off-plan home, and is reached once construction is completed.
The Title Deed (also known as Completion) is signed before a Notary Public, as is a Mortgage Deed if required. You will also be expected to pay the remaining installment of the sales price.
Make sure both you and your lawyer have thoroughly examined the content of this paperwork, especially the Mortgage Deed (if you need to sign one) as it may include an abusive “Floor Clause” or Cláusula suelo although nowadays this is unlikely. Also ask for copies of all building permits and licenses to have record of, especially the Licence of First Occupation or Licencia de Primera Ocupación.
At this point it is highly recommended that you hire a chartered Surveyor to carry out an inspection of the property, creating a “Snagging list” of any defects so the Developer can correct them.
Once everything is signed, you will legally take possession of the property and must then register it under your name and pay all corresponding taxes and fees such as VAT, Stamp Duty or AJD and Notary, Land Registry, Estate Agent and Legal fees.
In conclusion, providing you work with an experienced lawyer, purchasing an off-plan or new-build home nowadays is a solid investment option as these types of property can be found up to 30% cheaper than resale ones, you will just need more patience than normal during the long process!
If you are considering investing in an off-plan home in Spain and need a lawyer, the Premier Law team would be happy to help.
Please contact us at email@example.com or +34 952 764 483.