Monday, 13th July 2020

This Month's Magazine
Ask for your rights when Buying off-Plan - Part I

Ask for your rights when Buying off-Plan - Part I

The first of a two parts artcile looking at your rights when buying off plan.

Over the last months we have been reading and listening to amazing stories about people who bought off plan and end up having nothing, about builders being arrested, mayors charged with fraud and most of it related to properties sold off plan. It is sad to have to say that, most of the problems could have been avoided if buyers had known their legal rights and how to proceed correctly with the purchase of a property “off plan” in Spain. Unfortunately too many unprofessional estate agents and intermediary advisors have been believed just because they are British and speak English.

Let us show you the way and try to get you involved in your purchase rather than think that just because you cannot speak the language you will be unable to understand. If your solicitor can speak English and you know which questions to ask and what details to check, it is never going to be a problem.

The following are the steps to go through; each represents one of your rights that you just must not lose.

1. First step and first information.
If you have decided to buy an unfinished property in Spain, the developer is legally required to provide you with the following information: Registration details of the Developer with the Spanish Company Registry (Registro Mercantil), its trade name, address and data of the marketing (pormotora) company. Also, property plans and general location of the unit. Details of use granted and maintenance of the installations. Building specifications and description in respect of electricity, water, gas, heating installations and fire protection measures. Dimensions and specification of the fixtures and fittings.
This information is contained in what is referred to as the “memoria de calidades”. Property description and details of the usable area, common areas and accessory services.
The price of the property and accessory services and terms of payment.
Bear in mind that anything the developer publishes must be performed, as the publicity that the developer supplies is equivalent to a legal contract. So keep a copy of it.

2. Second step -The deposit and the advanced payments.
Normally, you would reserve your apartment while its construction is being completed. You would sign a private contract with the seller and put down a non-refundable deposit (about 10% of the property’s total price). Thereafter, you will be expected to make advanced payments (stage payments), which should be protected by an insurance policy, until the construction is completed.
On completing the construction, you would need to sign the sales/purchase contract (contrato de Escritura de Compra-venta) before a Spanish Notary. Beware, the buyer does not get ownership until the property is fully built and the purchase/sales contract is signed as above. You must open a bank account to make these payments to ensure that the developer receives them as required.

2.1. Guarantee of advanced payments. The staged payments of the property’s total price must be insured in order to get the return of all money paid in advance plus interest at 6% of penalization in the event that the developer does not commence the works of the property on the scheduled date, or in case of non-completion of the property. On signing the sales contract, the developer must provide documentation with a guarantee for the advanced payments and details of the guarantor. In the event that the insured events do occur, the purchaser may demand the developer to refund the payments with an annual 6% interest increase. If the developer does not answer to the demand, the purchaser should contact the guarantor to demand the refund. Your lawyer should check that your private contract contains reference to this guarantee.


3. Third step - The private sales contract.
Buyer and developer must sign a private sales contract, which serves to define the conditions of the future purchase, once the construction is completed.
This contract should contain the following provisions: Identities of seller and buyer, legal contractual capacity of seller and buyer. Description of the property; details of the usable area, common areas, accessory services, and location. The selling price and taxes levied on the property to be paid.
That in case of dispute, both parties agree to submit to the exclusive competence of the Spanish Courts within the area of the property. Signatures of the parties to the purchase contract. Payment terms while the apartment is under construction, up to its completion. Bank account details where staged payments are to be paid in.
Reference to the penalties to be applied either in case the buyer does not conform to the payment terms agreed, or the seller does not provide the quality and standards promised.
Possession Date: the date when the buyer will take possession of the house.
The contract shall also contain the penalty applicable in case the developer does not complete the construction of the property on time. Plan of the property and its description and specifications (memoria de calidades). Together with the private contract, the developer must provide you the following documentation: Description of the property and the building where it is located, the common areas and accessory services. Plans of the property and its location. Construction details: electric wiring, fire protection measures…
Reference to the materials used in the construction of the property. Details of registration of the building in the Property Registry (Registro de la Propiedad), or mention to the non registration of it. Copy of the building permit.
Note that this is not the final contract, which will be signed before a Notary on a public deed.

4. Fourth step: Signature of the deed & Registration.
As soon as the construction is finished you must sign the Purchase Deed (Contrato de Compra-Venta) before a Notary; where applicable, it should contain the mortgage contingency and its details: amount, rate and term.
The Notary is the public official who makes the contract legal. He certifies that the parties have signed the contract; he will keep the original document in his files in case of any problem later. Note that the notary does not certify that all statements are true, only that the parties have sworn to them. The purchase Deed must be registered with the Spanish Property Registry (Registro de la Propiedad).
Once it is done, the title deed (Escritura Pública de Compra-Venta) fully assures your title and the registered contract makes you the owner of the property. The registration of the property is also important for tax purposes, the real estate tax (IBI tax) must be paid every year otherwise you could be fined by the Spanish tax authorities.
If you cannot sign the contract in person, you can give power of attorney to another person. You will receive the keys to your property upon signature of the contract in the presence of a Notary.

Part Two of this article will be published next months edition

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