1. Information

If you have decided to buy an unfinished or new build property in Spain, the developer is legally required to provide you the following information:

• Inscription details of the Developer at the Spanish Company Registry (Registro Mercantil), its trade name, address and data of the promotional society.

• House maps and general location of the unit.

• Instructions of the use and maintenance of the installations.

• Building specifications and description of the electricity, water, gas and heating networks and fire protection measures. Dimensions and specification of the fixture and fittings. This information is contained in the memoria de calidades.

• Property description and details of the useful surface, common zones and accessory services.

• Price of the property and accessory services and terms of payment.

Keep in mind that anything the developer publishes must be performed, as the publicity the developer supplies has the power of a legal contract.  

Normally, you would reserve your apartment while its construction is completed. You should sign a private contract with the seller and put down a non-returnable deposit (about 10% of the property total price).

In the meantime, you will be expected to make advanced payments (shared parts of the property total price), which should be protected by an insurance policy, until the construction is completed. On that date you should sign the sales contract (contrato de Escritura de Compra-venta) before a Spanish Notary.

Beaware that not until the property is completed, does the buyer obtain its ownership.You must open a bank account to make these payments as for the developer receive them periodically.  

The shared parts of the property 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 the developer does not commence the works of the property on the date scheduled, or in case of non-completion of the property. On signing the sales contract, the developer must provide documentation with the type of guarantee for the advanced payments and indication of the guarantor.In the event the insured events occur, the purchaser may demand the developer for refund of the advanced payments with an annual 6% interest increase. If the developer does not answer the demand, the purchaser should contact the guarantor to demand for refund.Your lawyer should inspect any details in your private contract and make sure that it contains reference to this guarantee. 

3. The private sales contract

Buyer and developer should sign a private sales contract, which serves to settle the conditions for the future purchase, once the construction is completed. This contract shall contain the following provisions:

• Seller and buyer identification.

• Seller and buyer legal capacity to make a contract.

• Description of the property; details of the useful surface, common zones and accessory services, and its 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 from the location of the property.

• Signature of the parties to the purchase contract.

• Payment terms while the apartment is under construction, up to its completion.

• Bank account details where advanced payments are to be paid in.

• Reference to the penalties to be applied either in case the buyer does not accomplish the payment terms agreed, or the seller does not provide the qualities 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 with following documentation:

• Description of the property and the building where it is located, the common areas and services.

• Plans of the property and its location.

• Construction details: electric wire, 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.

This is not the final contract, which should be signed before a Notary on a public deed. 

As soon as the construction is finished you should sign the Purchase deed (Contrato de Compra-Venta) before a Notary, which shall contain the mortgage contingency, and the specifics of it: amount, rate and term, where applicable.The Notary is the public official whose signature creates a legal contract. He certifies that the parties sign the contract properly. He keeps the original document in his files in case any problem could arise 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: the registered contract makes you the owner of the property.The registration of the house is also important for tax purposes, the real estate tax (IBI tax) shall be paid every year since you could be fined by the Spanish tax authorities. If you cannot be present to sign the contract, you can make a power of attorney allowing another person to sign it for you, if necessary. You should   receive the keys of your property upon signature of the contract in the presence of a Notary.  

• Value added tax (IVA) 7% of the total price. It is necessary to this tax as the sale is a business operation between a developer and a private individual...

• Stamp duty (Impuesto de Actos Jurídicos Documentados) 0.5%: It must be paid upon signature of notary’s document.

To pay these taxes, you will be required to obtain the Spanish tax identification number, say the NIE, if you are non-resident, or the NIF if you are Spanish resident.

6. Fees to pay

When buying a new property, the following fees, subject to VAT, shall also be paid:

• Notary (Notario): You must pay the notary fees when you sign the deed; these are fixed on official scale and will vary depending on the size of the property.

• Property Registry (Registro de la Propiedad): You must pay the registration of the deed at the Spanish Property Registry in order the property of the house can be transferred to you. Before going to the registry, you should have paid the corresponding taxes, its receipts must be given to the Register, and otherwise you will not be allowed to make the registration.

 7. Other points to check when buying a new house

In order to avoid possible problems that could arise later, do not forget to check every point described below. Otherwise you may find that your dream house is illegally built. You will must have your own lawyer to deal with this paperwork, as they know the ins and outs of it. 

When you are willing to buy a dwelling zoned within urbanization in Spain, you should first check the Partial Plan (Plan Parcial). It is the plan of building plots, which must be approved by the urbanism department (town planning department) of the Town hall where the plots are recorded in.This plan assures that your urbanization is legal and that there are no other developments planned nearby that could affect your new property. Urbanization is a planned community which provides a minimum of services and a minimum of quality control of the constructions, installations, roads…  

If your property is going to be built near the beach, make sure that your property will comply with The Spanish Coastal Law (Ley de Costas) of 1988 or that the builder has an authorization from the Coast department, which provides that the authorities must restrict building within 100 meters of the beach and establishes a zone of influence (zona de influencia) up to one kilometre inland.  

The builder must have obtained the building license (licencia de obra) issued by the Town Hall, which allows him to build the house. The certificate of the building completion (certificado de fin de obra) is issued by the architect once the building is complete. The developer needs it in order to get the certificate of occupancy. The developer must provide you with the certificate of occupancy, which is issued by the Town Hall (Ayuntamiento). This administrative document permits you to inhabit your new dwelling. Only when the certificates of completion of the building and the certificate of occupancy have been issued, can the purchase deed be duly finalized and notarized. The developer shall obtain and pay them. It could be difficult to register the sale if the building does not have legal approval. Other problems could arise; demolition of the property could be enforced.  

Once you receive your property’s keys, you should check your property in order to detect whether there existing defects or not. Homeowners can, in some cases, force the developer to fix any problems with the property after the sale, under some specific conditions. The term of guarantee for possible construction defects is as follows:

• For those houses, which applications for building licenses were issued before May of 2000, the guarantee periods are as follows:

• 6 months, at least, since the deed was signed, for defective construction which have no effect on the building's final purpose?

• 10 years, from the date of completion of the works for defective construction of the essential parts of a building.

• 15 years, for the cases in which the contractor had no complied with the terms of the contract.

• For those houses which applications for building licenses were issued after the month of May, 2000, the guarantee periods are as follows:

• 1 year for defective construction which have an adverse effect on the finish of the house (electricity installations, painting…). In this case, the builder is responsible for all property damages.

• 3 years for defective construction which have an adverse effect on the habitability conditions (humidity…). In this case, the other agents involved in the construction of the building are liable for the property damages...

• 10 years for defective construction which have an adverse effect on the building structure?

Spanish law provides a time limit of 2 years to claim for construction defects from the date on which the defect was apparent and known to the proprietor, provided that the defect arose during the guarantee period described above.The different agents will be personally and individually liable for property damages to the buildings caused by their own acts as well as by the acts of others for whom they are legally responsible.They will be jointly liable when the responsibility for the damages cannot be attributed to any one individual or entity. 

As with buying a second hand property in Spain, it is important to read around the subject and use the service’s of your own lawyer who you have engaged to act on your behaves, with new builds is also important to keep in contact with the developer and make regular visits to the site, and list and point out any problems which you see, during the build including keeping a diary of your visits and taking photographs’, and keep a copy of all correspondence and any paper work. As should there be problems at a later date you will have a detailed record of events. 

This Article was original created  by iAbogado Servicios Jurídicos SL (Madrid, Spain).Visit www.iAbogado.com for more articles with content on legal matters in Spain. Reprint with the kind permission of iAbogado.