Until recently, buying an off-plan property was a great way to secure a bargain but also something to be very cautious about. People can tell you horror stories about their attempt to buy a home that wasn’t even built yet, and how it turned out completely different to what they were promised.
However, times have changed. These days buyers of off-plan properties benefit from much more legal protection and, as long as all necessary due diligence is carried out, the process is usually a smooth ride.
Stage 1: finding the property
When searching for the right home, step number one is usually to make an appointment to view one or more potential properties. However, this isn’t an option with off-plan homes as they do not even exist yet! In this case, interested parties will generally meet with development companies and be shown a proposed project. The salesperson will talk them through topics such as price, timeline of the build and any customizable aspects the buyers can have their say in. This is usually a very attractive pull for potential off-plan property investors: they will be given the option to have a say in certain parts of construction and design of their property.
Once you think you have found the home for you, it is very likely that you will be asked to sign a lengthy contract and make a deposit payment to take the property off the market. This is the time when we strongly recommend you find a lawyer to carry out all necessary due diligence, which will involve examining the contract with a microscope and advising you as to the terms and conditions before you sign.
Stage 2: Signing the contract
Only once you are completely sure that you understand the terms of the contract should you proceed to sign it and pay the deposit. After this point, you will be expected to make more partial payments further down the line significantly larger that the deposit, as each phase of construction is completed.
Note that Spanish law establishes that any and all developers of off-plan properties in Spain must provide buyers with a bank guarantee for every payment made. This way, should there be a breach of contract in any way by the developer, the buyer will have proof of all installments made up until that point and be more likely to be reimbursed.
During this stage is a good time to arrange a few other aspects related to purchasing a house here: an NIE number, a Power of Attorney if you don’t plan to live permanently in Spain, and maybe a Spanish bank account to easier handle the utility bills.
Stage 3: Completion
It may seem like it takes forever to reach this point, but the key to investing in an off-plan property is to have patience!
The final stage is completion of the property, and registration of its existence in the Property Register. Hopefully your new home will have been finished within the initially agreed timeline, however please note that this is not always the case and in Spain it is common for development companies to include a non-negotiable clause in the sale contract that allows the completion deadline to be extended by up to six months.
Before signing the final completion contract, bring in your lawyer once again to ensure that everything is delivered as promised and agreed upon at the start, as once the property is signed for and handed over to you it can be very difficult to rectify faults even if Spanish law establishes guarantee periods in favor of the consumer.
Once you have confirmed that everything is as it should be and the property has been registered, it’s time to sign the contract and make the final payment. Straight after this you will need to pay the corresponding taxes and register the property in your name – your lawyer can do all of this on your behalf via the Power of Attorney.