Accountants and solicitors/lawyers in Marbella - Puerta Vides S.L. Spanish lawyers and accountants in Marbella - Puerta Vides S.L. Spanish lawyers - solicitors and accountants in Marbella - Puerta Vides S.L.
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The Spanish Lawyers and Solicitor of the Puerta Vides Property Law Department
Puerta Vides´s Spanish Company Lawyers and Company Solicitors
Puerta Vides's Spanish Litigation Lawyers and Spanish Litigation Solicitors
Spanish Lawyers and Solicitors for Yachting and Maritime Law in Spain
Details of Puerta Vides's Spanish lawyers, Spanish Solicitors.
Puerta Vides´s Spanish Accountants Marbella
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Answers to readers' Spanish legal queries by the Spanish lawyers and Spanish Solicitors of the Spanish law firm Puerta Vides S.L.
Essential Steps to take in Choosing a Lawyer for your Spanish Purchase
 

How are your Down Payments Protected under Spanish Law on your Purchase of a New Development in Spain

When buying an off plan property it is usual practice to pay the purchase price in various staged amounts in advanced to the promoter. These instalment payments are usually set out in the purchase contract. The contract will set out the amount and dates upon payments are to be made right through to completion. These payments can even start prior to construction work on the development commencing.

These amounts paid in stages by the purchaser, in one respect are advantageous for the buyer, because he has the possibility of dividing the purchase price into various payments, and does not have to pay a large amount of money in one instalment. The disadvantage though is the fact that the buyer is not getting anything tangible benefit in return until completion takes place in 2 or 3 years time and the property is built and transferred into the buyer’s name. There is therefore a risk that while the house is being built that the promoter could be affected by a problem, which delays the construction or prevents it from being built.Maybe the local council or the courts halt the development during construction and the delays cause the development not to be completed by the contractual completion date. The developer may suffer financial difficulties or go bankrupt. In these situations (depending on the terms of your contract) you may have the contractual right to terminate your contract to purchase the property and demand the return of the purchase funds already given to the developer in the earlier staged payments. The practical problem arises when the developer refuses to return the money, and the buyer is forced into the costly and time-consuming scenario of suing the developer through the Spanish Courts for the return of the money.

Protection for the Purchaser under Spanish Law

Fortunately Spanish Law has for a long time been aware of the potential risk to buyers in these situations and so has aimed to protect the buyers position by minimising their risks at the time of buying any off plan property. They did this by enacting the 57/1968 Act that is a Spanish national law governing this particular situation. This Spanish law requires any individual or company that promotes properties of any kind and who wish to receive payments from the buyers in advance of construction or completion to comply with the following:

  • It is compulsory for the developer to guarantee the refund of the amounts received in advance of completion. This is done through an insurance policy organised by the developer, which is issued by an authorised company, usually through a bank warranty (guarantee) issued by a bank or savings bank. Should the developer fail to start or complete the development the buyer will have the reassurance of knowing that he or she will be refunded the money by the bank or insurance company, according to the terms of the bank warranty. This means the buyer has the peace of mind of knowing that the funds are available for reimbursement.
  • All the amounts paid to the promoter must be deposited in a “special “ bank account, which is separate from any other funds belonging to the promoter. The promoter is only entitled to use these funds for dealing with the expenses caused by the construction. In case that construction has not started or completion has not taken place on the contractual date the buyer will be entitled to:
    1. Terminate the contract and be refunded for all the amounts paid, plus interests until all the money is repaid.
    2. To extend the contract in writing, including a new date for completion.

You Spanish lawyer during his coneyancing checks should confirm that the developer is going to supply such a bank warranty for his client. Then once the instalments are paid your lawyer should ensure that the developer sends him a copy of the bank warranty. If your lawyer does not advise you about the warranty, or send you a copy ask him for a copy of it. Also be aware that you are not obliged by Spanish law to pay for this warranty. Some unscrupulous developers and their lawyers have been known to try and charge foreign buyers 2,500 Euros for this warranty! This often happens when buyers use lawyers recommended by the developer or the estate agents. As these lawyers have been known sometimes not act in the best interests of their clients, due to the conflict of interest they may have between their clients and the developer, or his agent from whom they are getting their clients.

All the Spanish Lawyers of the Spanish Marbella law firm Puerta Vides SL are members of and regulated by the Malaga Law Society (Ilustre Colegio de Abogados de Malaga).