Purchasing a property off plan in Spain means you pay in advance for a property not yet built. However, you make great savings in the end. This is because the builder gives very favourable terms to the buyer because the buyer is financing the project and the property will have increased in value when it is eventually finished.
The costs associated with purchasing a new property are slightly different to those for a resale. ITP (transfer tax) is no longer applicable since you are purchasing from a developer, and instead you pay 4% of IVA (VAT) and 1.20% of AJD (stamp duty). Both taxes are based on the purchase price.
The “plusvalia”, as previously mentioned, may be payable by the buyer or the vendor, as agreed in the contract. Other costs are the same as the resale property, i.e. the notary and land registry fees.
It is very important to appoint a legal representative when purchasing “off plan” so that this representative can check that all the necessary licences are in place. The good news is that a new Andalusian decree has been introduced to protect the consumer. Since February 2007, all developers are obliged to supply a complete information package to a prospective buyer. The documents include papers identifying the builder, the planner, the project manager and the developer and any other intermediary involved in the sale. It also includes the floor plans, building specifications, dimensions, delivery date, terms and conditions of the sale, property registration details, and information on the building insurance that protects the buyer should the builder not complete the project.
Spanish law requires that the purchase contract must contain the delivery date with a penalty clause, specifying that the property must be handed over within “x” days of the first occupation licence being issued.
The developer must also provide bank guarantees for the payment made when private purchase contracts are signed and any further payments made during the construction period.
Your lawyer or property consultant will request and check the following:
- The construction specifications
- The specifications of the materials used
- Details of the communal areas
- Bank guarantee details
- The contract
- Whether the developer or purchaser will pay the plusvalia tax
- Whether the developer can offer a mortgage
- If the 10 year insurance policy covers defects on the property.
The developer is responsible for attending to defects at the moment the property has been handed over:
- Up to 1 year for any snagging defects
- Up to 3 years for any minor defects
- Up to 10 years for any structural defects
When you find a buyer for your property, you will first receive a reservation fee, at which time you must take the property off the market. The private purchase contract is then signed within a specified time frame and you will receive a full 10% deposit on signature of the contract. The private purchase contract will stipulate all the terms and conditions of the sale, including the final date by which the balance of the sales price must be paid and title deeds signed before the notary public. Continued tomorrow…
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