Are you planning to buy an off-plan home in 2020? You’ll have lots of choice thanks to the surge in new developments along the Spanish Costas, in particular the Costa Blanca, in the past couple of years. While there are obvious benefits to buying a brand-new Spanish property, purchasing one requires careful research and appropriate legal protection. Here are six key things to consider…
1) Payment will be in stages so plan carefully. Off-plan buyers will first pay a reservation deposit, typically €5,000-€6,000 (plus VAT), which reserves their chosen unit. Next, a sales contract will need to be signed, usually within 30 days of reserving the property and requiring the buyer to pay a deposit worth between 10 per cent and 30 per cent of the purchase value. After that, the amount and frequency of stage payments due until completion will vary depending on the development. High value properties, such as custom-built villas, usually require several stage payments.
2) When purchasing off-plan, all stage payments made by the buyer should by law be protected by a bank guarantee from the developer. This way, your money is safeguarded in the event of the developer going bankrupt or breaching the contract. Bank guarantees, which will be verified by your lawyer, should not be issued for a property that does not have the necessary planning permits.
3) Your off-plan contract should include a specified completion date with a 30 or 60-day rider, stating the property must be finished and delivered with all relevant paperwork in place, including Final Works Certificate and Certificate of Habitation. Your lawyer will check these things, as well as do thorough due diligence on the land ownership status and building/ planning permits of your chosen development, not forgetting the financial credibility of the developer.
4) Think about exchange rate movement. From start to finish, an off-plan purchase typically takes between one and two years. The exchange rate is constantly changing and over longer periods there is the possibility of it fluctuating significantly. This could affect the cost of your stage payments and final balance, which will be fixed in euros but not in Sterling. For peace of mind, consider forward purchasing all or some of your required euros through a currency specialist.
5) Spanish banks can provide mortgages for off-plan purchases but only once the property is completed and fully registered. Therefore, buyers must cover deposits and stage payments themselves. Buyers can get an approval in principle before completion or even signing an off-plan contract, but you should be prepared to update your application nearer the scheduled date of completion. Be aware that a mortgage will be based on the bank’s valuation at the point of completion, which may be different to the original purchase price that was agreed when the off-plan contract was signed.
6) On taking possession of your new property, make the developer aware of any faults or defects immediately – a process known as snagging. Examples could be windows or cupboards that don’t close properly, cracks in the new plaster, poorly fitted lights, problems with the plumbing or even mistakes with the interior layout. The developer should agree to rectify any issues within an agreed time-frame.
Sun Lawyers is experienced with helping foreign buyers complete off-plan purchases successfully, providing all the necessary legal protection throughout the entire process right through to post-completion.