BUYING OFF-PLAN

Buying off-plan is a common way to buy new property in Spain. There can be positives with this route of buying, particularly if you are buying as an investment and you have little intention of actually living in the property when it is finished. You may even want to become a property speculator and I would be the first to say that there is nothing wrong with that. Everyone is entitled to make a living. Speculators often sell unfinished buildings during the period that the building work is progressing. If the speculator has bought before building has even started and all that had been bought was an artist’s impression the prices can appear to be very low at this stage in the process. When the property is half completed it can often be sold on at a higher price and that is before the speculator has even paid the full price of the new property. There are even adverts in the quality English Sunday newspapers telling potential speculators how they can profit from buying property in the Spanish market without ever paying the full price for the property. This is fine if you are in business to make money from buying and selling property.

However, if, like us, you are looking for your dream home, it is a different matter. When you make your decision to buy off-plan you will be essentially buying an artist’s impression and a drawing of the floor plan of your future apartment or house. Would you consider paying considerably more than £100,000 for a painting? This is what you are in effect doing. In the process you are also indirectly funding the building work as the building progresses and proving to the bank which funds the developer that the properties are actually selling. The banks funding the development will therefore leave the funding in place to allow for completion. Any money you pay to the developer as a deposit and as staged payments should, by law, be held in a separate bank account and you should ask your Spanish lawyer to check this point.

In addition, when buying off-plan, you do not know whether or not the building will have defects – and many new buildings do. The other potential problem is that of the actual delivery date of the property. In Spain most new properties are delivered late and sometimes very late – even up to a year behind schedule. This is despite the fact that Spanish law states that a purchase contract must specify a delivery date. You can, of course, negotiate a late delivery penalty clause whereby the developer will pay you an agreed sum for every day that building work exceeds the agreed date. However, many sellers will simply ignore this or offer you your money back as a gesture of goodwill.

What happens if delivery is late?

By this stage your money will have helped indirectly to fund the building programme and what you now want is the property not your money back. The developers may actually be only too happy to offer you a refund since they know that the property is now worth more than it was when you first entered into the off-plan agreement so if you pull out they can sell it at a higher price. The developer will often get around the problem of late delivery by passing the buck to the local town hall. Before anyone can move in the new property must have a First Occupation License, la licencia de primera ocupacion. Currently there are properties under construction near to us where this license will not be granted by the town hall until the developers return the access roads to the condition they were in before building started, since the builders have wreaked havoc on the roads, pavements and drains. Even if these apartment blocks are finished and ready for occupation not one single person can move in. Should you find yourself in such a situation the developer may blame the local town hall rather than telling you that it is because of their actions that the local town hall has refused the license.

Illegal occupation

There have also been occasions when new buyers have moved unofficially (and illegally!) into the new property before this license has been granted. Some of these new residents have continued to use the developers’ electricity and water supply for as long as a year until all the paperwork has been completed. The developers often encourage this action.

Your money

You must also ensure that the money you pay up-front is in fact paid into a separate bank account covered by an insurance policy. There have been occasions in the past when people have bought off-plan and the builder has gone bankrupt, taking clients’ money with him. Should the builder go bankrupt you are entitled to a refund of all the money you have paid plus interest.

Disadvantages of off-plan purchase

Having had one unfortunate experience with an aborted off-plan purchase I personally would never consider buying in this way (remember our first case history). There are other disadvantages to off-plan purchasing. Among these are the fact that the communal gardens in an urbanisation will take years to be at their best. There may be no swimming pool when you first move into your dream property. The community charge is not actually set until a Board of Management has been appointed so you have no way of knowing what your overheads might be. You cannot talk to neighbours who already live in the development to ask if there are problems with noise transmission between floors or through the walls. You have no way of knowing whether the development will be primarily residential or primarily holiday homes or a mixture of both. If you are moving into a large development, unless you are buying in the final phase you may end up living on a building site for several years until the development is completed.

When you inspect the prospective property the developer must show you the plans of the buildings and the gardens together with a detailed specification of the building materials to be used. All this should be in your contract and if the developer does not match the contract details the law is on your side – or should be.

By law all information contained in advertising materials must be correct. If a pool is shown on the plan but does not materialise you have redress in law.

You must ensure that the developer is responsible for a tax called the plus valia, a municipal tax payable on the increased value of the property and the land after completion – you should not be liable for this. It is the developer who is making the profit so he should pay the taxes, not you.

If the developer tries to charge you a cancellation fee for a mortgage which you do not want or need and have not agreed to he is out of line and you can refuse to pay.

When you have signed the contract and agreed to make staged payments these must be paid by the date stipulated otherwise the vendor has the right to terminate the contract and you could lose all the money you have already paid. The property will then be re-sold to another purchaser – probably at a higher price.

Should you be considering an off-plan purchase then please take note of all the above points. Personally I think it is a very foolish way to buy a property. Resale properties make much more sense to my mind since you can actually see what you are buying and talk to neighbours. You can also see if there have been any

problems with the quality of construction over the years that your new purchase has existed. Therefore you are less likely to make a terrible mistake.