INFORMATION ABOUT BUYING A NEW PROPERTY OFF PLAN OR DURING CONSTRUCTION
Many off plan buyers were severely burnt before, during and after the property crash in Spain however it seems as if off plan purchases are back in vogue.
Despite the historical problems as long as you are cautious and ensure that the developer is reputable, the development has a building license and your payments are covered by a bank guarantee, buying off plan does have its benefits.
BENEFITS OF BUYING OFF PLAN:
- Off plan prices are generally lower than completed projects
- Early buyers have their pick of the best plots / units
- Payments can be staggered over a number of months
- Spanish property prices are expected to increase over the next 12 to 18 months
- Buyers have the possibility of choosing individual fixtures and fittings, floor tiles, bathroom suites, kitchens etc. In certain circumstances, it may even be possible to redesign the layout of the proposed project.
RESERVATION AND DEPOSITS
Once you have found your perfect property and are certain you want to go ahead with a purchase you will be required to pay a deposit to the developer to reserve the property you have selected until the private purchase contract is signed.
The initial deposit is normally between 3000 euros and 6000 euros for an apartment but can be as much as 50,000 euros to 100,000 euros for a large Villa.
This deposit is normally non refundable and if you decide not to go ahead with the purchase you are likely to lose the money.
After the initial reservation the purchase contract is generally signed within 14 days and you will be required to make the first of the advanced payments, which can be anything from 10% to 30% depending on the agreed payment schedule.
For your protection any amounts paid to the developer in advance are legally required to be GUARANTEED by the developer either through a bank guarantee or an insurance policy.
The developer is required to give you a document proving the existence of a bank guarantee or the policy number and it should form part of the private contract.
*It is important to check with your lawyer that the guarantee exists and your money is protected before you hand over any money.
PRIVATE PURCHASE CONTRACTS (PPC)
The PPC is the contract between you the buyer and the developer who is the seller.
Your lawyer must check that the Private Purchase Contract includes the following.
- Details of the Bank Guarantee or Insurance policy
- Details of the developers dedicated bank account for all payments
- Confirmation that the developer has been granted a building licence
- Full details of the project and the property you have agreed to purchase
- The building specifications including materials etc
- Fill plans of both your property and the development
- Accurate and clear description of the property and also the development including communal areas and amenities together with the developers advertising material
- The price of the property and what is included i.e. garage, storeroom
- The property taxes and who is required to pay them
- The payment schedule including dates for payments
- The agreed completion date
- Penalty clauses should the developer fail to complete the project on time