What Does Buying Off-Plan Mean?
Buying off-plan (sobre plano) means purchasing a property before or during construction. You buy based on plans, renders, and a model apartment. The property may not be delivered for 12-24 months. In Spain, off-plan buying offers potential price advantages and the chance to customise finishes, but it also carries specific risks that require careful legal protection.
Why Buy Off-Plan?
- Lower entry price: Developers often sell early units at 5-15% below the projected completion price to fund construction.
- Customisation: You can often choose kitchen finishes, bathroom tiles, flooring, and sometimes layout modifications.
- Modern standards: New builds must comply with current energy efficiency regulations (CTE 2019), meaning lower running costs.
- Staged payments: You pay in installments during construction, not all at once.
- Capital appreciation: If the market rises during construction, your property may be worth more on delivery than you paid.
Payment Structure
A typical off-plan payment schedule in Spain:
- Reservation: 3,000-10,000 EUR
- On signing the contract: 20-30% of purchase price (minus reservation)
- During construction: 10-20% in staged payments linked to construction milestones
- On completion (key handover): 50-70% of the purchase price
The final payment is often covered by a mortgage. Get pre-approval early so there are no surprises at delivery.
Legal Protections: Bank Guarantees (Ley 38/1999)
This is the most critical aspect of buying off-plan in Spain. Under Spanish law, the developer must provide a bank guarantee (aval bancario) or insurance policy for every payment you make during construction. If the developer goes bankrupt or fails to deliver the property, these guarantees ensure you get your money back.
Since the 2008 financial crisis, this law has been strengthened. However, enforcement varies. Your lawyer must:
- Verify that each payment is covered by an individual bank guarantee
- Confirm the guarantees are issued by a reputable Spanish bank
- Keep copies of all guarantee documents
- Never let you pay into a non-guaranteed account
Due Diligence on the Developer
Before committing, your lawyer should check:
- Building licence: Does the developer have a valid licencia de obra? Without it, construction is illegal.
- Land ownership: Does the developer actually own the land?
- Financial health: Is the developer solvent? Check the Registro Mercantil (commercial registry) for filed accounts.
- Track record: Has the developer completed similar projects? Visit their previous developments if possible.
- Insurance: Is there a 10-year structural warranty (seguro decenal) in place?
The Contract: What to Check
Off-plan contracts are drafted by the developer's lawyers. They favour the developer. Your lawyer should review and negotiate:
- Delivery date and penalties for late delivery (at least 1% per month of delay is standard)
- Specification of materials, finishes, and brands
- Conditions for accepting or rejecting the property on delivery
- Clauses allowing reasonable tolerance in floor area (typically 2-3%)
- Refund terms if you need to withdraw
Taxes on Off-Plan Property
Off-plan purchases from a developer are subject to IVA (VAT) at 10%, not ITP (transfer tax at 7%). You also pay AJD (stamp duty) at 1.2% in Andalucia. This makes the total tax burden higher than resale property. Use our free calculator to estimate your total costs for new-build versus resale.
Risks to Be Aware Of
- Construction delays: Very common. Budget 3-6 months beyond the stated delivery date.
- Quality issues: The finished product may not match the showroom. Document everything in writing.
- Market risk: If prices fall during construction, you may owe more than the property is worth on delivery.
- Developer insolvency: Even with bank guarantees, recovery can take years.
Snagging: Inspecting Before Handover
Before accepting delivery, conduct a thorough snagging inspection. Check for construction defects, incomplete finishes, and anything that does not match the specification. You have the right to withhold final payment until defects are rectified. Hire a professional snagging surveyor for 300-500 EUR. It is money well spent.