Before making any non-refundable payments you will also need information on the following issues:
You need to be very clear about the payment terms. How much do have to pay, when, and corresponding to what on-site build progress? You will also need to know the complete details of the bank account to which payments should be made. The following table explains the different types of payments.
|Reserve||3,000 to 6,000 Euros|
|Private sale contract||20% to 30% of the price (plus VAT @ 7% and less the reserve payment already made).|
|Other stage payments||It all depends upon the promoter and the type of property you are buying. Many promoters do not ask for any other payments beyond the initial one of say 25% until completion, when the remaining 75% plus VAT becomes due. Other promoters may ask for up to 50% or 75% to be paid in stages during construction progress, with the remainder settled at the end.|
|Final payment at signing of public deeds.||Outstanding amounts are paid at the time of signing the public deeds of sale before Notary.|
Developers are obliged by Spanish law to insure your stage payments and keep them in a separate account from working capital. This is to ensure that, should the developer fail before completing your property, you will not lose the money you have already paid. Though it is mandatory I know of developers who do not comply with this law as it represents an extra financial burden for them. Do not buy off plan from a developer who cannot demonstrate that your stage payments are insured.
Many developers arrange a mortgage that you have the option of taking over. If this is the case you will need full details as to the terms and conditions of the mortgage. Note that you are not obliged to take over the mortgage, though doing so will probably save you some arrangement fees. However this potential saving needs to be evaluated in terms of the overall mortgage. Saving a few hundred Euros in arrangement fees but paying dearly over the rest of the mortgage’s lifetime isn’t an ideal solution. Compare the mortgage with other offers and then make a decision. If you don’t take the mortgage offered with the property the developer would probably have to pay some cancellation fees. You will probably not have to take this decision until much later in the process, when you come to take possession.
If the reservation deposit is non-refundable then before signing anything you will need a commitment from the developer as to delivery dates and penalties, if any, should they not be met. I would also ask the developer what procedures will be used to keep you informed of construction progress. Once again this question will probably be met with a look of astonishment but that doesn’t mean to say you shouldn’t ask. After all how hard is it for a developer to email a monthly progress report (with milestones signed off by an architect) plus photos to buyers? The more demanding buyers become, the quicker developers will have to improve to meet these demands.
Be sure you understand exactly what communal facilities will be available to you as an owner of property on the development, and the terms and conditions of using those facilities.
Ask the developer to explain the status of planning permission for the property in question. My advice is avoid any non-refundable payments on any property that doesn’t yet have planning permission. A good lawyer can easily check on planning permission, even in a place like Marbella where heinously corrupt local politicians have granted illegal planning permission to many developments.
In all likelihood you will sign 2 private contracts (not including the public deed of sale) when you buy a property off plan from a developer in Spain. First of all a reserve contract to accompany the reserve payment, followed 30 days or so later by a private sale contract and a more substantial payment. Before signing either of these contracts you should ask for an example copy of each that you can study. Don’t sign any contracts or make any payments before you understand exactly what you are committing to and before carrying out due diligence using an independent lawyer.
© Mark Stucklin (Spanish Property Insight)