The purchase of property “off-plan” —that is, acquiring a dwelling that has not yet been built or is still under construction— is a common practice in the Spanish real estate market, particularly in times of urban expansion. It involves entering into a contract of sale with a developer or builder for a property that will be delivered at a future date.
While this type of transaction offers certain advantages to purchasers, it also entails a number of legal and practical risks. The following article examines the essential legal aspects of off-plan purchases under current Spanish law.
The legal regime governing off-plan property sales in Spain is primarily set out in:
Law 38/1999, of 5 November, on Building Regulation (Ley de Ordenación de la Edificación – “LOE”).
Royal Legislative Decree 1/2007, approving the Consolidated Text of the General Law for the Protection of Consumers and Users.
And, generally, the provisions of the Spanish Civil Code, particularly those relating to contractual obligations and termination for breach.
The off-plan developer is subject to several key legal obligations
Guarantee of advance payments: Developers must secure all amounts paid by purchasers before or during construction through either a bank guarantee or an insurance policy (surety bond).
This guarantee must ensure the refund of all sums paid on account, plus statutory interest, in the event that construction does not commence or delivery does not take place within the agreed timeframe.
The guarantee must be issued individually in favour of each purchaser and expressly referenced in the contract.
It is essential that your legal representative in the off-plan sale ensures this point and that t he guarantee is issued and withdrawn or the insurance policy is duly signed.
Special account requirement: All advance payments received must be deposited into a special, segregated bank account used exclusively to finance construction of the specific project. We must request a bank certificate for the special account specifying the name of the developer and the project being developed. This is important because the developer can only use your payments for the development of that specific project. In addition, the bank must authorize each payment and ensure that there is no misappropriation of funds.
Information and transparency duties: The developer must provide detailed and accurate information to the purchaser —including technical specifications, building plans, construction licenses, delivery schedules, and total price— as required by Royal Decree 515/1989.
This is usually done through a document called a DIA (“Documento de informacion Abreviada”).
Advantages of Purchasing Off-Plan
Off-plan acquisitions offer a number of potential benefits:
• More competitive pricing: Buyers usually obtain properties at lower prices than completed units, as they help finance the project from its early stages.
• Customisation options: Purchasers often have the opportunity to choose ï¬nishes or make minor modifications during construction.
• Capital appreciation: In a rising market, the property’s value may increase before completion, generating a potential gain.
• Financial planning: Payments are typically made in instalments during construction, allowing better cash-flow management.
Risks and Potential Pitfalls
However, these transactions also entail significant risks, particularly when the statutory guarantees are not properly implemented.
• Delays or construction stoppages: If the developer fails to complete or deliver the project on time, the buyer may face lengthy recovery procedures —especially if no valid guarantee or bond was issued.
• Absence or defect of guarantees: Failure to provide a valid bank guarantee or insurance policy, contrary to Law 20/2015, leaves the purchaser exposed to financial loss.
• Unilateral changes to specifications: Unauthorized modifications to plans or materials may constitute contractual breaches and lead to disputes.
• Developer insolvency: If the developer enters insolvency proceedings, buyers without properly individualised guarantees may rank only as ordinary creditors and risk losing their deposits.
Recommendations for Purchasers
Before signing an off-plan purchase agreement, buyers are strongly advised to:
Verify that a valid building license and approved project exists.
Ensure that an individual guarantee or insurance policy has been issued and remains in force.
Obtain a Land Registry extract (nota simple) to confirm ownership of the land.
Include clear contractual clauses regarding delivery dates and penalties for delay.
Seek independent legal advice from a lawyer specialised in real estate law before making any payment.
Purchasing off-plan property in Spain can be an attractive and legitimate option for acquiring new housing at advantageous conditions. Nevertheless, such transactions demand caution and careful legal due diligence.
Spanish legislation provides robust consumer protection provided that the developer duly complies with its obligations regarding guarantees and transparency. Engaging a lawyer specialized in Spanish real estate law is therefore essential to minimize risk
and ensure that the transaction proceeds securely and in full compliance with applicable law.
At MARBELLA SOLICITORS, we have specialised lawyers in off-plan transactions and who will be delighted to assist you and help you through the entire purchase process, from the reservation to the very end and even beyond, that is: annual tax returns, Spanish Will, etc.
Our Law Office is specialized in property and tax Law, so we are experts in this area of the Spanish Law, with a large experience in conveyancing and purchase/sale transactions. All our lawyers are qualified solicitors, duly registered with the Bar Association. We are based in Costa del Sol with 6 offices along the coast.