Buying a new-build property in Spain is an attractive adventure for many foreigners. You choose a project, pay the deposits and look forward to completion. But what if the project is delayed or not finished? In some cases, you can cancel the purchase of the new construction in Spain and are entitled to a refund of the advances.
In this article, we explain step by step what happens in practice when you cancel the purchase of a Spanish new build, and how to effectively get your money back via the promoter's bank guarantee or insurer.
1. When are you entitled to a refund of your advance?
When buying a new build property in Spain, you usually pay advances to the promoter during construction. Spanish law (Ley de Ordenación de la Edificación) requires the promoter to secure these amounts through a bank guarantee or insurance policy, so that you are protected if the project is not delivered.
You have no right to refund when you cancel the purchase for reasons that are not legally justified. Consider, for example, divorce, family circumstances or the fact that you prefer another project. In this case, you will lose all or part of the advances already paid. Please refer to the penalty clauses in your contract with the promoter.
You basically have right of reimbursement Of advances paid when:
- the promoter cannot deliver the project, e.g. due to failure or force majeure, or;
- the contractual delivery date is significantly exceeded (often +/- one year, depending on your contract).
In that case, you can rescind the purchase contract and demand the repayment of your advances (with interest) through the guarantee taken out for you.
Caution: So the whole system of buyer protection in Spain hinges on a correct bank guarantee or insurance. Never pay a deposit without a bank guarantee and check that the bank account you deposit into is also the account mentioned in the guarantee contract.
Read more about the importance of a bank guarantee here.
2. Negotiating the terms of reimbursement
The first step in practice is a negotiation with the promoter. This involves discussing the concrete conditions:
- Exactly what amount will be refunded?
- Is interest added to the amount to be repaid?
- Are there any additional costs or damages that you charge? Have you suffered demonstrable damages due to the delay, such as additional rental costs? This may be part of the negotiation.
Although the buyer is legally strong, this process is rarely automatic. Proper negotiation can ensure that the refund is complete and without unnecessary delays. In this context, it is common to also inform the economic inspection through the official complaint forms.
If an agreement cannot be reached, you will be forced to start court proceedings. This is quite costly. In addition, depending on the workload of the courts, litigation can take years.
You then also have the option of suing the financial institution directly. You must then prove the default yourself (e.g. with the purchase contract and proof that the completion date has been exceeded). This is more complex and requires legal assistance.
3. Entering into a settlement agreement between buyer and promoter
After negotiations, a settlement agreement is usually drawn up between buyer and promoter.
That agreement contains the arrangements for:
- The amount and timing of the refund,
- the waiver of further claims, and
- the termination of the purchase agreement.
After signing the settlement agreement, the promoter is free to put the property back on the market. Of course, only when you have effectively recovered your advances.
4. Contacting the promoter's bank or insurer
The next step is to address the bank guarantee. The insurer or financial institution who issued the guarantee will be contacted to ensure the refund is effective.
At this stage, the buyer often has to sign a few more documents, such as a declaration that the guarantee is invoked and that the sale has formally ended. Only after this administrative step can the release of funds take place.
5. Effective repayment of advances
The way the money is eventually repaid depends on the type of guarantee the promoter has taken out. Two options exist:
- The financial institution deposits directly to the buyer, or
- The institution first pays the promoter, who then passes on the amount to the buyer.
In both cases, the bank guarantee or insurance policy is the key to a successful repayment. Once this process is completed, the buyer gets back his paid advances - with or without interest - and the promoter can resell the property.
What if the promoter does not have a bank guarantee? Are there any alternatives then?
Conclusion: cancel new construction in Spain
Although the legal protection in Spain is clear, in practice, the reimbursement of advances when a purchase is cancelled rarely happens automatically.
Promoters and financial institutions each have their own procedures and requirements, and without knowledge of Spanish law, the process can easily slow down.
At Confianz, we guide buyers step by step:
- negotiating with the promoter,
- drafting the settlement agreement, and
- the release of the bank guarantee or insurance policy.
This ensures that you actually receive the amount you are entitled to.
However, the most important conclusion is that you should make sure you buy your new build in Spain with bank guarantee or insurance. Do not make payments without a bank guarantee or insurance contract. Without a bank guarantee or insurance contract, you are a bird for the cat.
Read more about the Purchase process of a new building in Spain or listen to our podcast episode on the steps when buying on plan in Spain.
