If a Spanish property developer misses the completion deadline or goes bankrupt, as a buyer you are entitled to a full refund of your deposits including statutory interest. This right is guaranteed by the bank guarantee or an insurance policy, where the financial institution can be held directly liable if the construction promoter defaults.
Read more about the buying process of new construction in Spain.
Why buying new construction in Spain has a unique risk profile
When buying a property on plan in Spain, the legal process differs fundamentally from the Belgian Breyne Act. In Belgium, you become the owner of the land immediately; in Spain, the transfer of ownership of both the land and the construction only takes place when the deed is executed after full completion.
Between the initial deposit and the final delivery, you are financially vulnerable.
"In the Spanish property market, the bank guarantee (Aval Bancario) not an option, but a legal necessity," argues Glenn Janssens, legal counsel at Confianz.
Without these bank guarantee. you have no security over your capital if the promoter goes bankrupt. The bank guarantee is an essential part of the sale contract; if it is missing, you have the right to cancel the sale immediately and demand your money back.
When can you effectively call in the bank guarantee?
You can claim your interim payments once the developer fails to meet its contractual obligations. This covers situations such as:
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Bankruptcy of the construction promoter.
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Final cessation of structures.
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Significant delay (exceeding the contractual completion date).
Although you are legally entitled to action as soon as the deadline passes, the 'good faith' factor is crucial in Spanish courts. In practice, we apply a reasonable period of 6 to 9 months after the final completion date before any proceedings are initiated, unless there is manifest evidence that construction will never be completed.
Who is liable? The switch to the bank or insurer
When a construction project stalls, legal action against the promoter itself is often unfruitful due to insolvency. However, legislation protects you through the joint and several liability of financial institutions.
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Direct claim: You appeal directly to the bank or insurer that issued the guarantee. They are obliged to pay out, regardless of the developer's financial status.
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No individual guarantee? Even if you do not possess a physical guarantee certificate, the developer's bank may be liable. If you deposited funds in a special account with the promoter's bank, that bank had a duty to oversee the existence of a blanket guarantee policy.
Here you will find more information on how to rely on a bank guarantee in practice.
Frequently asked questions about bank guarantees in Spain (FAQ)
What should I do if my Spanish promoter goes bankrupt? Collect all payment receipts and your purchase contract immediately. Check whether you have received an individual bank guarantee. If not, identify the bank to which you deposited the funds; they may still be liable for repayment under Spanish law.
Can I get my money back in case of a small construction delay? A minimum delay of a few weeks is usually insufficient to rescind the sale. Courts require a "substantial default". Usually, a delay of 9 months or more is considered substantial enough to successfully claim the bank guarantee.
What costs will I be refunded when invoking the warranty? You are entitled to the full principal amount of all interim payments (including the reservation amount). In addition, this amount will be increased by the statutory interest from the time of payment until the effective refund.
Is a bank guarantee mandatory for new builds in Spain? Yes, according to Spanish law (LOE - Ley de Ordenación de la Edificación), promoters are legally obliged to guarantee down payments from buyers through a banking institution or insurance company once the building permit is granted.
About the author: Glenn Janssens is a lawyer specialising in Spanish real estate transactions and tax regulations. Since 2017, he has been helping Belgian and Dutch individuals and entrepreneurs to safely purchase and structure real estate in Spain. He guides files from A to Z: from due diligence, ownership and tax control to estate planning and optimisation for residents and non-residents. Thanks to his years of experience, hundreds of handled files and focus on transparent communication, Glenn makes complex Spanish legislation understandable and practically applicable for every property buyer.
