In a series of previous articles on buying new construction in Spain, we already highlighted the importance of the bank guarantee. This article explains what you can do if you lose money on a buy on plan.
The issue: buying a new building in Spain
If you buy a property on plan in Belgium, you first become the owner of the land. Then you start making payments to the contractor or promoter as the works progress. This way, you are protected by the right of accession: you become the owner of all constructions on your land.
In Spain, the buying process is different. You start with the interim payments first. Only after completion do you become the owner of both the land and the property. Moreover, the payments do not always coincide with the progress of the works. Therefore, it is necessary to have a bank guarantee to safeguard your interim payments.
From a legal point of view, a bank guarantee is an essential part of the purchase agreement. This means that you can cancel the sale if there is no bank guarantee. You will then be entitled to a refund of all your interim payments (including reservation amount), plus interest.
From when can I call on the bank guarantee?
You can reclaim your interim payments when the developer has not completed the property. This is for example in case of bankruptcy of the promoter, late completion or if the works were never started. In theory, you can invoke the bank guarantee from the moment the contractual completion date has passed and provided you act in good faith. Good faith is where the shoe pinches. You must have good reason to believe that the property will manifestly be delivered late or not at all. In practice, it is therefore best to allow for a reasonable period of 6 to 9 months after the deadline for delivery.
Who do I speak to?
Legal action against the promoter is usually of little use. They may still be insolvent and unable to reimburse you. You can sue the insurer or financial institution directly, regardless of the developer's financial situation. The bank guarantee obliges them to refund your interim payments to the developer.
Under certain conditions, repayment by banks is even possible without a bank guarantee. This is because of the joint and several liability between the developer and the bank. You then appeal to the developer's bank; the bank to which you deposited the funds at the time.
Do you have any questions about buying new construction in Spain? Then feel free to contact on.