Buying Off-Plan Property in Spain: Everything You Need to Know
Purchasing an off-plan property in Spain can be an exciting investment opportunity, especially with the limited stock in the resale market. However, it requires careful planning and due diligence to ensure a smooth process. In this blog, we’ll explore the main considerations for buying off-plan property, including costs, legal obligations and tips for protecting your investment.
Why Off-Plan Properties Are Popular
With limited resale properties available, off-plan developments have surged in popularity. Buying off-plan allows you to secure a brand-new property, often at a lower price during the early stages of development. It also provides the flexibility to choose designs and layouts that suit your needs.
Key Considerations When Buying Off-Plan
Purpose of Purchase
Decide whether the property will be for personal use, rental income, or a combination of both. This decision impacts the ownership structure (personal name vs. company name) and potential tax implications. Read our blog about buying a property in the name of a company.
Budgeting & Taxes
In Andalucía, resale properties incur a 7% transfer tax, while new builds have a 10% VAT plus 1.2% stamp duty.
In Costa Blanca, both resale and off-plan properties have a 10% tax, with an additional 1.2% stamp duty for new builds.
Stage payments are common for off-plan purchases, typically requiring 30% upfront and the balance upon completion.
Research the Developer
Investigate the developer’s reputation. Check previous projects for quality, timelines and customer satisfaction. Confirm that the developer has secured planning permission to avoid potential delays or legal issues.
Legal Guarantees
Spanish law mandates bank guarantees or insurance for off-plan payments. These protect your funds if the developer cannot complete the project. Ensure these guarantees are in place before making any payments.
Reviewing the Contract
Contracts for off-plan purchases differ significantly from resale agreements. Key clauses to review include:
- Penalties for missed payments.
- Compensation for delays in property delivery.
- Snagging clauses for addressing minor defects.
- Snagging and Long-Term Protection
Before completion, inspect the property for defects. Developers typically allow 15-30 days for snagging issues. Additionally, Spanish law requires a 10-year insurance policy to cover structural defects.
Community and Utility Setup
Be aware of initial setup costs for community fees and utility contracts. Unlike resale properties, off-plan buyers may face a delay in utility activation.
Holiday Rentals
Verify with the developer and local authorities whether holiday rentals are permitted. Increasing regulations by town halls may restrict rental activity in certain areas.
Spanish Will
Protect your investment by creating a Spanish will for your Spanish assets. This simplifies the inheritance process and ensures clarity in asset distribution.
Why Legal Advice Matters
Buying off-plan involves unique challenges. Collaborating with experienced legal professionals ensures your interests are protected at every stage, from reviewing contracts to checking planning permissions.
If you’re considering buying off-plan property in Spain, our team is here to guide you. Download our comprehensive cost breakdown, or contact us for personalised advice on ownership structures, legal safeguards and more.
