Buying a property that hasn’t been built yet comes with real risks — but Spain has strong legal protections specifically designed around off-plan purchases, largely in response to problems during the 2008 financial crisis. Here’s what you need to know.
What “Off-Plan” Means
Buying off-plan (sobre plano) means purchasing a property directly from a developer before, or during, construction — based on architectural plans and a show home rather than the finished product. Payments are typically made in stages tied to construction milestones, rather than one lump sum at completion.
The Main Risks
- Developer insolvency before completion, potentially losing staged payments already made
- Construction delays, sometimes significant, affecting your plans and any related financing timeline
- Final product differing from plans in finish quality or minor specifications
- Licensing or planning issues discovered after you’ve already committed funds
The Legal Protections That Mitigate These Risks
- Mandatory bank guarantees (aval bancario) or insurance — Spanish law (Law 20/2015 and related regulations) requires developers to guarantee staged payments through a bank guarantee or insurance policy, meaning your money is protected and refundable if the development isn’t completed
- Staged payments held in a dedicated account — legitimate developers hold buyer deposits in a special account tied to the specific development, separate from general company funds
- Specific completion date and penalty clauses — a properly drafted purchase contract should include a firm completion date and financial penalties for the developer if it’s missed
How to Protect Yourself Further
- Verify the bank guarantee is real — your lawyer should confirm the guarantee exists and covers your specific payments, not just take the developer’s word for it
- Research the developer’s track record — completed projects, reputation, and financial stability
- Use an independent lawyer to review the purchase contract before signing, not one recommended by the developer
- Confirm all planning permissions and licenses are in place for the specific development
- Visit the site during construction if possible, rather than relying solely on developer updates
Tax Treatment
Off-plan/new-build purchases incur VAT (typically 10%) plus Stamp Duty, rather than the ITP applied to resale properties — a different tax structure worth factoring into your overall budget.
Frequently Asked Questions
What happens if the developer goes bankrupt mid-construction?
With a valid bank guarantee in place, you’re entitled to recover your staged payments — this is precisely the scenario the guarantee requirement exists to protect against.
Can I get a mortgage for an off-plan property?
Yes, though the mortgage is typically drawn down at completion rather than funding the staged construction payments, which you generally need to cover from your own funds as they fall due.
Is off-plan cheaper than buying a finished resale property?
Often somewhat cheaper per square meter for comparable quality, partly compensating buyers for taking on construction and timeline risk, though this varies significantly by development and location.