Purchase of housing in construction

Purchase of housing in construction

In Spain when facing the sale of properties that are under construction it is important for the buyer to know the guarantees that the law establishes for cases of paralysation of works or when the construction does not reach completion, even for the case in which works do not even start, situations that occurred during the last real estate crisis.

When signing the contract of sale, the buyer delivers a part of the price (payment on account), whose return must be guaranteed in the case that the construction does not start or is not completed. This guarantee must be a bank guarantee or an insurance.

This is what the current regulations establish: Law 38/1999 on Building Regulation dated November 5 (additional provision 1) provides that the payment of advance amounts by the buyer to the developers of the building will be covered by insurance to compensate the breach of contract. Law 57/1968, of July 27, guarantees to buyers of future homes the return of the amounts that had been anticipated, whether the construction had not started or if it had not come to a good end, the guarantee can be provided by means of endorsement, as per insurance contract.

These obligations are imperative for the seller-developer, as well as an inalienable right for the buyer. In addition, in the delivery of amounts must be required proof that the amount has been deposited in a special bank account that can only be used for the construction of the project in question.

Other relevant aspects that must be taken into account when buying a house in construction or floor plan are the following:

  • Information about the seller: Check that the developer is the owner of the lot on which the house will be built;that the developer has the building license of the City Council; and check that the promoter company is registered in the Mercantile Registry, the data of its managers and administrators, registered office and CIF.
  • Request theplans of the future home, exact location within the promotion, the usable area and the memory of qualities that should detail the materials used.
  • The contract must specify thefinal price of the home, specifying whether it includes 10% VAT that is levied on the first transmissions or if it must be added.
  • The contract must also include theform of payment and term of delivery of the home. Normally, a quota system is established before handing over the keys (usually 20% of the total price is advanced and the rest is delivered to the signature of the public deed of purchase).
  • It must also be anticipated what occurs with the reservation if the buyer decides not to buy the house or what happens if the delivery of the house is delayed, if we are entitled to some type of compensation, or what rights we have if the house finally does not arrive to be built.
  • Contracts may include the possibility of introducing modifications to the dwelling, which depending on its entity or importance must be agreed with the future owner.

At the end of the work and before handing over the keys, it must be verified that the house is in the agreed conditions and carefully check the finishes of the property and that everything complies with the agreed-upon quality report, as well as ensuring that the home has a first occupation license, which must be delivered to the buyer.

Finally, it is important to carefully analyse any private documents that are signed, making sure that the contracts do not contain abusive clauses that could harm the buyer.

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