Buying off-plan in Spain: process, risks and buyer protections

Off-plan buying — purchasing a property before or during construction — has been a defining feature of the Costa del Sol market in recent years. It offers the opportunity to acquire a newly built home at a price agreed before completion, with modern specifications and the protections that Spanish law attaches to new construction. It also carries risks that are structurally different from buying a finished resale property. Understanding the process, the legal safeguards, the cost structure and the red flags is essential before committing to any off-plan purchase.

The off-plan process: stage by stage

Reservation and initial deposit

Off-plan purchases typically begin with a reservation agreement (contrato de reserva), signed alongside a reservation deposit. There is no standard figure: the amount varies widely from one development to another. What matters far more than the headline number is what the reservation terms actually say — so review them carefully before paying. Confirm whether the deposit is refundable during the legal due diligence period, whether it is forfeited if you later withdraw, whether it is conditional on obtaining mortgage finance, exactly who it is paid to, and whether it is deducted from the final price. Before signing anything or handing over any money, instruct an independent Spanish property lawyer.

One point deserves particular attention. The legal regime that obliges a developer to guarantee the return of your money generally applies from the moment the building licence (licencia de edificación) is obtained. A reservation payment handed over before that licence exists is not automatically covered by the statutory advance-payment protection, and needs specific review by your lawyer before it is paid.

Private purchase contract and stage payments

The main document is the contrato privado de compraventa — the private purchase contract that sets out the full terms: price, specification, completion date, penalty clauses and the guarantee arrangements protecting your payments. Stage payments typically follow a structure with an initial percentage on signing the private contract and further tranches linked to construction milestones, with the balance paid at completion (escritura) before a notary. The exact structure and timing vary by developer and should be set out clearly in the contract.

Completion and handover

At practical completion, the developer notifies buyers that the property is ready for handover. Before the final payment is made at the notary, buyers should carry out a thorough snagging inspection — a room-by-room check of all finishes, fittings and systems against the agreed specification. Any defect identified should be documented precisely, classified by severity, and tied to an agreed timetable for remedy, typically recorded in a handover snagging list agreed between buyer and developer before you sign the final completion deed.

Note that this buyer-and-developer snagging record is not the same as the acta de recepción under the LOE, which is the formal handover of the completed works from the constructor (builder) to the promotor (developer). The two documents serve different purposes and involve different parties; your lawyer can explain how each applies to your purchase.

How your stage payments are protected

Spanish law requires developers to guarantee the return of amounts paid in advance by buyers before completion, against the risk of the home not being built or not being delivered. This protection takes one of two forms: a bank guarantee (aval bancario) or a surety insurance policy (seguro de caución). Either instrument must be provided by a bank or insurer duly authorised to operate in Spain, and should cover the advance amounts paid, plus applicable taxes and legal interest.

As noted above, this obligation generally applies from the moment the building licence is obtained. The guarantee should be individual — identifying you as the buyer and your specific home — rather than a blanket facility at project level. The essential points your lawyer will check are that the guarantee names the buyer and the property, that it covers the advance payments plus IVA and legal interest, that it remains in force, and that the cumulative payments you make never exceed the amount covered.

The law also requires advance payments to be deposited into a special account, kept separate from the developer’s other funds and used only for the construction. This special account does not have to be held at the same institution that issues the guarantee, and the guarantee itself may come from an insurer rather than a bank. In practice, this means payments should be made exclusively to the special account identified in the contract and in the guarantee documentation — never to a general account or a third party. Verify the beneficiary account and the guarantee before making any payment; your lawyer will confirm this at each stage.

The guarantee is not, however, an automatic payout that triggers the moment a deadline slips. As a general framework — to be confirmed with your lawyer for your specific contract — if the developer fails to complete within the agreed period, you may (depending on the contract and the law) terminate and reclaim the amounts advanced plus legal interest, or agree a documented extension. Enforcing the guarantee typically requires a formal, provable demand (requerimiento fehaciente) to the developer, followed by a period — of the order of 30 days — in which the developer does not return the money. Buyers should also be aware that a guarantee can lapse if roughly two years pass from the developer’s breach without a claim being made, so timely legal advice matters.

Costs and taxes for off-plan purchases

Off-plan purchases from a developer generally attract a different tax structure from resale transactions. Where the sale is a first delivery of a dwelling that is subject to and not exempt from IVA, the following broad framework applies:

Cost	Rate / basis	Notes
VAT (IVA)	10%	Standard residential rate on a first delivery subject to, and not exempt from, IVA
Stamp duty (AJD)	~1.2%	Andalucía rate; calculated on the declared deed value
Notary fees	Regulated scale	Set by an official tariff that varies with the document, value and complexity
Land registry	Regulated scale	Official tariff for registering the new title
Legal fees	By quotation	Vary by firm and scope; request a written quote listing services and taxes included
Total additional costs	~12–13% (approx.)	Indicative only; the actual total varies by property and circumstances

IVA generally applies to each stage payment as it is made (not only at completion), so budget for the tax on each tranche. Your lawyer will confirm the correct invoicing structure and the figures that apply to your purchase.

Construction responsibilities under the LOE

The Ley de Ordenación de la Edificación (LOE, Ley 38/1999) establishes liability periods for the various parties involved in a building — the builder, the project designer, the technical direction and the developer, among others. These are legal responsibilities of the building agents, not simply a warranty offered by the developer:

• 1 year for defects in finishes and fittings (defectos de terminación o acabado)
• 3 years for defects in building elements that affect habitability — such as damp, waterproofing, insulation and installations
• 10 years for defects affecting the structural safety of the building (cimentación, soportes, vigas, forjados, muros de carga u otros elementos estructurales)

Depending on the cause of the damage, responsibility may fall on the developer and on the responsible agents — builder, designer, installer or technical direction — and in some cases liability can be shared jointly. Claims for defects may therefore be directed at the developer and the responsible agents according to the origin of the damage, without prejudice to your contractual rights against the seller.

Two timing points are important. Actions under the LOE for these defects generally prescribe two years from the moment the damage appears. And the 1, 3 and 10-year periods run from the recepción de la obra — the handover of the works from builder to developer — not from the date of your purchase deed. Because these periods and deadlines are technical, report any defect in writing as soon as it is identified, keep all records, and take advice promptly.

It is worth distinguishing three different things that are easily confused: the legal 1/3/10-year responsibilities of the building agents described above; the mandatory ten-year structural insurance (seguro decenal), which is the insurance generally required by law for residential buildings; and any commercial warranties a developer may choose to offer. Insurance covering the one and three-year periods can be required by regulation but should not be assumed to be automatic; the decennial structural cover is the one imposed as a general rule.

Risks to understand before signing

Off-plan carries risks that differ materially from buying a finished property:

• Completion delays: construction delays are common. Check the contract for penalty clauses if the developer fails to complete on time, and understand your rights if completion runs beyond the contracted date — commonly the right to terminate and recover the amounts advanced plus legal interest, subject to the contract and the law.
• Specification changes: contracts may allow developers to substitute materials or finishes. Ensure the specification is detailed in the contract and any permitted substitutions are tightly defined, or require your prior consent.
• Developer track record: research the developer’s history, financial standing and previously completed projects. A developer with an established record of delivered projects may carry less execution risk than an unknown entity, though past delivery is not a guarantee of future performance and does not remove the need for full legal checks.
• Market movement risk: the market may move either way between reservation and completion. Off-plan buyers bear that risk, and property values are not guaranteed to rise.
• Mortgage risk: lenders will appraise the property at completion, not at the time of reservation. If valuations have fallen, the loan amount may be lower than expected.

Taken together, these points call for a balanced view. A properly structured guarantee substantially reduces the risk of losing the protected advance payments if the home is not delivered — but it does not eliminate delays, disputes over specification and finishes, mortgage-financing risk, the costs of enforcing your rights, or market risk. Off-plan can be an excellent route to a modern home, provided it is approached with independent professional advice at every stage.

Pros and cons

Frequently asked questions

What happens if the developer goes into administration before completing the project?

If your advance payments are covered by a valid, individual bank guarantee or surety insurance policy, you can generally claim the amounts advanced, plus applicable taxes and legal interest, from the guarantor. In practice this is not an instant payout: it typically requires a formal, provable demand and your lawyer submitting a claim, and it is subject to the terms of the guarantee and the applicable time limits. This is precisely why verifying the existence and validity of your guarantee — and making payments only into the designated special account — before each payment is so important.

Can I sell my off-plan unit before completion?

In some cases, yes — developers may permit a cesión de contrato (assignment of the purchase contract) to a third party before completion. This usually requires the developer’s consent and may be subject to an assignment fee. The tax treatment of an assignment can be complex, so specialist advice is essential before proceeding. Not all contracts permit assignment, and some restrict it entirely.

What documents should my lawyer check before I sign the private contract?

A thorough legal review generally covers, among other items: the nota simple of the plot and the developer’s ownership; a valid building licence (licencia de obras) and the approved project and specification (memoria de calidades); the buyer information documentation for the development; the special account and the individual guarantee protecting your payments; any charges or mortgages on the land and how they will be cancelled; the horizontal division and the declaration of new works (división horizontal and declaración de obra nueva); the final works certificate (certificado final de obra); the applicable occupation authorisation; the decennial structural insurance; the Building Book (Libro del Edificio); the energy performance certificate; and the planning status of the land. Your lawyer will tailor the list to the specific development.

What do I need before I can legally occupy the property?

A completed new build needs the appropriate occupation authorisation before it can be lawfully occupied and connected to services. In Andalucía, the occupation of finished buildings is now generally handled through a declaración responsable de ocupación (a responsible declaration), accompanied by the final works certificate and the required technical documentation, rather than necessarily an express first-occupation licence issued by the town hall. Your lawyer should confirm that the correct occupation title for that municipality has been obtained or filed.

It is worth understanding that a responsible declaration is not the same as a prior municipal inspection and approval: it allows the activity to proceed from the day it is filed with the required documentation, subject to the town hall’s later powers of checking and control. Utility companies (water, electricity) will require the licence, responsible declaration or communication that applies before connections can be activated in the owner’s name. The developer is typically responsible for putting the correct occupation title in place before handover.

Considering an off-plan purchase on the Costa del Sol? Plaza Estates can help you identify suitable developments across Nerja, the Axarquía coast and the western Costa del Sol, and make the available project documentation easy to review. Before you reserve or pay anything, you should appoint your own independent lawyer and a technical adviser or architect; we coordinate with independent professionals and do not provide legal, tax or planning advice ourselves. Browse listings at plazaestates.es
Plaza Estates · +34 952 524 191 · [email protected]