Can you explain the Spanish legal system relevant to purchasing Spanish investment property?

Legal Protection

When considering the purchase of a Spanish property from a developer, many people are a little nervous because of “horror stories” that they have seen or heard. Such stories have included:-

1 Builders without adequate insurance becoming insolvent before completing the property.

2 Defective or non-existent planning documentation.

3 Mortgage loans secured on the land being developed and sold, remaining unpaid after completion of the site.

Many of these cases are still the subject of very costly court cases but could have been avoided with appropriate care at the outset. There are in fact substantial safeguards embodied in Spanish legislation protecting the property purchaser.

Against Builder Insolvency
There is a legal requirement for builders engaged in the construction and sale of properties to provide the buyer with an insurance policy or banker’s guarantee, protecting the buyer’s payments against the risk of the builder becoming insolvent before completing the work.

Contractual Matters
Under consumer protection law, developers must provide a full contract containing all the terms of the purchase, building specifications, detailed plans, copies of their title to the land on which the construction is to take place and planning consent.

Planning Matters
On newly built properties the title deeds executed at the Notary’s office (solicitor appointed by the Spanish government to witness the signing of all legal and public documents) must contain copies of planning documentation which proves that the building has been erected on the land in accordance with local planning regulations and without breaches of the building license obtained prior to the commencement of the work by the developer.

New Building Law
Finally, an important new Law (“Ordenacion de la Edificacion”) has come into force in compliance with an EU directive affecting building projects in which the application for planning permission is made after 6th May 2000. The builder, for instance, is now responsible in respect of defects found by the owner in the first year following delivery of the property. The property developer is responsible in respect of defects affecting habitability in the first three years and serious construction defects for a period of ten years. The builder and developer are obliged to have suitable insurance in place to cover them in respect of their legal responsibilities.

With appropriate advice and guidance, it is possible to take full advantage of the protection given to both buyers and sellers of property in Spain, thereby avoiding the difficulties which some buyers may have experienced in the past. At IP Spain we are extremely vigilant to ensure that all necessary insurance and consumer protection is in place to ensure that buying property in Spain from a developer is easier and safer than buying from a private seller.

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