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Buying off-plan property in Spain means paying for a home before it is finished, sometimes before construction has even started. New developments in Mallorca, Ibiza and the rest of the Balearics are popular with foreign buyers, but staged payments to a developer carry real risk if the project is delayed or never completed. Spanish law offers strong protection, provided it is applied correctly and checked by an independent lawyer.
How an off-plan purchase works
Typically the buyer signs a reservation, then a private purchase contract with a payment schedule, for example:
- A reservation fee.
- 20–30% on signing the private contract.
- Further instalments during construction.
- The balance on completion, when the deed is signed and keys are delivered.
VAT at 10% (for dwellings) is added to each payment, and stamp duty (AJD) is paid when the deed is signed.
The key protection: bank guarantees
Spanish law requires developers to guarantee every amount paid by buyers before delivery of residential property. This is set out in the Building Act (Ley de Ordenación de la Edificación, first additional provision). In practice it means:
- Money paid on account must go into a special account at a bank.
- Each payment must be covered by an individual bank guarantee (*aval*) or insurance policy issued in the buyer’s name.
- If the building is not started, not completed or not delivered on time, or does not obtain its first occupation licence, the buyer can recover the amounts paid plus legal interest.
Courts in Spain have repeatedly protected buyers who paid into the developer’s account even without an individual guarantee, holding the bank responsible in many cases. But recovering money through litigation takes time. It is far better to have the guarantee in hand from day one.
What your lawyer checks before you sign
The developer and the land
- Who owns the land and whether it is mortgaged.
- The developer’s company records, experience and financial situation.
Licences
- Building licence granted, and for which project.
- Whether the plans you have been shown match the licensed project.
The contract
- Detailed specifications (*memoria de calidades*) and plans attached.
- Delivery date and penalties for delay.
- Right to cancel and recover payments if the deadline is missed.
- Clear rules on changes to the project.
- Allocation of the developer’s mortgage: you should receive the property free of it or with an agreed subrogation.
Guarantees
- An individual guarantee for every payment, issued before or at the time of payment.
- Payments only to the special account named in the guarantee.
Our property lawyers review all of this before a client commits to the first instalment.
At completion
Before signing the deed, your lawyer confirms that the building has its first occupation licence (or equivalent), that the property is registered as a new building, and that the finishes match the contract. Snagging issues should be listed in writing. If you need financing, our team can also advise on mortgages for non-residents and on subrogating the developer’s loan.
After delivery: warranties
Spanish law gives buyers of new buildings:
- 1 year for finishing defects.
- 3 years for defects affecting habitability.
- 10 years for structural defects.
Frequently asked questions
Is my deposit safe if the developer goes bankrupt?
If it is covered by a bank guarantee or insurance, you can claim directly from the guarantor.
Can I sell my contract before completion?
Sometimes. It depends on whether the contract allows assignment and on any fees charged by the developer.
What if the finished home is different from the plans?
Differences must be documented. Depending on their importance, you may claim correction, a price reduction or even termination.
Conclusion
Off-plan purchases can be excellent value, but only with proper legal safeguards. The bank guarantee is your most important protection, and it must be checked before you pay. Castell.law advises buyers of new developments in the Balearic Islands in English, German and Spanish.
