It would appear that sale and purchase of off-plan property has revived, and in some areas with great strength and little criterion. The view of numerous construction cranes decorating our scenery once again, complemented by eye catching advertising panels and temporary sale offices with tempting offers from promoters, is a reality.
The customer profile for this kind of product is usually a purchaser that does not require the property on a short-term basis, and on occasions purchases with forward sale under competitive initial payment conditions offered by the promoter up until the signing of the deeds. As a result, the purchaser may subconsciously reduce his or her level of precaution and demand, absolutely necessary in any kind of property investment.
In light of sales teams often making haste with slogans such as waiting lists, high level of interest, fear of not making a down payment on time… We are ultimately faced with scenarios and situations that for numerous reasons we assumed would not recur here, at least in the short term.
Due to this scenario, in this article we would like to propose a series of recommendations to be taken into account before signing any kind of private document (waiting list, pre-reservation agreement, down payment, reservation contract…. In any form the Property Developer may present it) and above-all, before handing over any money. These recommendations can only truly be effectively put in practice under the supervision of an independent specialised Property Law and Conveyancing lawyer.
First of all, it is necessary to verify with the Land Registry that the property development plot is registered under the name of the property developer in question.
It is also necessary to verify that the property developer is registered with the Commercial Registry, and that the representative for signing the private contract has sufficient power of attorney.
The following verification that is absolutely necessary, is to confirm that the property development has all of the compulsory administrative permits, in particular the corresponding Construction Permit. If this qualification does not appear in the documentation certifying the ownership of the plot, it is necessary to consult the corresponding City Council to verify the administrative authorisation of the project.
Supposing that all of the previous requirements have been satisfied, we will find ourselves in the phase of signing the private reservation contract and making a down payment towards the final amount. Thereon the following points should be taken into account:
Regarding the signing of the private document, it should always be revised by a specialised property lawyer whom will make sure that it does not contain any unfair terms, that all aspects are covered and necessary information included (plans, building specifications, completion and handover dates, penalisation clauses for late delivery, cost distribution…). All of the above required by law and in defence of the interests of the purchaser.
Regarding down payments, it is of crucial importance and necessary to demand that the property developer complies with two conditions; Firstly, proof that the amounts paid are deposited in a special account solely for the purpose of financing the construction, and secondly, that from the first instalment that the amounts are guaranteed via an insurance policy or a bank surety to cover the reimbursement of any amount paid plus statutory interest in the event of the development not being completed or the handover of the property being delayed.
Finally, we would like to reiterate once again that you should always consult an independent specialised lawyer from the beginning of the purchase process. It is possible that the vendor or property developer may appear surprised by the presence of a lawyer from the outset of the negotiations (it is not common practice among local purchasers due to the inexistence of Conveyancing in the Spanish legal system), but without doubt it is the most sensible decision to be adopted to assure the protection of your interests, and your peace of mind.
At MSG LEGAL, as independent specialised lawyers in Property Law y Conveyancing, we will advise and guide you during the entire purchase process and act as mediators with all of the intervening parties.
Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.