Buying off-plan property in Spain: what if construction stops?
Buying an off-plan property in Spain can be an attractive option, offering modern homes, staged payments and often high-quality finishes.
However, there is one important risk that buyers are not always fully aware of: what happens to your deposits if the construction is not completed?
In this article, we explain this clearly and in practical terms.
What does "buying off-plan" mean in Spain?
When you buy a property off plan, you are purchasing a home that has not yet been built or is still under construction. During the construction phase, buyers are usually required to make several deposit payments to the property developer.
Because these payments are made before the property is completed and delivered Spanish law has introduced strict protection measures for buyers.
Mandatory guarantees: what a developer is legally required to provide
When buying an off-plan property in Spain, the developer is legally required to protect the deposits paid by the buyer. This protection is provided in two specific ways.
1. A legal guarantee for your payments
The developer must provide either a bank guarantee (aval bancario) or a surety insurance policy (seguro de caución). This guarantee ensures that all amounts paid are refunded, including interest, if construction does not begin, if the project is not completed, or if the property is not delivered within the agreed timeframe.
2. A separate bank account dedicated exclusively to the project
All deposits must be paid into a bank account specifically linked to the project. This account must be strictly separated from the developer's other funds, and the money deposited may only be used for the construction of the project.
What if the project is halted or not delivered?
Unfortunately, it does sometimes happen that a construction project is not completed. In such cases, buyers have clearly defined rights under Spanish law.
As a first step, you should send the developer a formal written notice in which you terminate the contract and request the refund of all amounts already paid, increased by the statutory interest. The developer then has a 30-day period to respond.
If no response is received, it is essential to check which guarantees were provided. Do you hold a bank guarantee or a surety insurance policy? In practice, these documents are often overlooked, even though they are crucial for protecting your rights.
If you have a bank guarantee, you can address the bank directly and demand the repayment of all deposits paid, including interest. It is important to act promptly, as a bank guarantee usually expires two years after the developer's default.
If, on the other hand, you have a surety insurance policy, you should notify the insurer of the situation and request payment of the insured amounts.
What if no guarantee is in place?
Unfortunately, this is a situation we also encounter in practice. When a developer has failed to put the legally required guarantees in place, the bank into which the deposits were paid may be held liable.
According to established case law, the bank should have verified the existence of the required guarantees and should not have accepted payments without a dedicated project-specific bank account.
Even in this situation, there are therefore legal avenues available to recover your funds.
Why is this so important for buyers in Spain
Many foreign buyers place their full trust in the developer and assume that everything will be properly taken care of. They are often unaware that, when buying off plan, guarantees are not a mere formality but a legal requirement. This is precisely why a thorough check before purchasing is essential.
How we support buyers when purchasing off-plan
When assisting with off-plan purchases, we always verify that the required guarantees are correctly in place, that the payment structure complies with legal requirements, and that the project is legally and financially sound. Not to sell at all costs, but to prevent problems later on.
Buying an off-plan property in Spain can be perfectly safe, provided everything is properly arranged. Reliable information and professional guidance make all the difference.
