Buying off-plan comes more risky. Law 20/2015 abolishes Law 57/1968 and modifies Law 38/999

Last 14th july the Spanish Parliament issued Law 20/2015 (published in the Official Gazzete wednesday 15h july 2015), which contains the new regulation for the insurance sector.

Of course, there would be lots to comment on the new insurance regulation, but this is not the aim of this forum, nor of this post. In fact, we would not mention Law 20/2015 in this blog, being the only reason to comment it the deep changes this Law implies for off-plan property buyers.

Hidden in an Additional Provision of the said Law 20/2015, we can find two relevant decissions that affect seriously the rights of the buyers:

          1) Law 57/1968 is abolished

          2) Law 38/1999 is modified, and the obbligatio to issue BGs or Insurance just comes since the building licence is issued to the promoters.

It seems the pressures from the Banking and Insurance Companies lobbies have been succesful because this means a significant cutting on buyers rights.

Law 57/1968, that was ratified by Law 38/1999, had operated as a Consumers' Protection regulation, protecting off-plan buyers from losing the monies paid in advance for the properties in case they weren't built or finished and/or the promoter came to insolvency.

Now, with Law 57/1968 out-of-game and Law 38/1999 modified, the protection to the off-plan buyers is limited, as far as now the obbligation to issue guarantees for the advanced payments comes out only since the building licence is granted.

For us it's really a nonsense regulation, as far as the Supreme Court is, in the latest judgments, highlighting the protective nature of Law 57/1968 and ruling in favour of the buyers' rights, and this new regulation comes to erase all the safeguarding system stated by that Law, pointed by the Highest Court as the lead to follow.

If this new regulation would have been in force within the latest years, buyers of such famous developments as Trampolin Hills, Fortuna Hills or Santa Ana del Monte would be absolutelyunprotected.

Fortunately, this new regulation just will operate since 1st january 2016, so the former off-plan buyers would be still under the protection of Law 57/1968 and Law 38/1999.

But, should you be interested in buying an off-plan property, you shouldn't make any payment until the building licence is granted to the promoters, unless you want to risk to be unprotected for the advance payment.

Read in on our blog: http://www.eyeonspain.com/blogs/rightinspain.aspx

Lucas

i have not yet read the new law but judging by your summary the consumer will be protected by guarantees which also indicate that the buildings are legal.  So the consumer is protected in two ways he or she wasn't previously. This is a good thing no? 

The point that needs to be made is that legal advice must be sought when buying off plan and it is the lawyer's responsibility to ensure the necessary guarantees (and therefore the planning consent) are in place. 

In in the past, us Brits (well me for one) assumed the guarantees were a legal right and had to be issued. This did not happen in many cases.  Also, houses were built without the necessary planning permission so purchasers could not live in the houses when they were built or worse, the houses were demolished once the buyers had moved in! 

I will get around to reading the new law at some stage and will comment further when I have.