Off plan purchase -warning

A new law Ley20/2015 replaced Ley 57/68 for offplan properties and this law came into force as from the first of January 2016. So all those purchasing off plan property after that date must remain aware of the following.

The change in the law is that bank guarantees are only valid as from the time a developer attains a Building Licence from the town hall. Only as from that moment onwards are bank guarantees valid.

Many developers try to allay purchasers fears claiming they have an application for a Building Licence; well, that isn’t enough. Unless a developer has attained a Building Licence, all the money you have paid towards your new property is unsecured.

Should the developer go bankrupt or the development become stalled (for whatever reason) you will lose ALL your money. Even if you have been issued with bank guarantees rubber stamped by a bank, they are totally useless unless a Building Licence has been issued.

A conveyancing lawyer must therefore advise his client not to pay any deposit before a Building Licence is issued to a developer. 

To repeat, any interim payment you make prior to its granting will therefore be unsecured and you will be left financially exposed with a risk of losing your deposits. It must be stressed that deposits are NOT covered by a bank guarantee or insurance policy prior to attaining a Building Licence under this new legislation.

Buyer beware!

How does the law in Spain or the banks regulator allow a bank to issue a fake bank guarantee that is worthless, and in fact cannot be a genuine bank guarantee?

This appears to be a potential loophole where the Bank Guarantee only becomes effective from the point that a Building licence has been issued. It’s intent was presumably to ensure building licences are in place before monies are deposited, but this is obviously dependant on the conveyancing lawyer’s due diligence....

Hence the forewarning buyer beware.

So much for consumer protection. So ads are you saying banks will accept money deposits and issue so called ‘’bank guarantees (fake, invalid)’’ because they do not ask for evidence of a building licence.

As for conveyancing lawyer’s due diligence, that is about as reliable as the lucky lucky man at the beach.

Seems like here we go again, rob the ignorant foreigners who know no better and foolishly trust banks and lawyers. Not all buyers read EOS, they just arrive on Ryanair when they are not on strike, with bucket and spade.

Yes sadly the message has to remain buyer beware.

Please don’t shoot the messenger!

https://www.gov.uk/guidance/how-to-buy-property-in-spain#purchasers-checklist

I thought that after thousands of people that put large deposits down in Spain and..then getting ripped by the builder not completing the site was a thing of the passed ... people must be crazy to put large amounts of money down on a property that has not been built yet.

Bank Guarantees and law were introduced to supposedly protect and were marketed as such to act as legal reassurance, but past history and the way that purchasers were significantly compromised within an unregulated real estate, legal and Banking industry, and in all too many instances where Banks continue to remain in denial of their legal obligations, only leaves one to believe that offplan purchase even with laws in place, remains a risk too far.    

Yes ads, after all the corrupt grief and hassle suffered by innocent foreigners only Spain could come up with a new law riddled with loopholes to encourage the banks and Spanish developers to rob even more innocent buyers.

In the UK now we are getting used to seeing housing estates opening up every other day, a few miles from me they have opened a 500 house estate, not fully started yet, a chap I know has had a look with a view to buy so we spoke and he was quite strong in saying 'No way would I buy from a picture, map or promise of what it might look like' yet speak with those who want to buy in Spain and it seems they are glad to buy a picture.

Weird that they wont do it in their own country..... Yet will in someone else's country that they know next to anything about.

Not necessarily so I’m afraid Baz, as shown in Foxtons UK marketing literature....

”Who buys off-plan properties?

Buying off-plan is ideal for homebuyers that aren’t looking to move in the immediate future – investors, retirees, parents buying for children and first-time buyers are just some of the types of people we sell off-plan properties to. In fact, in the past year, 45% of our customers buying an off-plan property were doing so with the assistance of the government’s Help to Buy scheme.”

Presumably the regulated aspects appear quite different however, as they go on to identify thus

“Warranties give you peace of mind

One of the great things about buying a new build property is that its construction will be covered by a warranty, which is usually effective for up to 10 years. This warranty may also include the safeguarding of your deposit if the property isn’t finished for some reason and any appliances in the property may be covered too.

One of the largest warranty providers is the NHBC, who will check the build quality of a new development at every stage of construction. They ensure that the developers are doing everything by the book and that the home you are purchasing is built to the best possible standard. This gives homebuyers peace of mind that everything in their new home will work correctly, which is especially important for overseas investors who may never even visit the property.”

So ironically oversees investors are being encouraged to buy offplan in the UK too!

The point being that  it’s wrong to imply that people are not purchasing offplan property in the UK, but the main difference is that in the UK they appear better regulated, which then implies that people wrongly have expectations of Spain to regulate likewise.

Not so I’m afraid.

This is not a competition however (nor is it intended to encourage offplan purchase in the UK), but a forewarning of the need to recognise the major differences in conveyancing systems, and to remain aware and vigilant of the many scenarios that have impacted so many, and sadly continue to do so, until such time as regulatory structures are improved in Spain. 

Off plan property purchase in the UK is is a cast iron investment...I bought off plan in the UK 2 year's back ..all the builder asked for up front was a £500 returnable deposit if you change your mind ..I waited 8 months for my 4 bed detached and before I picked the keys up it had gone up in price by £23,000 every house on this estate is sold off plan ...if you don't put you holding deposit down you simply won't get one all new builds in my area of the UK are sold this way.

We digress....

Stay aware folks but push push push for better effective regulatory structures which should eventually lead to greater accountability and fairer protections from abuse for citizens.

This message was last edited by ads on 23/08/2019.

Yes ads and windtalker, I am not saying that in the UK no one buys off plan, I am saying that in this one particular case to whom I spoke with this person was shy of buying off plan, bet there are more like him also, yet folk come to Spain knowing nothing of the country (If you are not born and brought up in a country you know nothing about it) see a picture, fall in love with it, you know the rest.

Baz, as you know half of what goes on in Spain cowboy land you would get locked up for in the UK. But despite all that’s gone on and all the warnings, Billy Brit is still arriving and joining the queue to have his pants down.

I wonder if you pay your deposit on a UK credit card, if you would still get the purchase protection? I know the protection is only for goods up to £30,000, but if you made a £30,000 part payment, surely that counts? I realise that deposits on off plan are much more than this, maybe spread it over a couple of cards?

According to this it appears not Markfish, but worth querying further? Perhaps Maria would be kind enough to clarify?

https://www.moneysavingexpert.com/shopping/section75-protect-your-purchases/#exceptions

Is it just the British that are stupid enough to hand over a 30,000€ deposit on a property that might get built in 3 year time ...or are other nationalities just as gullible.

** EDITED - inciting -Against forum rules **

Hardly just the British. Must be at least 500 new builds around us at the moment and most purchased off plan by non-British. Loads of Scandinavians and other N European buyers.

One particular developement of some 50 properties were all sold long before completion. Another one which has only just begun clearing the ground has a sign that says only 10 remaining and that must have at least another 50 properties.

Virtually all the estate agents showing people around are from non-Brit companies at the moment. Costablanca Bolig, Nordichome Espana and Scandinavian Homes Torrevieja seem the most popular.

Even resale properties seem to be attracting non-British at the moment. 

There would be absolutely nothing wrong with off plan purchases if you could trust a bank guarantee where you are placing an upfront deposit that is refundable if anything goes wrong. The problem here is this is Spain and you never know what loophole is coming next.