Main risks of buying off-plan property

Although purchasing future developments offers clear advantages, contingencies can affect both the delivery of the home and the security of the invested capital. Identifying these factors at an early stage helps to prevent them effectively.

1. Delays in delivery deadlines

Schedule delays are the most frequent issue when buying off-plan property. Delays can stem from administrative licensing issues, material shortages, adverse weather conditions, or shortages of construction staff. It is essential that the contract establishes a specific delivery date, avoiding ambiguous phrasing that leaves the final completion date solely to the developer's discretion.

2. Insolvency or insolvency proceedings of the developer

If the developer experiences severe financial difficulties before completion, the construction work risks being halted. In the worst-case scenario, insolvency proceedings without the corresponding bank guarantees can endanger the financial contributions made by buyers during the build.

3. Changes to the initial project and specifications schedule

At times, unexpected changes to the specifications schedule, floor area, or room layout are introduced during construction. Although certain technical modifications may be unavoidable due to site management requirements or local regulations, the developer cannot unilaterally alter substantial features of the home or substitute materials for lower-grade alternatives without the buyer's consent or appropriate financial compensation.

4. Lack of licences and planning issues

Building without the corresponding building licence or commencing sales without final project approval from the local council poses a serious risk. The subsequent absence of the First Occupation Licence (Licencia de Primera Ocupación - LPO) or certificate of occupancy will prevent utility connections (water, electricity, gas) and the signing of the title deed before a notary public.

Guarantees for advance payments: legal framework

To mitigate buyer vulnerability regarding developer contingencies, the Spanish legal framework mandates strict safeguards over funds paid prior to and during construction.

The regulation of advance payments historically traces back to Law 57/1968, the principles of which were integrated into the First Additional Provision of Law 38/1999, of 5 November, on Building Regulation (LOE), substantially amended by Law 20/2015. This legislation imposes precise obligations on real estate developers receiving advance funds:

• Special, segregated bank account: The developer is required to deposit advance payments made by buyers into a special bank account dedicated exclusively to construction expenses for the development. This account cannot be mixed with general corporate funds.
• Bank guarantee or surety bond: From the moment the developer receives the first advance payment and the building licence is obtained, it must guarantee the refund of these funds plus legal interest through an individual bank guarantee or a surety bond issued by an authorised insurance provider.
• Refund of payments upon breach of contract: If construction does not begin, is not completed within the agreed timeframe, or fails to secure the First Occupation Licence, the buyer has the legal right to terminate the contract and demand a full refund of all advance payments, plus legal interest.

It is vital to stress that guarantees must be individualised. It is not enough for the developer to claim to hold a global policy for the development; each buyer must receive an individual guarantee certificate or insurance policy in their name, detailing the exact sums contributed at each milestone of the payment schedule.

Essential documentation before signing and paying a deposit

Before making any payments or signing a reservation agreement to buy off-plan property, it is essential to request and audit the following technical, administrative, and legal documentation:

1. Proof of land ownership: Verify via a Nota Simple from the Land Registry that the plot earmarked for construction belongs to the developer and is free of encumbrances or charges incompatible with development.
2. Municipal building licence: Document issued by the local council authorising the start of construction in accordance with the submitted project.
3. Basic and execution project: Detailed architectural plans of the property (including measurements, net usable area, and gross built area) and common areas of the building or development.
4. Signed specifications schedule: A detailed description of materials for structure, insulation, joinery, flooring, tiling, climate control, and sanitary fittings to be used in construction.
5. Draft purchase contract and payment schedule: Draft document establishing the final price (itemising applicable VAT), advance payment dates, and the target completion date for construction.
6. Bank guarantee document or surety bond policy: Certificate issued by the financial institution or insurer backing each contribution made.

Special consideration for Social Housing (VPO) in the Comunidad de Madrid

For homes subject to public protection schemes (VPO, VPPB, VPPL) within the Comunidad de Madrid, documentary verification involves additional requirements. The property's provisional classification order must be verified, along with the maximum sales price limits per usable square metre under regional Madrid regulations and the buyer's eligibility criteria. Furthermore, matters concerning legal disqualification periods (descalificación) or subsequent resales remain strictly subject to the regulatory framework applicable in the Comunidad de Madrid.

Analysis of contract clauses: key points to review

Private contracts drafted by developers often contain complex clauses. Conducting a thorough legal analysis to identify unfair or unbalanced terms that violate consumer protection legislation is imperative.

Key priority areas during contract review include the following:

Automatic extension clauses: Terms granting the developer indefinite extensions or relying on vague justifications must be avoided. Schedule extensions should only be permissible in cases of duly proven force majeure beyond the developer's control.

Withdrawal penalties: The contract must maintain balance regarding breach penalties. If severe penalties apply to a buyer delaying a payment, equivalent penalties must apply to a developer failing to meet construction deadlines.

Imposition of costs legally borne by the seller: Clauses passing the cost of Municipal Capital Gains Tax (Plusvalía Municipal - IIVTNU) or developer mortgage cancellation costs onto the buyer are null and void as unfair terms under Supreme Court case law.

Mortgage subrogation: The buyer is free to choose the lender for their mortgage loan. They cannot be forced to take over the developer's mortgage, nor can they face financial penalties for choosing a different financial institution.

Professional guidance for a safe off-plan purchase

The legal, technical, and financial process of acquiring future real estate requires multidisciplinary oversight to safeguard the buyer's interests effectively. Engaging specialist professional advice enables an audit of the project status, verification of developer legal standing, and assurance that bank guarantees cover all advance payments in full.

At Sky Real Estate, we assist our clients throughout every step of the acquisition process. Our structure is backed by legal support from recognised firms in the sector, such as Sky Law, winner at the European Legal Awards (2023-2025), and registration in the mortgage credit intermediaries register of the Banco de España (ICI D-286), ensuring the highest standard of rigour and regulatory compliance.

If you are considering buying off-plan property and want the peace of mind of independent expert advice focused exclusively on your technical and contractual interests, we invite you to explore our personal property shopper (PSI) service, where we will guide you through every stage of the project with complete transparency and legal security.