Many contracts for the purchase of off-plan housing contain, among other things, a clause stating that the amounts advanced for the housing purchased will be deposited in a special account of the developer. The promoteur has to give a bank guarantee to buy a property in Spain
But what is a special account, what is its purpose and importance?
The special account is one of the guarantees established by law 57/68 in favour of purchasers of off-plan housing. Its purpose is to guarantee that the advances paid for the purchase of the house are deposited in a bank account. Distinct from any other type of funds belonging to the promoter. And that the latter can only use these amounts for services derived from the construction of the housing.
The aim is to ensure that the sums paid as deposits by purchasers when buying a house under construction are not diverted to purposes other than the construction itself. In this way, the bank prevents these funds from being used arbitrarily by the developer.
To this end, the bank, before opening the account, must require the developer to take out insurance or a bank guarantee to ensure the repayment of the advances. In case the construction is not started or completed within the agreed time.
Buying a property in Spain – bank guarantee
Are you thinking of buying a property in Spain? Congratulations! Spain is a beautiful country, with a pleasant climate, beautiful beaches and a rich and exciting culture.
Before you set out to buy a property, it is important to understand the process and the different options available to you. One of the most important things to consider is the bank guarantee.
What is a bank guarantee?
A bank guarantee is an insurance policy that you can take out with a Spanish bank. It allows you to cover the payment of the purchase price of your property in Spain if you are unable to do so yourself.
Bank guarantees are an interesting option for buyers who cannot obtain a traditional mortgage, or for those who do not want to depend on the bank to finance their purchase.
How does it work?
When you take out a bank guarantee, you pay a sum of money to the builder’s Spanish bank. This money is usually equal to part of the purchase price of the property you wish to buy.
The builder’s bank then provides you with insurance that covers the payment of the purchase price of the property if the builder does not build the house. This means that if the builder does not finish the house, the bank will refund the money you have already paid.
The bank guarantee therefore allows you to buy a property in Spain without risk. It is an interesting option for buyers who are afraid to buy in Spain.
In the current uncertain economic climate, many property buyers in Spain are reluctant to invest without a bank guarantee. This may seem like a reasonable guarantee, but in fact, builders do not like bank guarantees because they add costs. This is a very important consideration when deciding to invest without a bank guarantee.
Why should I always ask for a bank guarantee for a property in Spain?
Bank guarantees are an insurance policy that Spanish banks require from property builders in Spain. This allows them to protect themselves in the event of the builder’s default. The bank guarantee is an insurance policy taken out by the builder and guarantees the repayment of the money.
If you are planning to find out the pros and cons of investing in property in Spain, it is important to know that the bank guarantee is a tool that helps to reduce the risks associated with this decision.
In fact, a bank guarantee prevents you from being exposed to serious expenses if the builder does not finish the work.
With a bank guarantee, you are not solely responsible for the risk associated with a property investment in Spain.
The bank is responsible for issuing the bank guarantee. During the procedure, it will carry out an assessment of the risk and value of the property. It will also establish the amount of the guarantee granted.
Here are some highlights of the regulation in force since 1 January 2016:
- The obligation to provide a guarantee arises at the time of obtaining a building permit.
- The guarantee must be issued and kept in force for the total amount of the advance payments, including taxes, plus legal interest from the date of the advance payment until the expected delivery date of the property.
- If construction does not start or is not completed on time, the developer must be obliged to repay all amounts, and if he does not repay them within 30 days, the guarantor may be obliged to repay them.
- If two years have elapsed since the developer failed to fulfill the guaranteed obligation without being required to terminate the contract and return the amounts, the guarantee lapses.
- The cancellation of the guarantee will occur either when the certificate of occupancy, the first occupation permit or equivalent document is issued and the delivery of the dwelling to the purchaser is accredited, or when, after these conditions have been met, the purchaser decides not to take delivery of the dwelling.
- Non-compliance with these obligations constitutes a consumer offence and therefore falls under the jurisdiction of the courts.