The dismantling of a builder’s crane – which some now say is now the national bird of Spain – is a fairly new sight on Spain’s Costas del Sol or Blanca. For many, it signifies an important step on the road to obtaining the keys to their new property. It implies that the “off plan” property, reserved up to two or more years ago, is approaching “delivery”

In line with the terms of their Private Purchase Contract (“PPC”), during the “build out” phase, purchasers, who will have usually paid a deposit – perhaps as much as 30% of the finished price of their property – will have also made stage payments against a schedule. Usually, the stages are either specific dates or works completed. 

With each passing month clients move closer to the time when they, or more likely their lawyers, will receive the formal request from the developer or promoter of the development to complete their purchase(s). 

If possible, some weeks before being called upon to complete, purchasers should review their position and consider their options.

Some purchasers, attracted to an “investment” return, may now be having doubts about the final value of the property to be purchased in comparison with their expectations of capital growth.

Others who entered the market as a multiple purchaser with the aim of “flipping the contract” – transferring the legal obligation to complete to another purchaser - before completion may now be faced with losing a non-returnable deposit if they are unable to complete on all properties optioned. 

Others may have purchased at a development where, built into their purchase price, is a “guaranteed” rental return or “yield” for a period of years from completion. This is usually offered by the developer or promoter, although only very few developments will actually sustain intensive rental activity. This is more of an exercise in a developer wisely reinvesting some of the profits from the sale of the property to make its purchase more attractive. This may continue to be attractive and will allow – subject to reasonable management charges - the property to “wipe its face” ensuring that any mortgage debt taken to pay for it is substantially countered by rental income realised.

To continue with the purchase of the property because it suits you or you have been unable to “flip” prior to completion, you’ll need to ensure that you have sufficient funds to complete. 

Unless you have ready cash you’ll need to consider applying for a mortgage. Mortgages in Spain should be getting easier. There’s a lot of competition out there for the incoming UK £ or Irish €, but recent reports from colleagues in this sector suggest that the banks are looking more carefully at their mortgage operations. Particularly they are reviewing property valuations – which provides the basis of their “loan to value” criteria – as in the UK. 

Additionally, bank employees are being encouraged by Head Office to scrutinise much more closely the financial status of the non-resident applicant.

Applying for a mortgage in Spain is a reasonably complicated procedure, so, unless your spoken Spanish is good, we’d recommend that you do not try to directly apply to a bank in Spain. We’d suggest that you should entrust the obtaining of a mortgage to a recognised broker. Particularly one which does not charge you any up front – administration fees – or similar. 

There are several excellent English run bilingual mortgage  brokers who our clients have used to great success and we’d happily recommend them. Through their day to day operations they are very familiar with the offers from and criteria of a vast array of lenders. 

You should be aware that most banks have targets as to the number of mortgages they can place. These are usually annual and follow the calendar year. It is argued that it is  easier to obtain a mortgage within the first three to six months of the year than the last.

It is also worth noting that unless a Licencia de Prima Ocupación – a license to occupy a completed property – more below, has been obtained by the developer a bank is unlikely to consider a mortgage on such property.

Whilst talking money – there are many clients, particularly those from the UK buying with retirement in mind, who have cash for their purchase. Again it is sensible to talk to a specialist currency broker about a transfer from the UK to Spain. The sum to be transferred to your Spanish account will be converted from Sterling to Euros at a rate which is often far more favourable than the usual consumer rate. The costs borne by the Euro purchasing client will also be significantly lower than using the facilities of a high street banks to make the same transfer. This is largely a question of economies of scale as the currency brokers purchase millions of Euros daily and can therefore substantially undercut the banks. 

We work very closely with a couple of key operators in the foreign exchange sector who are equally at home dealing in Dollars, Sterling, Krona/Krone as they are in Euros. They have proven to our satisfaction the vast savings that can be obtained.

When it comes time to complete what should the “off plan” purchaser do?

You will appreciate that only when you have signed the deed of sale – the Escritura - and paid the balance of the purchase price will you actually become the legal owner of the former “off plan” property. You will then be able to register you title to it. Prior to this point if the developer fails to deliver the property, for example if they go into liquidation, you will be only a creditor and will be owed the sums you have paid during the currency of the PPC.

Did the PPC have a specification attached to it detailing the full description of the property, the precise size and configuration of the rooms, the quality of finish – marble wood etc.? A simple inspection of the property will disclose whether it accords with the description. 

Should it be necessary, several reputable businesses have emerged in the last couple of years in Spain, who provide a pre-completion survey – or “snagging survey” service. These are very useful for you and, as necessary, your lawyer’s discussions with the developer’s lawyer. Completion may be delayed whilst remedial work is carried out to settle the issues raised by the snagging survey. We have also seen situations when a payment is made to a purchaser in compensation for the defective finish – thereby reducing the overall price of the property. This is well worth considering if you have doubts about the quality of the property being delivered. - Article Continued Below -