New build or resale?

The fundamental difference

When you buy a resale you buy something that exists. You can walk through it, have it surveyed, check the registry and move in shortly after the notary. The risk lies in the condition of the property and in paperwork that does not match.

When you buy a new build from a developer you usually buy something that does not exist yet — a promise, a plan and a delivery date. You pay during construction and get the property in a year or two. The risk lies not in the condition but in the counterparty: the developer’s finances, the developer’s timetable and the developer’s interpretation of what was promised.

This is not a judgement on which is better. New builds give you new installations, modern energy solutions and guarantees on the building. Resales give you established areas, mature gardens and a price you can negotiate on what you actually see. But they require different checks, and those are what this page is about.

Different taxes

Tax is the first difference and the one that surprises most people.

• New build from a developer: you pay VAT, IVA, on the price, plus stamp duty, AJD, on the deed. Two taxes, to two different recipients.
• Resale (and also a new build sold on by a private individual): you pay transfer tax, ITP, to Andalusia. One tax.

Bear in mind, too, that VAT is paid along with the stage payments during construction, not at completion. It must therefore be in your cash flow from the start.

Payment in stages

A common structure when buying off-plan:

1. Reservation — a smaller amount that takes the property off the market for a few weeks while the contract is negotiated.
2. Purchase contract, contrato privado de compraventa — a larger payment when the contract is signed.
3. Stage payments during construction, either on fixed dates or tied to progress on site.
4. Final payment at the notary when the property is finished and the keys are handed over. This is also where any mortgage comes in — it cannot be signed until the property exists.

The share paid before completion varies between projects and is negotiable, especially early in a project. The more you pay in advance, the more the next section matters.

The bank guarantee — your only security

Spanish law requires the developer to guarantee every amount you pay before completion, by bank guarantee (aval bancario) or insurance, and to deposit the money in a dedicated account that may only be used for the construction. If the developer goes bankrupt or fails to deliver on time, you should get back what you paid, with interest.

So much for the law. In practice:

• The guarantee must be in your hand, issued in your name, for every payment. A promise in the brochure is not enough, and “we will arrange it later” is a warning sign.
• Never pay into any account other than the one named in the contract as the guaranteed account.
• The reservation fee often falls outside the guarantee. Keep it low until the contract and guarantee are in place.

Your lawyer should actively request the guarantees. It is the single most important document in an off-plan purchase.

Delays

New builds get delayed. Not always, but often enough that you should plan for it. Building permits that drag on, labour shortages, a supplier that fails — it all lands on your delivery date.

So read, in the contract:

• Which date applies — and whether it is delivery of the home or just “completion of the works”.
• How long an extension the developer is entitled to before you may cancel. Such clauses are common and sometimes generous.
• What happens if you cancel: do you get everything back, with interest, and within what time?
• What happens if you are late with a stage payment. Here the contracts are rarely as forgiving.

Do not plan to sell your home with completion the same week the Spanish property is due for delivery.

The occupancy licence

The licencia de primera ocupación is the town hall’s certificate that the building was completed according to the permit and may be used as a dwelling. Without it:

• you may find it hard to contract electricity and water in your own name,
• the bank may refuse to release the loan,
• and you own something that is formally not approved for habitation.

Developers sometimes want to sign at the notary before the licence exists, “it is coming in a few weeks”. Do not sign. Completion without the licence is completion where all the risk has been moved to you.

Checklist before buying off-plan

1. Who is the developer? Company name, registration number, previous projects. Have they delivered before — and on time?
2. Does the developer own the land? Checked at the land registry. Is the land mortgaged, and how?
3. Is the building permit, licencia de obras, granted and valid? Not applied for — granted.
4. What is included? The specification, memoria de calidades, as an annex to the contract. What is not in there is not included.
5. What will the community fees be? The developer has an estimate. It is often low.
6. Bank guarantee for every payment, in your name.
7. Delivery date and cancellation rights in plain terms.
8. The building guarantees after completion — there are statutory guarantees for different parts of the building with different durations. Find out which, and how they are enforced.

Otherwise the order is the same as in every Spanish purchase: NIE, bank account, checks, contract. Read the buying process step by step if you have not already.

Considering a specific project? Send a search brief and we look at the developer and the contract before you reserve.