Changes in the law which rules the guarantees for payments on account of the price during the construction of a property in Spain

(Please check our blog “Insurance for payments on account at the time of the purchase of a property in Spain”)

Law 20/2015, of July 14, management, supervision and solvency of insurers and reinsurers, has amended the Law Construction Planning in relation to the rights of individuals in the anticipated amounts paid on account during the constuction of a property in Spain.

– Several provisions of the Spanish“Law 57/1968 of 27 July, regarding the receipt of sums of money in advance for the construction and sale of homes. Modifications are introduced by the first additional provision of the Law Construction Planning, which main contents to the purposes of this blog, are detail as follow:

–  The individual and companies that promote the constructions of all types of habitable properties, including those made under a community of owners or cooperative society, which seeks  to obtain from the purchasers the funds for its construction, will meet the following conditions:

1. a) To guarantee, from obtaining the building License, the return of the amounts paid plus the legal interest, by means of insurance/ contract suretyduly signed with insurance companies authorized to operate in Spain, or by joint and several guaranteeissued by credit institutions duly authorized, in the event that construction does not start or does not reach a successful conclusion by the agreed deadline for the delivery of housing.

1. b) To receive the amounts advanced by the buyers through credit institutions and to be deposited in a special account with separation of any kind of funds belonging to the developer, including the assumption of a community of owners or cooperative, and which may only draw for the construction of the houses.

The Guarantee will be extended to the amounts paid by the buyers, including applicable taxes, plus legal interests.

Up to date, the guarantees did not include the applicable taxes (most cases the proportional amount of the advance VAT). It seems that with the new regulations, the guarantees provided by the developer must include the taxes actually paid (partially or totally).

It is added a transitory provision  by which the insurance entities, before 1 July 2016 and for the quantities delivered to account thereafter, adapt existing policies as from 1^st January 2016.

Do not hesitate to contact our Spanish law firm in Marbella now, for any legal, tax or accountancy query.

Félix Ruiz, Lawyer in Marbella