Bank guarantee when purchasing new construction in Spain
29.01.2025Why a bank guarantee is essential when buying an off-plan property in Spain
The dream of owning your own new-build home in Spain becomes a reality for many by buying an off-plan property. This often offers financial benefits and the opportunity to partly furnish the property to your own taste. However, as with any property transaction, there are also risks. One of the most important legal guarantees that buyers can obtain is a bank guarantee. In this blog we explain why this document is essential and how it protects buyers against financial risks.
What is a bank guarantee?
A bank guarantee is a legal document issued by a bank or insurer that protects the payments that a buyer makes to a property developer. This means that if construction is not completed or the developer goes bankrupt, the buyer can reclaim their money through this guarantee.
Legal obligation regarding a bank guarantee in Spain
In Spain, providing a bank guarantee when selling off-plan properties is mandatory for property developers. This is laid down in Law 20/2015, which strengthens the rights of buyers and helps prevent past abuses. However, it is up to the buyer to check whether the bank guarantee has been drawn up correctly and whether it covers all amounts paid, including advances and instalments.
Advantages of a bank guarantee
A bank guarantee offers several advantages to buyers:
- Financial security – Should the project be delayed or not even completed, the buyer is entitled to a refund of the amounts paid.
- Protection against bankruptcy – If the developer goes bankrupt, the buyer can get his investment back through the bank or insurer.
- Increased confidence – With a bank guarantee, the transaction becomes safer and more reliable, allowing the buyer to invest with peace of mind.
What should you look for in a bank guarantee?
Although a bank guarantee is mandatory, there are a few important points that buyers should pay attention to:
- Check that the bank guarantee covers all payments, including advances and future instalments.
- Make sure that the guarantee has been issued by a recognised bank or insurer.
- Have the bank guarantee legally checked by a specialist lawyer to ensure that it is drawn up correctly and meets all legal requirements.
Conclusion: Don't take any risks and be well informed
A bank guarantee is an essential protection when purchasing a property off-plan in Spain. It ensures that your investment is safe, even if the developer does not meet his obligations. It is therefore strongly recommended that you seek legal advice and have all documents thoroughly checked before making a purchase. This way you can enjoy your future dream home in Spain with confidence and certainty!
Do you have any questions about bank guarantees or purchasing a property in Spain? Let us know or contact a specialist advisor!
