What does buying off-plan mean?
An off-plan property is simply a building that has been granted planning permission but that hasn’t been finished yet. It is a popular option for those who aren’t in a particular rush or are looking to make a significant profit on their investment. Considering the current situation in Marbella’s property market it might just be the best time to buy off-plan: the market is rising but is nowhere near the maximum yet. This growth could be captured and turned into a quick profit.
Advantages of buying off-plan
When buying off-plan, you are able to pick “the cream of the crop” in a development. Apartments and houses with the best orientation and views and not likely to be available by the time the building is finished.
Here’s the thing about a property that’s not there yet – it can be changed! If there are choices of material or designs you’re not happy with, you might be able to take it up with the developer and change them in advance – as opposed to paying to fix it when you buy a newly finished property.
Developers offer a substantial discount to compensate for the trust you express when buying something that is not actually there yet. And in the short period of time between buying into the project below market value and reselling it upon completion, a property investor can make the kind of profit unseen in other sectors.
A down payment (usually 10%) is required to enter the deal, with several subsequent payments linked to the completion of building stages. For instance, you might be required to pay 25% of the remainder when the basic structure is completed, 25% more when the floors and some interior work has been finished and the rest upon completion. Alternatively, payments might be spread over time with no link to the building progress.
Things to consider
It is highly advisable that you retain a seasoned, registered lawyer before you commit yourself to signing any document or even pay a booking deposit. It is very easy to recognize a qualified lawyer in Spain: you are either an abogado or not, there is no in-between. Unless your lawyer has been recommended to you by a trusted acquaintance, ask for their Law Society’s number and verify they are registered to practice.
Do not to sign any contracts unless the town hall where the property is located has issued a building license for the property or development.
After the property crisis of 2008, when a lot of development projects were frozen due to lack of financing, banks now offer guarantees (avales bancarios) against this possibility. It is much better to get one of these for your individual property with your bank, rather than a collective one provided by the developer – it will offer more protection.
One should never buy an off-plan property on land that is still not registered under the developer’s name. This is something a qualified lawyer would never let you do anyway.
When the developer is near the completion of the property, you may find that it takes slightly longer than you anticipated. When it comes to standard contracts for off-plan property in Spain, a clause is usually included for construction to be delayed without penalty for up to six months, which is usually non-negotiable. You may, however, be entitled to either extend the deadlines of your upcoming payments or revoke the contract, having all your deposits returned to you with interest. This is an issue that would have to be taken up with a lawyer.
All in all, buying off-plan is as safe as any other business transaction – if done with proper legal support. With the introduction of bank guarantees, the risk of losing money has been practically removed from off-plan purchases.
Villa Alcucuz, an award-winning villa by Bright, for instance, is available now for off-plan purchase and due to be completed at the end of this year. Purchasing this stunning villa off-plan will cost you only 8,495,000 Euros, while its price upon completion will rise to 9,995,000 Euros. This amounts to a substantial profit of 17% that can be made in under a year.