Buying a new build in Spain: where the guarantee starts

The brochure shows a finished terrace. The agent asks for six thousand euros to hold the unit. The building itself is a fenced plot with a crane on it. Almost everything said at that moment is about the price and the payment schedule. The question that decides whether the money is safe is duller than that: has the town hall issued the building licence yet?

Spanish law does protect money paid towards a home under construction. What is easy to miss is that the protection has a starting line, and a good deal of what buyers hand over is handed over before it.

The guarantee starts at the building licence

The rule sits in the first additional provision of the Building Act, Ley 38/1999, in the wording given to it with effect from 1 January 2016. It replaced a 1968 statute that a surprising number of guides still cite. It covers the amounts a developer receives from the moment the building licence is obtained. Not from the first payment, and not from the signing of a private contract.

That one phrase decides a great deal. A reservation fee taken while the developer is still waiting for the licence, or a deposit under a private contract signed on the strength of a planning approval, sits outside the statutory guarantee. The money is not necessarily lost, but if the developer fails, that buyer is an ordinary creditor rather than a protected one.

The practical answer is short. Ask to see the licence before any money moves. If it has not been issued, the money belongs in a lawyer's client account under written instructions rather than in the developer's.

What the guarantee has to look like

The provision is specific, and the specifics are checkable against your own paperwork.

• It has to be a surety insurance policy with an insurer, or a joint and several guarantee from a bank. Nothing else qualifies.
• It has to be an individual policy per buyer. A collective policy covering the development, with no certificate in the buyer's own name, is not what the law asks for.
• The money has to be received through a credit institution and held in a special account, separated from the developer's other funds, and the bank has to require the guarantee before it opens that account.
• The purchase contract has to set out the repayment obligation, name the insurer or the bank, and give the credit institution and the account number.

The last point is the easiest test of all. A contract that does not name the account is telling you something about the rest of the arrangement.

What happens when the building is late

If construction never starts, or the home is not delivered on the agreed date, the buyer chooses: cancel and take the money back, or grant the developer an extension recorded in an annex. The refund is not only the instalments. It expressly covers the taxes paid on them and interest at the statutory rate.

The route matters as much as the right. First a formal demand to the developer. If thirty days pass without result, the claim goes to the insurer or the bank, which then has thirty days from the claim to pay. And the guarantee is cancelled only when two things are true at once: the occupancy document has been issued, and the developer has proved that the home was actually handed over.

Only one of the three warranties is compulsory

Every guide describes a one, three and ten year warranty on a new Spanish building: one year for finishes, three for habitability defects in the fabric and the installations, ten for the structure. Those three periods are real and they are in article 19 of the Building Act. What is not true is that all three have compulsory insurance behind them.

The second additional provision of the same act makes only the ten year structural cover enforceable. The one and three year covers were left to a royal decree that has never arrived. The one year cover can in any case be replaced by the developer retaining five per cent of the material cost of the works.

So the structural cover is an insurance question and the first three years are a contract question, which is the reverse of the way it is usually presented. The ten year cover has teeth elsewhere too: under article 20, a notary may not authorise the declaration of the new building and the registry may not record it without proof of that policy. The exception is the individual self-builder of a single home for their own use, who still has to take the cover out if they sell within ten years, unless the buyer expressly releases them.

The building book can stop the registration

The libro del edificio is usually treated as a folder of manuals handed over at completion. It is also a registry requirement. In a decision of 25 March 2026 the Directorate General for Legal Certainty upheld a registrar who refused to record a new building declaration because the building book had not been filed with the registry, on the basis of articles 9 and 202 of the Mortgage Act, and rejected the argument that single family homes and self-builders fall outside it. A decision of 11 March 2026 confirms the other half: on a change of use, or a resale within ten years, the ten year cover still has to be evidenced for the remaining period.

For a buyer that is not a formality. An unregistered building is a title you cannot rely on, and registration also needs the tax number of everyone appearing in the deed, which for a foreign buyer is the NIE. We apply for those alongside the purchase through our NIE service.

The tax on a new build works the other way round

A resale is exempt from VAT and pays regional transfer tax. A new build does the opposite: ten per cent VAT on the first delivery by the developer, covering up to two parking spaces and the storeroom when they are transferred together, plus stamp duty on the deed.

Three consequences are worth knowing before the payment schedule is agreed.

The stamp duty is the buyer's. On the purchase deed the buyer is the taxpayer. That is the opposite of the mortgage deed, where since 2018 the lender pays. The rate is set by the region, and the reduced rates are almost always tied to a main home, so a holiday home pays the general rate.

The VAT falls due on each instalment. Not at the deed. Every advance payment during construction carries its own VAT and its own invoice. That is also why the refund under the guarantee expressly covers the taxes paid.

The Canary Islands sit outside VAT. They apply IGIC instead, with a general rate of seven per cent and a separate regime for housing. Check the rate for the specific property rather than assuming the general one.

One trap on the VAT side. A finished home that the developer has let or used for two years or more is no longer a first delivery. It is taxed as a resale, with transfer tax instead of VAT, which moves the total by several percentage points. What the running costs look like once the keys are handed over is set out in the guide to non-resident property tax.

First occupation is a regional document

There is no national occupancy certificate. The Balearic Islands work with a cedula d'habitabilitat issued by the island council, and utility companies there have to see it before contracting a definitive supply. Madrid replaced its licence with a responsible declaration in 2020. The Valencian Community also runs first occupation as a responsible declaration. Elsewhere the name and the route differ again.

Find out which document applies in that municipality before signing, for two reasons. Without it the utilities are not connected in your name, and it is also one of the two events that cancel the deposit guarantee.

The mortgage may already exist

Developments are normally financed with a single mortgage over the whole building, divided between the units when the building is split into separate titles. A buyer can step into the share attached to their unit instead of arranging a new loan. No new mortgage is created, so there is no stamp duty on a new mortgage deed and none of the set-up costs. Whether it is the better deal depends on the rate; the cost allocation and the ten day period that apply either way are in the guide to Spanish mortgages.

Questions we get

Is my reservation fee protected?
Not by the statutory guarantee if it was paid before the building licence was issued. That is the most common gap of all.

Can the developer hold the money in its own account?
No. The instalments have to run through a credit institution into an account separated from the developer's other funds, and the contract has to identify it.

If the build fails, do I get the VAT back as well?
Yes. The refund covers the amounts paid including the taxes on them, plus interest at the statutory rate.

Is the ten year insurance enough?
It covers structural damage. Finishes and habitability defects in the early years are a claim against the builder and the developer, not against that policy.

Why Buenaley?

Buenaley is a Spanish law firm working with international clients. On a new build we take two things off your hands, in this order.

The first is the NIE. Without that number nothing goes into your name at the land registry, and it is the step that holds up completion most often. We apply for everyone who will appear in the deed, through our NIE service.

The second is the building itself: the licence, the guarantee, the contract, and what the contract does not say.

• NIE applications for every buyer, started straight away
• Building licence and deposit guarantee checked before any money moves
• The private contract read against the payment schedule and the delivery date
• Ten year cover, building book and first occupation checked before completion
• Completion by power of attorney when travelling does not suit

Buying off plan, or already paid a reservation without seeing the licence? Send us the contract and the plot reference and you will hear where the money stands. Or start with the NIE application, because without that number nothing goes into your name.