The Process of Buying an Off-Plan Property in Valencia

With the new energy certification requirements in Europe, purchasing an off-plan property in Valencia is now more advantageous than ever. Whether you plan to rent out the property or sell it in the future, having a top energy rating will help you avoid potential issues. Today, a poor energy rating can complicate both rentals and sales.

Here’s a guide to the stages of purchasing an off-plan new build property in Valencia.

Stage One: Initial Steps and Contract Signing

In the first stage of buying an off-plan property in Valencia,  you’ll typically be introduced to a show property or given detailed plans of the proposed new development. The developer’s sales team will outline the timescale for construction, offer you a range of customisation options for fixtures and fittings, and present the purchase price. At this stage, you will also receive a contract that details the payment schedule and the projected completion date for the build.

You will review the contract (or your solicitor) to ensure that it includes all essential elements, such as a clearly defined payment schedule, penalties for late payments, and the projected completion date of the development. Importantly, you will also ensure that the developer provides a bank guarantee. In Spain, developers are legally required to offer this guarantee, which protects your payments if the project isn’t completed as planned.

Once everything is in order, you can proceed with signing the contract and paying the initial deposit. This deposit will usually be a small percentage of the total purchase price (usually around 10% of the property price). Still, it commits you to the deal and means that the property cannot be sold to another client.

Stage Two: Progress Payments and Bank Guarantees

After signing the contract and paying the deposit, you will enter the second stage of the off-plan purchase process. This stage involves making several scheduled payments, typically larger than the initial deposit, as construction progresses.

Once again, you must receive a bank guarantee for each payment you make toward the property. This guarantee ensures that in the event, the developer fails to complete the project, you will be able to recover your money. It’s wise to involve your lawyer in every payment stage to ensure all legal protections remain in place.

During this phase, preparations can also be made for the final property handover. You could sign a power of attorney at this point, allowing your lawyer to complete certain tasks on your behalf if needed, such as signing the final paperwork. You must also obtain your NIE (Número de Identificación de Extranjeros), a tax identification number required for property purchases in Spain. At Domosno Valencia, our admin department helps you with that.

Having these administrative details sorted in advance will make the final steps of the purchase process smoother.

Stage Three: Property Completion and Inspection

The third stage occurs when the property’s construction is completed. However, it’s essential to note that completion dates can be delayed. Developers in Spain commonly include a clause in the contract that allows them to extend the completion date by up to six months. This is a standard term and is not negotiable.

Before the final handover, it’s critical to conduct a thorough inspection of the property to identify any potential issues or defects. This is commonly referred to as a “snagging” inspection. Your lawyer can help arrange this, ensuring that any problems are corrected before you take ownership. It’s far more difficult to resolve issues after the property has been handed over, so this step is crucial.

Additionally, developers in Spain often reserve the right to mortgage the property during construction to secure financing for the build. Your lawyer will check that all mortgage debts are cleared from the property’s title before you complete the purchase. This ensures that you acquire the property free of any encumbrances.

Once the property has been registered in the developer’s name, and all issues have been resolved, the final purchase can take place. At this point, a completion meeting will be arranged where you will make the final payment, covering the remaining balance of the purchase price.

Stage Four: Finalising the Purchase and Registration

The final stage of buying an off-plan property in Valencia involves completing the legal and administrative procedures. Once the property has been handed over to you, your lawyer will assist you with paying the applicable taxes and registering the property in your name.

In Spain, the taxes associated with purchasing a property off-plan can be substantial, so it’s essential to budget for them. Typically, you will need to pay the  VAT (IVA), which is 10% of the property’s purchase price, along with other smaller fees related to the registration process. Your lawyer will calculate these costs for you and ensure they are paid correctly and on time.

Once the property is registered in your name, the process is complete, and you will officially own your new home in Valencia.

Key Considerations When Buying Off-Plan in Valencia

While the off-plan property market in Valencia is now much more secure than it was during the early 2000s, only work with developers that provide proper bank guarantees and meet all legal requirements.

Buying an off-plan property in Valencia can be a smooth and rewarding experience by following these stages carefully and seeking the right advice.