How your advance payments on a new build are protected

Key rules

• Guarantee: The developer must guarantee your advance payments with a bank guarantee or insurance, and you should hold your own certificate or policy before paying.
• Special account: Your payments must go into a special account separate from the developer's other funds, using the bank details the developer gives you.
• Coverage: The guarantee should cover your payments, legal interest and the VAT you paid with them.
• Late building: If the building is not finished on time, you can end the contract and claim your money back with interest.

The law protects your stage payments

Spanish law requires the developer to guarantee your advance payments with a bank guarantee or an insurance policy. If the building is not finished or delivered on time, the guarantee returns your money plus interest. This applies to homes under construction bought from a developer. Do not pay anything until you have seen the proof.

What to confirm before you pay

1. The guarantee exists. Ask for the individual certificate or policy for your payments, issued in your name before or when you pay. It should name you, the home, the developer and the amounts covered. A general statement from the developer is not enough.

2. The bank or insurer is real. Check that the bank is in the Bank of Spain register of credit institutions, or that the insurer is in the register of insurers kept by the Dirección General de Seguros y Fondos de Pensiones. Then contact the bank or insurer yourself to confirm the guarantee exists.

3. It covers what you pay. The guarantee covers your advance payments plus legal interest. The VAT (IVA) you pay with each stage payment is generally treated as part of the amount paid, so it should be covered too. Check that the wording says so.

4. Your money goes to a special account. The developer must receive your advance payments in a special account at a bank or savings institution, kept separate from its other funds. The developer must give you the bank's details. Pay only into that account, never to another account or in cash.

When protection ends

The guarantee ends when you have the home and the licence of first occupation, or when the public deed is signed and the home is delivered to you. The bank or insurer then releases it. The exact release conditions are in the guarantee text, so read them before you sign.

Before that point, if the building is not finished on time, you can end the contract and claim back your money with interest. You have a right to claim directly against the bank or insurer that issued the guarantee.

Get a lawyer to check

Ask a lawyer to review the account details and the guarantee before your first payment. It is a small cost compared with the sums at stake. The checklist and documents below list what to ask for, and the questions below cover insolvency.

Timeline and deadlines

• Get the individual guarantee certificate or policy in your name: before or when you make your first payment

• If the building is not finished on time, end the contract and claim your money back with interest from the bank or insurer: if the building is late

• The bank or insurer releases the guarantee: once you have the home and the licence of first occupation, or the public deed and delivery

Documents you need

• Individual guarantee certificate or policy for your payments, issued in your name by the bank or insurer before or when you pay. It must name you, the home, the developer and the amounts covered.

• The bank's details for the special account that receives your advance payments, given to you by the developer. The account must be separate from the developer's other funds.

• Proof that the guarantee has been released, from the bank or insurer, once you have the home and the licence of first occupation or the public deed.

Checklist

• Check that it names you, the home, the developer and the amounts covered.

• Confirm that the bank is in the Bank of Spain register of credit institutions, or that the insurer is in the register of insurers kept by the DGSFP, Spain's insurance regulator.

• Ask the developer for the bank details of the special account, separate from its other funds, and pay only into that account.

• Ask a lawyer to check the account and the guarantee before you pay.

What if the developer goes bust or never builds?

You can claim your advance payments back from the bank or insurer that issued your guarantee, even if the developer is insolvent. Act in order and keep every paper.

What the guarantee gets back for you

The guarantee covers the advance payments you made, plus legal interest. The VAT you paid with those advances is generally treated as part of the amount paid. Check that your guarantee wording mentions both the VAT and the interest. The guarantee exists to return your money if the home is not finished and delivered on time.

Do this, in this order

1. Gather your papers. Get a copy of the guarantee (a bank guarantee or an insurance policy), your contract, and proof of every payment.
2. Terminate the contract in writing. Send the developer a notarial letter or a burofax (a delivery service that proves what you sent and when). Say you are ending the contract because the building was not started or finished on time, or the occupation licence was not obtained, and demand your money back.
3. Demand payment from the bank or insurer. Send a written demand with the contract, the proof of payment and your termination notice. Ask them to pay.
4. Go to court if they refuse or ignore you. File a civil claim against the bank or insurer, and against the developer if your lawyer advises it. Ask for the refund plus legal interest.
5. Register your claim in the insolvency, if there is one. If the developer has entered insolvency (concurso), also notify the insolvency administrator of your debt. Guaranteed money is still claimed directly from the bank or insurer.
6. Consider a criminal complaint if your money seems to have been diverted.

What insolvency changes, and what it doesn't

• Insolvency does not end your contract automatically. The administrator can ask a judge to end it, or may decide to finish or sell the project.
• You can still terminate for the developer's breach, including delay after the insolvency began.
• Without a guarantee, your refund claim ranks as an ordinary debt in the insolvency. These are usually paid late and often only in part. This is why the guarantee matters.
• If a bank accepted your deposits into an account without making sure the guarantee existed, it can be held liable.

Deadlines

• You can claim as soon as the delay happens. You do not have to wait for the promised delivery date to pass.
• Your right to claim lapses after 5 years, counted from the date you could first terminate.
• The guarantee or policy may set its own deadlines. Read it for them straight away.

Because the right sequence depends on your guarantee and your facts, have a lawyer who handles off-plan purchases check your steps before you send the first letter.

Frequently asked questions

Does the guarantee cover the VAT I pay with each stage payment?

Yes, the VAT you pay with each advance is generally treated as part of the amount paid, so the guarantee should cover it. Ask the bank or insurer to confirm that the wording includes both the VAT and the legal interest.

Who can I ask to check that my guarantee is real?

You can contact the issuing bank or insurer directly and ask them to confirm that your guarantee exists.

Can I get my money back if the building is not finished on time?

Yes, if the building is not finished and delivered on time, you can end the contract and claim your money back with interest.

When does the guarantee stop protecting my payments?

The guarantee ends once you have the home and the paperwork, meaning delivery plus the licence of first occupation, or the public deed and delivery. The bank or insurer then releases it.