When buying a new-build property in Spain, people often assume that all new-build purchases are essentially the same. However, there can be an important legal distinction between buying a property being built by a property developer and buying a plot of land on which a property is subsequently built on your behalf.
In the first case, you are ultimately buying a property. In the second, you are buying land and arranging for your own property to be built on it. In that situation, you may be considered an autopromotor, or self-developer.
This may sound like a minor distinction, but legally your position can be quite different.
Buying a new-build property from a developer
In a conventional new-build purchase, there is a property developer, known as the promotor, who is responsible for the development project. The developer buys or owns the land, manages the development, obtains the necessary permits and oversees the construction, and ultimately sells the property to the buyer.
This is also the case when the property is not yet finished at the time you sign the purchase agreement. For example, you may purchase a property today that will not be completed for another twelve months. As long as the developer is responsible for developing the project and subsequently sells the property to you, you are essentially a buyer.
This means that much of the responsibility for the construction process lies with the professional parties carrying out the development. As the buyer, you pay the agreed purchase price and, in return, expect to receive the property as agreed.
What is an autopromotor?
With autopromoción, the situation is different. For example, you may first purchase a building plot and then enter into a contract with a construction company to build a property on that land.
You are therefore not simply purchasing a finished product from a developer. Legally, you are the person commissioning the construction of your own home. This gives you a more active role in the construction process and means that certain responsibilities that would normally rest with a developer may fall to you.
A simple example illustrates the difference.
Suppose you see a beautiful villa for sale which, according to the plans, will be completed in a year’s time. The developer says: “This villa costs €500,000. We will build it and, once it is finished, we will hand it over to you.” In this case, you are essentially purchasing a new-build property from a developer.
Now suppose the same villa is offered differently: “You purchase the land today for €150,000. You then enter into a €350,000 construction contract with the builder, and we will coordinate the entire process.” On paper, the end result appears to be the same: eventually, there is a villa with a total cost of €500,000. Legally, however, the structure is fundamentally different. In the second example, you may be regarded as the autopromotor.
Why does this distinction matter?
The distinction does matter because an autopromotor is not only a buyer, but also the person commissioning a construction project. It is therefore important to establish clearly who is responsible for what during the construction process, who applies for the permits, who takes out the relevant insurance and what happens if problems arise during construction.
The contracts will also be different. In a conventional new-build purchase, the main focus is on which property you are buying, the purchase price and when it is due to be completed and handed over. In an autopromoción project, the agreements with the builder, architect and other professionals involved in the construction also play an important role.
One issue that deserves particular attention is the seguro decenal, the ten-year insurance covering certain serious structural defects. In conventional property development, this insurance forms part of the standard legal framework surrounding new-build properties. For an autopromotor building a property for their own use, an exception may apply under certain circumstances.
This may sound attractive, but not having seguro decenal is not necessarily an advantage. The insurance is accompanied by technical inspections during the construction process carried out by independent parties. In addition, the absence of such insurance may become relevant if the property is sold within ten years. For that reason, it may be worth taking out the insurance voluntarily, even where it is not legally required.
The end result may look the same, but the legal route is not
For a buyer, it is therefore important to look beyond the brochure, plans and total price. Two projects may look almost identical on paper and may even ultimately result in exactly the same property, while the owner’s legal position during construction is very different.
The key question is a simple one: are you buying a property that someone else is developing and completing for you, or are you buying land and commissioning the construction of your own property?
In the latter case, you are not only a buyer but may also be an autopromotor. And precisely because this role involves different responsibilities, it is important that the chosen structure and the various agreements are properly aligned.
At Lex Foris, we assist clients with both conventional new-build purchases and projects in which the buyer acts as an autopromotor. We look not only at the purchase of the land or the completed property, but also at the legal structure of the entire project and the allocation of responsibilities throughout the construction process.
Ilonka Dekker