1. What is a Bank Guarantee?

The Aval Bancario (Bank Guarantee) or Insurance Contract were both established by a 1968 Law to protect buyers in off plan developments.

The developer must guarantee the return of the deposited amounts plus annual interest, through an insurance contract or by bank guarantee, in circumstances where the construction does not start or does not finish in the agreed time. Please note that some bank guarantees have expiration date.

At the signing of the contract, the developer will give the buyer the document that contains the guarantee (the Aval or the Insurance Contract) and the document must have a reference to the amount that is anticipated.

The insurance contract or the bank guarantee together with the document that fully proves that the work has not been started or that the completion deadline has not been met nor complied with, will have executive power (as a sentence).

GM Legal Experts will make sure the bank guarantee is in place before any money is paid to the builder, and will manage the bank guarantee execution process if the construction does not start or is not finished in the agreed time as per the purchase contract.

2. Who is the Notary and why do you have to sign public deeds before a Notary?

In Spain you can't inscribe your title deed in property register - Spain's version of the land register - unless a Spanish notary witnesses the deeds of sale. Under Spanish law a notary's signature is required to 'elevate' a private contract into public deeds that can be inscribed in the land register, so the bottom line in Spain is no notary signature, no inscription in the property register.

A notary does not verify or guarantee the accuracy of statements made in a contract or protect you against fraud, so it is therefore vital to employ a lawyer to carry out the legal checks.

3. Which clauses must contain a purchase contract when buying an uncompleted property off plan?

The contract must contain the timetable for the property’s completion; stage payment dates; the completion date and (possibly) penalties for non-completion; details of the bank guarantee provided by the builder to guarantee any deposited amount and a copy of the plans and drawings.

The floor plan and technical specifications are signed by both parties to ensure that the standard and size of construction is adhered to. It’s important to ensure that payments are made on time, otherwise contract can get cancelled and you could lose all previous payments and the property could be sold to another buyer.


Any further questions? Please e-mail us at info@gmlegalexperts.com.