Do Not Pay a Developer Without a Bank Guarantee or Insurance in Spain
Buying a property off-plan in Spain, particularly in high-demand areas such as Altea, Albir, Calpe, Moraira or other locations in the Costa Blanca, can be an exciting opportunity. However, it also carries significant legal and financial risks if proper safeguards are not in place.
At ALTEALEX, we regularly assist clients who, unfortunately, only discover these risks when it is too late.
Before You Pay a Developer in Altea or any other city in the Costa Blanca, read this first.
One of the most critical rules is very simple: Never pay any money to a developer without a valid bank guarantee or insurance policy in place.
Why This Matters: A Real Risk for Off-Plan Property Buyers
One of the most distressing situations a Off-Plan Property buyer can face is:
- Paying a substantial deposit
- Seeing the construction delayed, halted, or never started
- Being unable to recover the money
While not extremely common, these cases still occur and when they do, the financial consequences can be severe.
What Does Spanish Law Require?
Under Spanish law (Law 38/1999 – Building Act), developers who receive advance payments are legally required to:
✔ Provide a bank guarantee or insurance policy. This must secure:
- All amounts paid in advance
- Applicable taxes
- Legal interest
✔ Open a special bank account. Funds paid by buyers must be:
- Deposited in a separate account
- Used exclusively for construction purposes
When does this obligation apply? Once the building licence is granted. Before that moment, advance payments may not be legally protected.
What Risks Do You Face Without This Protection?
If the developer fails to provide a guarantee, you could face:
– Loss of your deposit: if the developer becomes insolvent or the project fails, recovering your money may be extremely difficult.
– Lengthy and costly legal proceedings: Court claims can take years due to delays in the judicial system.
– Missed legal deadlines: If you do not act in time, you may lose your right to claim.
– Hidden financial or planning issues: The absence of a guarantee may indicate deeper problems within the development.
What Should the Guarantee Cover? A valid guarantee must include:
- All advance payments
- VAT or applicable taxes
- Legal interest up to the agreed completion date
It should be individual and issued in your name.
When does the guarantee expire? When:
- The property is completed
- The occupancy licence is granted
- The property is delivered to the buyer
Key Advice Before You Pay Anything
To protect your investment:
✔ Do not pay before the building licence is granted, even if the property is highly attractive.
✔ Verify the developer’s solvency, research their track record and financial stability.
✔ Demand the guarantee at contract signing, do not accept vague assurances or promises without documentation.
✔ Seek professional legal advice, especially if you are a foreign buyer unfamiliar with Spanish regulations.
How Altealex Protects Off-Plan Property Buyers
At ALTEALEX, we go beyond traditional real estate services.
As a law firm with more than 45+ years experience in real estate transactions, we provide:
- Full legal due diligence before purchase
- Verification of guarantees and documentation
- Risk assessment of developers and projects
- Ongoing legal support throughout the transaction
Our goal is simple: to ensure your investment is safe from day one.
Why Clients Trust Altealex?
- Over 45 years of legal and real estate experience
- Deep knowledge of Spanish property law
- We have been involved in over 2,500 property sales transactions
- Proven track record in complex transactions
- Trusted by both national and international clients
- We hold a professional indemnity insurance policy
Thinking of Buying Off-Plan Property in Altea?
Before making any payment, make sure your investment is properly protected.
At ALTEALEX, we provide a clear, honest and professional assessment of your situation.
