Off-Plan in Costa Blanca North: Payments & Guarantees

The Costa Blanca North new-build market is busy. From Jávea to Moraira, Cumbre del Sol to Dénia's northern fringes, developers are launching projects with completion dates 18 to 36 months out. For buyers who want a property configured to their taste — or simply want to lock in today's price before it rises further — off-plan purchasing makes compelling sense.

But the payment structure is unlike anything you encounter when buying a resale home. Money leaves your account in stages over many months, long before any keys change hands. Understanding exactly what you are committing to at each stage — and what legal protection covers your payments — is essential reading before you walk into any developer's sales office.

Stage 1: The Reservation (Reserva)

The process begins with a reservation payment, typically between €3,000 and €10,000 (or around 1% of the purchase price on higher-value properties). In exchange, the developer takes the unit off the market while you carry out initial due diligence with your lawyer.

Is it refundable? That depends entirely on the reservation agreement. Many developers offer a short withdrawal window — often around two weeks — during which you can pull out and recover your reservation fee. This is not a statutory right under Spanish law; it is a contractual term that varies by developer and project. Have your lawyer scrutinise the reservation document before you sign or pay anything.

Stage 2: The Private Purchase Contract (PPC)

Once your reservation is confirmed and your lawyer has completed initial checks, you sign the Contrato Privado de Compraventa — the binding private purchase contract. This is the key legal document: it locks in the price, the unit specification, the payment schedule, and the contractual completion date.

At this stage you typically pay a significant tranche — commonly between 10% and 30% of the purchase price, less any reservation already paid. The exact figure varies by developer; some structures consolidate capital here, others spread it across later construction milestones.

This is the moment your payment-protection framework must already be in place (see the guarantee section below). Your lawyer should confirm that a valid bank guarantee or insurance policy exists for this payment before you transfer a single euro.

Stage 3: Construction-Stage Payments

As the build progresses — foundations, structure, roof, fit-out — developers call one or more further tranches. A common pattern is a single mid-build payment of 10–20% tied to a visible milestone such as the structure reaching roof level, though arrangements vary: some projects ask for nothing between PPC and completion; others have two or three staged payments.

Each tranche must be individually guaranteed. Your lawyer should request the guarantee certificate for that specific payment before your bank transfer goes out.

Stage 4: Completion — Keys, Notary and the Final Balance

When the building receives its Licencia de Primera Ocupación (LPO) — the local authority certificate confirming the building complies with planning permission and is fit for habitation — the developer will set a completion date. You attend the notary, sign the Escritura Pública de Compraventa, and pay the remaining balance. If you have a Spanish mortgage, your lender draws it down at this point.

The typical balance due at completion is 60–70% of the purchase price, depending on how much you have already paid in earlier tranches. Completion is also when you pay Spanish purchase taxes: on a new-build, that means IVA (currently 10% for residential property) plus AJD stamp duty (1.5% in the Valencian Community), rather than the ITP transfer tax that applies to resales.

The Developer's Legal Obligation: Guarantee or Insurance

This is the protection that sets Spanish off-plan purchasing apart — and makes it considerably safer than it once was.

Under current Spanish law — specifically the Disposición Adicional Primera of the Ley de Ordenación de la Edificación (LOE, Ley 38/1999), as updated by Ley 20/2015 de 14 de julio — every developer who accepts advance payments for residential off-plan property is legally required to:

1. Hold your payments in a ring-fenced, dedicated bank account, separate from the developer's general funds.
2. Back every payment with an individual bank guarantee (aval bancario) or an equivalent insurance policy covering 100% of your deposits plus statutory interest.
3. Issue you the guarantee document before you transfer each payment — not after.

If the developer fails to complete — whether through insolvency, planning refusal, or any other cause — you are entitled to a full refund of everything you paid, plus interest, claimed directly against the guaranteeing bank or insurer. Spain's Supreme Court has consistently reinforced these protections in recent rulings, confirming that banks which permitted developer accounts without properly issued guarantees are themselves jointly liable.

The rule is simple: never transfer a stage payment until the guarantee for that specific tranche is in your lawyer's hands.

Seven Questions to Ask a Developer Before You Sign

1. Building Licence: "Does this project already hold a valid licencia de obras, or is it still pending?" Guarantees have no legal force until a building licence is in place; a project still awaiting permission carries meaningful planning risk.
2. Guarantee provider: "Which bank or insurer is providing the aval? Can I see the master guarantee agreement?"
3. Individual certificates: "When and how will individual guarantee certificates be issued for each payment tranche, and in my name?"
4. Completion date and delay penalty: "What is the contractual completion date, and what compensation is written into the PPC if you deliver late?"
5. LPO timeline: "How long after practical completion do you typically obtain the Licencia de Primera Ocupación?" (The gap between a building being finished and the LPO being issued can delay your move-in date.)
6. IVA and AJD: "Are your quoted prices inclusive of IVA, or exclusive?" (This is a frequent source of surprise — a €400,000 quoted price becomes €440,000 plus stamp duty once tax is applied.)
7. Track record: "Which completed projects can I visit in this region, and can you provide references from buyers who have already completed?"

Your Lawyer Is Not Optional

Working with an independent Spanish property lawyer — instructed by you, not introduced by the developer — is non-negotiable for an off-plan purchase. They will verify the building licence before you reserve, review the PPC in full, check the developer's solvency, and confirm that valid guarantee documents exist before every payment leaves your account. The cost of that protection, relative to the sums at stake, is minimal.

The Costa Blanca North's new-build pipeline is one of the most active in Spain — and the legal framework for buyer protection is among the strongest in Europe. Understand it properly, and off-plan purchasing here is a well-structured, clearly protected route to owning exactly the property you want in exactly the right location.

Frequently asked questions

Q: Is there a statutory cooling-off period after I reserve an off-plan property in Spain? A: Spanish law does not grant a statutory cooling-off period for property contracts. Some developers voluntarily include a short withdrawal window (commonly around two weeks) in their reservation agreements — check the terms carefully with your lawyer before paying anything.

Q: What law requires a developer to provide a bank guarantee? A: The Disposición Adicional Primera of the Ley de Ordenación de la Edificación (LOE, Ley 38/1999), as amended by Ley 20/2015 de 14 de julio, requires every developer collecting advance payments for residential off-plan property to back those payments with a bank guarantee (aval bancario) or insurance policy.

Q: What happens to my money if the developer becomes insolvent? A: If your stage payments were properly guaranteed, you can claim directly against the guaranteeing bank or insurer for a full refund plus statutory interest. Spain's Supreme Court has upheld this protection in numerous cases — including situations where banks allowed developer accounts to operate without properly issuing guarantee certificates, making the banks themselves jointly liable.

Q: What percentage of the purchase price is typically paid before completion? A: Most buyers commit 30–40% across the reservation, PPC and any construction-stage tranches, with the remaining 60–70% paid at the notary on completion day.

Q: Which taxes apply to a new-build purchase, and when are they due? A: New-build residential property in Spain attracts IVA at 10% (not ITP), plus AJD stamp duty — currently 1.5% in the Valencian Community. Both are payable at completion, alongside notary and Land Registry fees. Budget approximately 13–14% on top of the purchase price for all taxes and fees.

Q: Do I need my own lawyer, or can I use the developer's solicitor? A: Always instruct your own independent Spanish property lawyer. The developer's solicitor works for the developer, not you. Your lawyer must review the PPC, verify the building licence is in force, and confirm that valid guarantees exist before each payment — tasks they cannot perform objectively if the developer is also their client.