Buying new-build property in Andalusia 

New-build versus existing property: the fundamental difference

With new-build properties, you pay VAT (IVA) and stamp duty, whereas transfer tax applies to existing homes. Furthermore, the handling of guarantees and completion conditions differs: new-build properties come with statutory guarantees on construction and finish, whereas existing homes do not always offer these.

In practical terms, the main difference is this: with existing property, you buy what you see, but sometimes with hidden risks. With new-builds, you buy something that does not (yet) exist, but with greater legal protection where necessary.

Costs: what extra do you pay?

New-builds: VAT on new-builds is 10% and stamp duty is 1.5%. For new-builds, you should therefore factor in 13.5 to 14% in buyer's costs.

Existing properties: When purchasing existing homes, the transfer tax (ITP) varies from 4% to 10%, depending on the region. In Andalusia, the rate is 7%. Add to that the notary and solicitor's fees: a total of around 10% on top of the purchase price.

Andalusia (i.e. the Costa del Sol, including Estepona, Benahavís and Marbella) is relatively affordable compared to other regions.

The estate agent's fee is always paid by the seller, for both new-build and existing properties.

Buying off-plan: how does it work?

Most new-build properties on the Costa del Sol are sold off-plan: you buy before the building has been constructed. The advantage is that the buyer can secure a discount on the final purchase price once the property is completed. This discount typically ranges from five to twenty per cent. In addition, the buyer has the opportunity to influence the design of the property.

Payment schedule: on average, you pay between 40% and 50% of the purchase price within a period of 1 to 6 months, whilst the remaining amount is paid upon transfer of the property.

Rule of thumb: you only become the legal owner once the notarial deed has been executed and registration in the Spanish Land Registry (registro) has taken place. This occurs upon completion, not upon signing.

The bank guarantee: non-negotiable

This is the most important safety net for off-plan purchases. A bank guarantee for the construction instalments paid is a legal requirement in Spain. A bank guarantee ensures that future construction instalments due to the developer are protected in the event that the developer goes bankrupt. A bank guarantee is only issued if there is a valid building permit and the developer owns the land.

Please be aware of this specific risk: sometimes property developers start selling new-build projects, or even begin construction, before they have actually acquired ownership of the land. Anything built on this land automatically becomes the property of the landowner.

The Licencia de Primera Ocupación: the key document

This is the most underestimated document in new-build projects and is directly relevant to utility connections.

The Licencia de Primera Ocupación, literally 'First Occupancy Licence', confirms that the property meets all structural requirements and regulations and can therefore be occupied. Another function of the Licencia de Primera Ocupación is that it is required to register the property for various utilities, such as water, electricity and gas connections. If the Licencia de Primera Ocupación is missing, the property's existing and functioning utilities will still be registered in the contractor's name. In such a case, the occupant of the property could have their supply cut off immediately if the contractor decides to stop paying the bills.

In short: without this licence, you are not connected. Or rather: you are dependent on someone else to pay the bills. That is a serious risk.

Without this document, you cannot connect water or electricity and you are not officially permitted to let the property.

The good news is that new-build projects always have a Licencia de Primera Ocupación; otherwise, the transfer of ownership will not be signed. Nevertheless, verification by your solicitor is essential, even for existing properties.

Warranties for new-build properties

In Spain, sellers are required to take out a 10-year insurance policy to cover any construction defects that may arise during the development of the property. This insurance gives the buyer of a new-build property the assurance that, should any structural issues arise, they can make a claim under the policy.

With existing properties, you do not have this guarantee, unless it is included in contractual agreements with the seller.

Utility connections: is everything connected on completion?

In theory, yes, but there are practical snags. Upon handover, your solicitor will check that the connections to utilities such as water and electricity are correct (Boletín de Agua y de Luz).

For new contracts in your name: new contracts for water and electricity will be more expensive. The reason for this is that in some cases a certified electrician or plumber must draw up a special 'boletín' (technical report). The entire process of registering new service contracts can also take several weeks.

Your solicitor will arrange this: the solicitor will use the power of attorney to apply for your NIE number and to connect the utilities.

HOA and community fees

For apartments and gated communities, a Homeowners' Association (HOA, in Spanish: Comunidad de Propietarios) is mandatory. These are monthly or annual charges for the maintenance of communal areas, the swimming pool, security, and so on. In the Estepona-Benahavís-Marbella triangle, these can be relatively high due to the luxury facilities. Always ask about the exact community fees in advance. This is separate from the purchase price and is sometimes underestimated by buyers.

The three locations: what makes them different?

Estepona: Estepona retains its authentic Spanish charm whilst developing into a luxury destination. The 'new golden mile' around Estepona is attracting more and more buyers. The development has been carefully planned with an emphasis on walkability, sustainability and green spaces. Entry level lower than Marbella, growing supply of new-builds, prices rising rapidly.

Benahavís: Benahavís offers mountain tranquillity with gourmet restaurants in a picturesque white village. This is a municipality known as one of the wealthiest in Spain. Many gated communities and golf resorts. Pay particular attention here to the development status of plots: outlying areas are sometimes subject to different zoning regulations. Always check whether the project is 'urbano' and not 'rústico'.

Marbella: The highest price level of the three. Some of the most sought-after areas for property purchases include Nueva Andalucía, the famous Golden Mile, El Madroñal and La Zagaleta. More international buyers, higher community fees, but also higher rental potential where permitted.

Checklist: what should you check before signing?

This is the key to any new-build purchase in this area:

1. Does the developer have a valid building permit (Licencia de Obras)?
2. Does the developer own the land (otherwise a bank guarantee is not possible)?
3. Is there a bank guarantee for all instalment payments?
4. Has the Contrato de Arras (purchase contract) been reviewed by an independent solicitor?
5. Has a Licencia de Primera Ocupación been applied for or already granted?
6. Have water and electricity been officially registered in the buyer's name (Boletín)?
7. Is the property registered in the Spanish Land Registry?
8. What are the exact community fees?
9. Is there a 10-year building insurance policy in place?
10. If planning to let: is an RTA letting licence obtainable for this property?

Important practical advice

Hire an independent Spanish solicitor who is not affiliated with the developer. This costs around 1-1.5% of the purchase price, but in this country it is the equivalent of good insurance. An estate agent works on behalf of the seller; a solicitor works for you. A buyer's agent also works for you — that goes without saying. The legal system in Spain works differently to that in the Netherlands: here, the lawyer largely fulfils the role that the notary performs in the Netherlands.