Off-plan bank guarantee in Spain: protection of your payments

When buying an off-plan property in Spain, the buyer's money is protected by a bank guarantee (aval bancario) or a security insurance policy (seguro de caución). From the moment the building permit is obtained, the developer should guarantee the return of all payments together with taxes and statutory interest in case construction does not start or is not completed by the agreed date. They should also receive funds into a special account and give the buyer a document confirming the security.

This is not a formality that can be put off “until later”. It is one of the most important documents when buying property from a developer in Spain.

Question	Answer
What is a bank guarantee?	It is security for the money paid by the buyer towards a property under construction.
What does the guarantee protect?	Refund of the sums paid, together with taxes and interest, if construction does not begin or is not completed by the agreed date.
Should every payment be secured?	As a rule, the security should cover the amounts paid towards the price during construction, in accordance with the contract and the regulations.
Is it enough that the developer says “the payments are safe”?	No. The buyer should receive a specific guarantee or insurance document.
Who should check the guarantee?	An independent lawyer acting on the buyer's side.

What is an off-plan purchase and why is the guarantee so important?

An off-plan purchase means buying a property that is not yet completed – at the stage of plans, permit, construction begun or works well advanced. The buyer does not acquire a finished apartment, but a unit that is to be built and handed over in the future.

The decision is then based on the project of the development, floor plans, visualisations, location, technical specification, payment schedule, the contract with the developer, the development's documents and the security for payments.

Off-plan is popular because it often lets you choose a better unit (floor, view, layout), benefit from a lower price at an earlier stage and spread the payment over time. In new developments on the Costa Blanca, Costa Cálida or Costa del Sol, buyers pay attention to pools, gardens, gyms, parking spaces, storage rooms and a higher energy standard of buildings.

However, it requires more caution than buying a completed property, because the buyer pays money before the apartment exists. A typical schedule is:

reservation payment,
part of the price on signing the contract,
further instalments during construction,
the remaining amount at the notarial deed.

So even before collecting the keys, the buyer may hand the developer a significant part of the price. The problem arises when:

construction does not begin or is halted,
the developer fails to complete the development on time or has financial problems,
it is not possible to obtain the document permitting occupation of the property,
the buyer does not receive the unit in accordance with the contract.

That is why the Building Planning Act states that, from the moment the building permit is obtained, the developer should guarantee the return of the amounts paid, together with interest, by insurance or an aval solidario if construction does not start or is not completed by the agreed date. When you buy a finished property, you see the unit. With off-plan, you have to check whether the developer's promise is properly secured.

What exactly does the guarantee protect and which payments does it cover?

The guarantee protects the money paid to the developer towards the price of a property under construction. If the developer does not start construction or does not complete it by the date in the contract, the buyer can claim a refund in accordance with the terms of the guarantee and the regulations.

Under Spanish regulations, the amount of the security must cover all sums paid under the contract, including applicable taxes, plus statutory interest from the date of actual payment to the planned date of handover of the property. The protection should cover:

amounts paid towards the price,
taxes related to these payments,
statutory interest,
the specific property and the specific buyer, if the guarantee is individual.

In practice this means payments made before the completion of the development and the notarial deed: the reservation payment, the first instalment after signing the contract, subsequent instalments from the schedule and the related taxes. Each payment should be clearly described – whether it is part of the price, a reservation fee, a deposit or another consideration. Payment models differ between developments, so the buyer must know the nature of a given payment and whether it is protected.

The regulations provide that funds paid in advance should be received by credit institutions and deposited in a special account, separate from the developer's other funds, which can be used solely for the construction of the homes. Before making a transfer, check:

the recipient of the funds and the account number,
the basis for the payment and the document on which you are paying,
the terms of refund,
the link between the payment and the specific property,
whether the funds are going into the right account.

Warning signs are sentences such as: “please pay first, the document will come later”, “it is only a reservation, no guarantee is needed”, “everyone does it this way”, “the guarantee will be issued collectively”, “proof of the transfer is enough”.

When and how to call on the guarantee?

You can call on the guarantee in the situations set out in the regulations, the contract and the guarantee document itself. Most often when construction does not start, is not completed by the agreed date, the property is not handed over in accordance with the terms, and the developer does not return the money despite a formal demand.

Procedure according to the regulations:

The buyer calls on the developer – in a manner that allows the demand to be proved – to refund the sums paid, taxes and interest.
If the developer does not return the money within 30 days, the buyer may claim payment from the guarantor or insurer.
A direct claim against the guarantor may also be possible where a prior demand on the developer is not possible.

The guarantee therefore does not work like a simple “give the money back” button. The buyer should have the contract, proof of payments, the guarantee document, correspondence with the developer, evidence of a formal demand, and documents confirming the delay or the failure to carry out the development.

Deadlines are key. In the case of a bank aval, Spanish consumer sources indicate that after 2 years from the breach of the secured obligation, without the buyer demanding termination of the contract and the return of payments, the guarantee may expire. In the event of a serious problem with the construction, it is not worth waiting “for the situation to sort itself out” – you must consult a lawyer about the documents immediately.

Bank guarantee or insurance – what is the difference?

Spanish regulations allow two forms of security for the refund of payments. The aim is the same; the issuing party and the form of the document differ.

Bank guarantee (aval bancario)

It is issued by a bank or another authorised credit institution (aval solidario). The bank undertakes to pay the buyer specified amounts if the conditions of the guarantee are met – e.g. the developer does not start or complete construction on time and does not return the funds after a formal demand.

Insurance (seguro de caución)

It is concluded with an authorised insurance company. If the developer fails to fulfil the obligations covered by the security, the buyer can claim payment from the insurer in accordance with the terms of the policy and the regulations.

Which is better?

More important than the word “bank” or “insurance” is whether the document actually protects the payments. The buyer does not have to decide which form is more advantageous – they should have a lawyer who will check whether the specific security is correct.

How do you check whether the guarantee is correct?

The document must be real security for a specific payment, a specific buyer and a specific property, not a general promise. Check:

Buyer's details – who the beneficiary is; with two buyers, both persons must be correctly named. A mistake can make it harder to pursue claims.
The developer's details – they must match the contract and the registry documents. If the contract names one company and the guarantee another, clarify this before paying.
The development and the unit – the name of the development, the unit number, the phase, the parking space and storage room, if they are part of the purchase.
The amount – whether it covers all payments, taxes and interest; for subsequent instalments, each should be covered by the security.
Period of validity – it must not end before the planned handover; in the event of delays, check whether the guarantee has been extended.
Conditions for calling on it – whether a demand to the developer is required, in what form, which documents to attach, to whom to address the claim, and what the deadlines and exclusions of liability are.
Consistency with the contract – the details, amounts, dates, unit, schedule and refund terms must be consistent in both documents.

The role of an independent lawyer

The developer sells the property, the agency helps you through the process and with choosing an offer, and the lawyer checks whether the documents protect the buyer's interests. These are three different roles. The lawyer should verify, among other things, whether the developer is entitled to accept payments, whether the development has a building permit, whether the funds go to the correct account, whether the guarantee was issued by an authorised entity and whether it covers the right buyer, unit, amount, taxes and interest.

The Spanish authorities point out that when buying an apartment off plan (sobre plano), the checks are more complex and include, among other things, the existence of the developer and its representative in the commercial register, the registration of the land in the developer's name, the building permit, and whether payments go into a special account.

The lawyer should act solely on the buyer's side – not out of mistrust of the developer or agency, but for a clear division of responsibility. If someone discourages independent legal advice, it should raise caution. It is best to involve a lawyer before signing documents and before paying larger sums; after payment their options may be more limited.

The most common mistakes buyers make when paying a developer

The biggest mistake is treating a payment as a formality. In a transaction worth several hundred thousand euros, every transfer should be preceded by calm verification.

Payment before checking the documents – a reservation paid before a lawyer has seen the contract and the refund terms; especially risky with a high amount or an imprecise reservation document.
Agreeing to the document “later” – you need to establish when and on what terms the guarantee will be issued, and have this in writing. Verbal promises are not enough.
Failure to check the account – the number must match the documents and be confirmed through a secure channel. Do not pay on the strength of an email alone, especially when the number appears suddenly or changes just before payment.
No confirmation of whether the payment is secured – a general assurance that “payments are protected” is not enough.
Signing addenda without a lawyer – an addendum extending the completion date may limit the possibility of claiming a refund or relying on the guarantee.
Failure to keep records – keep contracts, addenda, proof of transfers, guarantee documents, correspondence, listing materials, schedules and confirmations of receipt of documents.
Waiting too long – when construction has stopped, the developer does not respond or deadlines are repeatedly pushed back, consult a lawyer straight away.

What to check before paying any money?

Our most important advice: with an off-plan purchase, do not pay money on the strength of visualisations, a brochure and an assurance that “this is standard”. The standard should be security. Before making a transfer, make sure that:

you know the developer exactly,
the development has the required permits and you know what stage construction is at,
you understand the payment schedule and have a clear contract,
you know the account number and the recipient of the transfer,
you know whether the payment is covered by the guarantee, and you have received the guarantee or insurance document,
an independent lawyer has checked the documents,
you understand what will happen in the event of a delay.

Buying property from a developer in Spain can be a very good decision. The primary market offers new construction, comfortable common areas, energy-efficient solutions and often a very good standard of finish. But the earlier the stage of the development, the more the documents matter. Safety does not rest on trusting the visualisations – it rests on documents.

Frequently asked questions

Is a bank guarantee mandatory when buying off-plan?

Yes. Spanish law imposes an obligation to secure the refund of amounts paid towards homes under construction from the moment the building permit is obtained – through insurance or a bank guarantee.

Is every reservation payment protected?

It depends on the structure of the contract, the nature of the payment and the documents. Before the transfer you need to check whether the payment is part of the price and whether it is covered by security.

Is proof of transfer enough?

No. Proof of transfer only shows that the money was sent. The buyer should have a guarantee or insurance document confirming protection of the funds paid.

How long does the developer have to return the money?

After a documented demand, the developer has 30 days to return the payments, taxes and interest. If they do not, the buyer can claim payment from the guarantor or insurer.

What to do if construction is delayed?

Check the contract, the guarantee document, the correspondence and the current schedule, and do not sign addenda without a lawyer. Do not delay – in the case of a bank aval, 2 years after the breach of the obligation, without a demand for the return of payments, the guarantee may expire.

Aria Spain, a licensed agency (RAICV no. 4123) selling new properties from developers with no commission for the buyer, guides clients in English through the whole process – from choosing a development, through contact with the developer and the notary, to collecting the keys – and recommends verification of the documents by an independent lawyer. Book a free consultation to discuss an off-plan purchase.