The sales contract of a property under construction in Spain

Definition and obligations of the parties

The sales contract of a property under construction is a contract through which the selling promoter commits to promoting the construction of a building, to commercialise it within a defined time frame, and to transfer it to the buyer once the construction is completed. The buyer commits to pay the agreed-upon price in order to acquire the aforesaid property and to fulfil the conditions set out in the contract for that transmission.

Thus, the object of the sales contract is a building which does not yet exist at the time of the conclusion of the contract, a future good. This building will have to be defined in as much details as possible in the contract. This is why the contract is usually accompanied by technical documents aiming to better define the building.

Before the conclusion of such a contract, both the selling promoter and the buyer will have to ask themselves the right questions, whether it is to seek the highest profitability, the safety of the transaction, or the best financing options while minimising all the risks involved in the transaction.

Here, the selling promoter assumes all the risks related to the promotion and the construction of the building. The selling promoter has to commercialise the building (to look for tenants and to rent it) and hand it back to the buyer once it has been commercialised, taking all the risks related to this situation.

The buyer on the other hand commits to pay the stated price and to acquire the property once it is finished in accordance with the conditions relating to the delivery of the building as per the contract.

Please note that there may be changes to the project for the construction of the building since the project and the technical documents regarding the construction might undergo changes. Any amendment to the contract requires the consent of the other party. Thus, if the amendments are proposed by the selling promoter, then the buyer may give his or her consent in order for these amendments to take place. Vice versa, if the buyer is the one to suggest these amendments, then the selling promoter may also give his or her consent.

The price

In order to set the price of the object of the sale, which is the building under construction, in practice two means can be used.

The first, and easiest, one consists in laying down a priori in the sales contract a total price which will not be susceptible to change during the construction of the building, unless otherwise expressly agreed to by the parties.

The second mean consists in establishing a variable price which will depend upon the profitability of the project determined on the basis of the profitability of the marketing of the premises.

The delivery subject to the fulfilment of the condition precedent

The parties may (and it is generally recommended to do so) adopt the conditions precedent in order to transfer the ownership of the building, in other words, both the contractual and the legal conditions that the building will have to satisfy in order to be delivered.

The most frequent conditions are the following:

  • Obtaining the necessary administrative authorisation, permit or license to the construction of the building
  • Realising the necessary act of fragmentation or of division in order to achieve the legal individualisation of the parcel of land on which the work will be performed
  • Delivery and inscription to the Spanish Land Registry (Registro de la Propiedad) of the building permit (declaración de obras nuevas)
  • Request and obtainment of the license of occupation and/or of the operating authorisation.

Cécile Proust & Clément-Henri Girardot

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Please note that this article is not intended to provide legal advice.

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