EDICIÓN: August - October 2012

Advice in purchasing newly-built homes

Text: Anja Sämann-Gutschick y Armin Gutschick

For anyone interested in buying a property in Spain, and particularly in Ibiza, buying a new build directly from the developer can be a beneficial option, since these kinds of purchases are subjected to a reduced IVA (VAT) rate until the end of this year. The Spanish Government wishes to encourage private owners buying new builds, by reducing the IVA tax from 8 to 4%. The reason behind this is the huge offer of newly-built homes that floods the market, and which they hope to reduce through implementing this measure.
Here we will advise you on what is most important to consider when buying a newly-built property.
The first issue to consider is who is the seller. If it is a developer, it is advisable to check the company’s solvency since, should the building company go bankrupt before the public title deeds are issued, any deposit you have already paid will only be recoverable through a judicial claim within an insolvency process.
If it is an apartment or flat, it must be clear if the horizontal division has been carried out already, since buying a home in a building with various units is only possible if this step has been formally taken. Also, you must check that the New Build deed has been granted and that the council (Ayuntamiento) has approved the certificate that states the build is finished.
Another key document when buying a new build is the occupancy certificate which, in Ibiza, is granted by the Consell Insular. It has a 10-year validity and is essential in order to contract the supply of electricity and water.

Whoever is buying a new build can demand this certificate from the seller. A developer should not complete sales before having obtained the occupancy certificates, and if they cannot present it when it comes to signing the purchase contract, the buyer should obtain the seller’s contractual agreement to provide it within an established time-frame and to cover any subsequent expenses.
In order to connect to the networks that supply electricity and water, you must obtain, as well as the occupancy certificate, the installation certificates that are provided by authorized installers.

Also, and at the latest when signing the public deed, a ten-year coverage insurance that covers any building defects must be taken out by the seller, with a 10-year validity. You must also make sure that the deed reflects that the tax for value increase of urban plots, known as “Plusvalía Municipal”, must be satisfied by the constructor.
The abovementioned IVA reduction is applicable to purchases carried out by private persons from companies. You must also remember that, as well as IVA, a 1% tax is applicable for all documented juridical actions, which means the total tax to be paid is 5%. IVA is paid instead of the tax on property transfers, which is applied to other types of sales and is at least 7% of the property’s declared value.

In summary, we can say that whoever buys a new build needs to make sure that the contract reflects that all the expenses generated by the new build declaration, the occupancy certificate and the installation certificates, as well as the “Plusvalía Municipal”, must be covered by the seller. •