If I buy off-plan, what guarantee is there for the money I pay on account? And what if the developer goes bankrupt or did not give me a bank guarantee?

Question

José Manuel Alburquerque · Accepted Answer

The law requires a developer that takes money before handing over the home to secure its repayment, with interest, by means of a bank guarantee or an insurance policy covering each buyer. If the building work does not start or is not finished within the agreed period, for whatever reason, including the developer going bankrupt, you can recover what you paid from the bank or insurer that provided the guarantee. If you were given neither a bank guarantee nor insurance, the bank into which you made the payments may be liable, because it was required to demand that guarantee. Claim as soon as possible and in writing, because claims under the bank guarantee become time-barred if two years pass from the developer's breach without your having demanded that it cancel the contract and refund what you paid. The guarantee required by law The rule is in the “Ley de Ordenación de la Edificación” —the Building Act— and applies in the same way throughout Spain, including Catalonia. A developer that takes payments on account for a home under construction, even if it is a cooperative or an owners' association (a “comunidad de propietarios”), must: Secure the repayment of everything you pay, including the taxes paid with each instalment, such as VAT, plus interest. It must do so from the moment it obtains the building permit, with a bank guarantee or with surety insurance, a policy that pays out if the developer does not return the money. If it is insurance, there must be an individual policy for each buyer. Collect your payments through a special account, separate from the rest of its money, which it can only use to pay for the construction. State in the contract that it will refund what it has received, with which bank guarantee or insurance policy it secures this and into which bank and account payments must be made. The guarantee lasts until the home has its certificate of habitability (“cédula de habitabilidad”) and is handed over to you. In 2025 the “Tribunal Supremo”, Spain's Supreme Court, held that the bank providing the guarantee is liable for everything you paid, even if the guarantee was given for a smaller amount, with interest from each payment. Before paying anything, ask for the bank guarantee certificate or the insurance policy in your name, which the developer must give you when the contract is signed. Pay only into the special account, never in cash or into another account. How to recover the money If the home is not handed over to you within the agreed period because the building work has not started or has not been finished: Demand in writing that the developer cancel the contract and refund what you paid, by a method that leaves a record, such as a “burofax”, a certified letter with proof of content. If it does not pay you within thirty days, or if it is not possible to claim from it, you can go directly to the bank or the insurer. If the guarantee is a bank guarantee, do not let two years pass from the breach without making that demand, because claims under it would become time-barred. The insurance is not subject to that time bar, but it is not advisable to wait either. If the developer is in insolvency proceedings, what used to be called “quiebra” (bankruptcy), you can still claim from the bank or the insurer, because it is they, not the developer, who provide the guarantee. As a precaution, also lodge your claim with the insolvency practitioner, who manages the proceedings, normally within a month of the declaration of insolvency being published in the “BOE”, Spain's Official State Gazette. If you were given no bank guarantee or insurance Do not give it up for lost. The law requires the bank that opens the developer's account for receiving those payments to demand the guarantee from the developer, on pain of being held liable itself. The Supreme Court applies this as follows: The bank that received your payments is liable for what was paid into it if it knew or could not have been unaware that they were payments on account for homes under construction. It is liable even if the payments were made into an ordinary account of the developer, because it is expected to show the diligence of an experienced trader. In 2024 it added that the bank that discounted the bills of exchange used to pay the advances is also liable, that is, the bank that paid the developer their amount before they fell due. Gather the receipts for each payment, which show the bank and the account into which they were made. Before suing a bank or an insurer, the law requires you to attempt negotiation.