When buying a new-build property in Spain it is important to know the different stages in the process, and Breezom is here to give you some very valuable tips that you might want to take into account.
Of course, to begin with, it is essential to undertake a search to find a property that matches the location, features and specifications you are looking for and once you are successful, the first thing you must do is to sign a reservation document that takes the property off the market and guarantees that you will be able to purchase it.
After this agreement, the purchase is formalised through the signing of the public deed before a notary where the remaining amount of the property is handed over. This document contains the terms and conditions governing the sale of the property.
It is always advisable that this process is carried out with the advice of a lawyer specialising in real estate law.
What is a reservation contract for a new-build property?
A reservation contract is a document that contains a private agreement between the seller of the property and the buyer, the signing of which establishes a commitment between both parties that ensures the purchase of the property. This contract lays down the terms and conditions under which the purchase is to be made, such as the price, delivery and payment deadlines, and the payment method.
In addition to signing the document, a sum of money is paid as a down payment on the commitment to purchase, which is then subtracted from the amount of the price of the property, which usually ranges between 5% and 10% of the total.
The reservation contract is carried out so that the person who wishes to purchase the property guarantees the right to make the purchase during a previously established period of time and the seller undertakes to deliver the property within the agreed timeframe and with the estimated technical and habitability characteristics.
However, signing this document does not mean that the buyer cannot withdraw from the contract. However, the contract cannot be rescinded unless there are cancellation clauses and the conditions for this are met, so if they do decide to do so, however, they may lose the amount paid as a deposit.
Model reservation contracts
The reservation contract must include a number of details about both parties and information about the property.
- Personal details of the buyer and seller (name, ID number, etc.).
- The land registry number to ensure the identity of the owner.
- Characteristics of the property: the address, associated facilities such as a garage or storage room, footages, etc.
- The certificate of liens on the property to verify whether the property is encumber with liens such as a mortgage.
- The amount of the deposit, which is usually between 1% and 5% of the total price of the property.
- The T&Cs for the remainder of the payment of the property; seller and buyer determine how the rest of the price is to be paid and who bears the costs.
- Termination clauses, if included, determine what causes could justify the termination and unpenalized withdrawal from the sale.
Obligations of the reservation contract
The signing of the reservation contract commits the signatories to a series of rights and obligations.
- Buyer: the buyer is entitled to purchase the property at the price agreed with the seller. This commitment means they cannot change their mind, regardless of the reason, including lack of financing or because they find a more suitable property. Also, he must pay the amount of the property within the deadlines stipulated in the agreement.
- Seller: by signing the reservation contract, the seller is obliged to sell the property to the buyer.
What is the earnest money contract?
This document is also signed to secure a purchase and sale agreement for a property between two parties: seller and buyer. It is legislated by the Civil Code, so it has greater legal security than the reservation contract. The earnest money contract can be rescinded if the corresponding compensation is paid, and in this contract it is also necessary to pay a deposit.
Differences between a reservation contract and a deposit contract
In order to know which of the contracts is more appropriate, the circumstances must be taken into account. If the buyer is absolutely sure that they want to buy the property, it is best to sign a reservation contract so that the seller does not sell it to someone else who is interested.
If the buyer has some doubts, such as when waiting for the bank to confirm financing, it is best to sign an earnest money contract, as it is possible to terminate the agreement if necessary because the purchase cannot be finalised.