13 Having your own Property Built
This is perhaps the most difficult option, generally only to be recommended if you are already familiar with the Spanish market. It goes without saying therefore that you will need the services of a specialist Spanish lawyer, as well as your architect.
The first step is to check with the local Ayuntamiento that you can get permiso de obra (planning permission) to build on the land you want to buy, and if so, what the limits would be.
Land in Spain is zoned for development, which can restrict your options. There are green zones and rural areas where development will not be allowed. There are also rules, which limit building size in relation to plot size. The Ley de Costas may also limit your options. The permiso de obra may cost you up to 5% of the estimated building costs.
Land zoned for development or where building is allowed is called “suelo urbano”. If you are buying land, which is classified as “suelo urbano”, it is possible to mortgage this on the normal terms and conditions. If you are buying land where building is not allowed – “suelo rustico” – the maximum mortgage amount is 50% of the value, and the maximum term 12 years.
If you are buying a property in the country to restore or redevelop, there can be additional problems. Because of their age, it is often the case that escritura do not exist for such properties, and you need to establish your right to the property through a process known as expediente de dominio. This is a complex process involving publication of your claim in the Boletin Oficial del Estado (the Official Gazette). Once you have done this, you need to ensure that the records of the Registro de la Propiedad and the Catastro agree, and that these are in accordance with what local custom holds to be the property boundaries.
You are only allowed to build on a certain percentage of the land area. You need to check for availability of utilities – especially water and electricity. You need to check for servidumbres de paso (rights of way) as these cannot be blocked. For all these you need the services of your lawyer.
You then need to appoint an architect, and to agree a contract with him which specifies exactly what he is responsible for including timescales, and costs. His fees are recommended by the Colegio (note that they no longer fix set fees, so they can now vary) and are around 6% of the estimated costs of construction – you will be invoiced for 70% at the start of building, and 30% on completion (this will allow for any change in the final cost of construction).
The architect’s fee includes the preparation of the memoria de calidades. It is very detailed, including for example the formula for the concrete, the type of materials, and the size of pipes.
The architect will instruct an aparejador, a qualified architectural engineer, who will supervise the building, carry out on site inspections, and ensure the building is to the required standards. He will issue the architect’s certificates which are necessary to obtain the Certificado de Fin de Obra (Completion Certificate), and the Licencia de Primer Ocupación (Licence of First Occupation). The aparejador will charge around 3% of the estimated building costs.
You need to instruct your architect and your lawyer to inspect the Plan General de Ordenación Urbana (PGOU) – the Town Plan. If you are buying a plot in an urbanization, you also need to check the proyecto de urbanización and the plan parcial. These together will tell you what other developments are planned for the area, whether the urbanization is registered and legal, and anything affecting the individual plots themselves.
It will also tell you what building permits will be issued around your new property, and what the building regulations are. This is a complex and specialised task, and you need your expert advisers to do it for you.
One of the complaints often heard is about “unexpected” developments, which block the wonderful view when the land was first bought. The first point here is that if you have obtained planning permission, it is logical that others will be able to do the same in that area. The second point is that over 80% of the costas in the provinces of Alicante, Castellón and Valencia have been zoned for development, and there is still huge demand for building land – so if there is any spare land available, always assume that it will be built on.
Only if you overlook a “green” zone are you likely to be saved from building development, and even here the zones can be changed unexpectedly as in the UK, so this is still no long-term guarantee. Careful inspection of the PGOU should help.
You will need to prepare an exact specification for the building, and then find a reliable builder. Your architect may accept responsibility for this, and for supervision. You need to agree a completion date, with a penalty clause for late completion. This needs to be incorporated into a legally binding contract with the builder.
This contract should include very similar provisions as in the previous section. If you are happy to proceed, you then need to proceed with the contrato de compraventa for the land, more or less as outlined earlier in this Guide. Some of the pre-contract enquiries will not be required (depending on the history and previous ownership of the land), but you do need to make sure that the IBI are paid up to date. In this case you will eventually have two escritura – one for the original purchase of the land, and the second for the building. These will be treated separately for capital gains tax purposes.
In this case there is no legal reason why you could not obtain a mortgage, but most lenders in Spain are reluctant to lend on “self-build” projects (autoconstrucción) due to the high risk that something will go wrong.
As in the case for buying from a developer,there are Spanish banks that are prepared to “pre-approve” your loan application for when the property is completed and sold, and issue you with a formal letter of intent (subject to completion and valuation), which should enable you to obtain bridging finance with your own bank.