Tips for the purchase of a new building

For all those who are interested in buying a property in Spain and especially in the Balearic Islands, buying a new building could be an interesting option.

In the following we will point out the most important points that a buyer should pay attention to when buying a new building.

Already the question of who is the seller should be considered. If it is a building contractor, it is advisable to check the solvency of the company. If you make a down payment and the building contractor goes bankrupt before signing the notarial deed of sale, you can only assert your claim in the insolvency proceedings.

In the case of apartments, it should first be clarified whether the notarial declaration of division (“división horizontal”) is already available. In the case of apartment buildings with several units, the purchase of a single apartment is only possible after the declaration of division has been made. In addition to the declaration of division, the following should also be submitted
the new building declaration before a notary (“declaración de obra nueva”) and the building approval by the municipality (“final de obra”) are already available.

One of the most important documents when purchasing a new building is the certificate of habitability, the so-called “cédula de habitabilidad”. The cédula de habitabilidad is issued in Ibiza by the island council, the Consell Insular, and is valid for 10 years. Without this document, neither electricity nor water contracts can be concluded with the utility companies.

Anyone who purchases a new building can therefore ask the seller for the relevant certificate. Property developers should not sell until the cédula is available. If the certificate of habitability is not yet available when the notarial deed of sale is concluded, the purchaser should at least impose a contractual obligation on the developer to produce this certificate at his own expense within a period to be determined.

In order to get the electricity and water connection, one needs the certificate of habitability as well as the certificates of the technical installations, the so-called “boletines de instalación” for electricity and water. When buying a new building, the “Seguro decenal” should also be available at the latest when signing the notarial deed of sale.
This is an insurance policy that the seller must take out to cover defects in the building. The insurance is valid for 10 years. In the contract of sale, it should also be noted that the municipal increment value tax, so-called “Plusvalia” must be borne by the building contractor, as this is often not negligible.

A value added tax of 10 % applies to new buildings when a private person is acquired from the contractor. It should be noted that 1.2% stamp duty is payable in addition to the value-added tax, so that a total of 11.2% tax is due. The payment of VAT replaces the otherwise usual land transfer tax of at least 8% of the notarial purchase price.

In summary, it can be said that the buyer of a new building must observe the following in the contract: The costs for the new building declaration, as well as the costs for the procurement of the official certificates for the utilities, the certificate of habitability and the value-added tax of the municipality are at the expense and cost of the seller.