It has been the Law in Spain since 1968 (Ley 57/1968) that all deposits paid to property developers in good faith must be protected and that the buyer should receive a refund in the event that, for whatever reason, the property was not completed.

Unfortunately that law was abused and in many cases ignored. During the property boom of the 2000’s some developers failed to give genuine guarantees. Unfortunately when the financial crisis came in 2008, many investors lost their deposits and endured lengthy court battles to try and recover their funds.The current situation for buyers is very different. As of January 2016, Ley 57/1968 was superseded by Ley 20/2015. This new law has made significant changes to the original 1968 Statute..

Developers MUST now give guarantees on all deposits either via an insurance policy or guaranteed bank deposit. The guarantee must be specific to each property and each buyer with a guarantee for every payment made as opposed to an overreaching guarantee for the whole development. Hefty penalties can be imposed on developers who fail to comply.

The guarantee must cover not only the funds paid to the developer but any associated taxes and are also subject to statutory interest. 

The builder should give details of the guarantee in their marketing materials (although in reality, often the buyer must ask for that information to be given). The contract should state that the funds will be returned if the property is not completed within the specified time. If the build is delayed then the buyer can ask for the funds to be returned within 30 days or can volunteer an extension, the guarantee will then continue throughout the extension. The buyer has up to two years to make a claim on the guarantee.The new law dictates that bank guarantees will only commence once planning permission has been granted. This serves to emphasise the need to have planning permission in place before committing any funds to a purchase.

The guarantee will not expire until the habitation certificate is granted at which point it is established that building has been completed.