Bank Guarantees for Spanish Off Plan Developments

Published on 11/15/2006 in Buying Process

Know Your Rights!

The Aval Bancario (Bank Guarantee) or Insurance Contract were both established by a 1968 Law to protect buyers in off plan developments.

Article. 1. - The developer must guarantee the return of the deposited amounts plus 6% of annual interest, through an insurance contract or by bank guarantee, in circumstances where the construction doesn’t start or doesn’t finish in the agreed time.

They also need to open a special bank account for your amounts (different from the general one of the developer) and have it expressly written in the contract.

Article. 2. - In those contracts where the parties agree on anticipated amounts the developer must expressly state:

a) That the developer will give back to the buyer all the advanced amounts plus the 6%, in circumstances where the construction fails to start or end within the agreed deadline, or the certificate of habitation is not granted.

b) Reference to the bank guarantee or insurance contract, this must indicate the name of the Bank or the Insurance Company.

c) Specification of the Bank or financial institution and the account number where the buyer’s money is deposited.

At the signing of the contract, the developer will give the buyer the document that contains the guarantee (the Aval or the Insurance Contract) and the document must have a reference to the amount that is anticipated.

Article 3. – If the deadlines for starting or finishing the development are not met, the buyer can choose between cancelling the contract with the return of advanced amounts plus 6% annual rate, or to concede a time extension, which will be stated in an additional clause in the contract, specifying the new deadline with the date for finishing the construction and completion.

The insurance contract or the bank guarantee together with the document that fully proves that the work has not been started or that the completion deadline has not been met nor complied with, will have executive power as it is stated in the Title XV of Book II of Civil Procedure Law, to demand from the insurance company or the bank, the amounts that the buyer is entitled to, without prejudice of any other given rights also applicable.

Written by: Maria de Castro

About the author:

Maria de Castro is a Spanish Lawyer and the Director of the Law Firm

Costa Luz Lawyers are contract and consumer real estate law specialists covering all parts of Spain. You can contact Maria at

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mr j ward said:
Wednesday, February 9, 2011 @ 3:34 PM

i was not given a bank gurantee or insurance cover on an off plan in the canary islands i had to pull out of the contract due to not being able to get a morgage we we informed the developer of this in writing within the timescale the developer says he cannot refund our money till the property is sold this is not in our contract can you please tell me what course of action i can take

rjleek said:
Friday, August 21, 2009 @ 2:10 PM

we are pulling out of our off plan purchase which is almost complete but two years late, however our Bank guarantee runs out in five weeks. I can't get hold of my solicitor at the moment.

crippy said:
Tuesday, July 1, 2008 @ 7:06 PM

Do you need to go through a spanish court, to bring the bank guarantee into force. If the developer breaks his contract ?

arther08 said:
Wednesday, May 14, 2008 @ 8:11 PM

What document can be provided that fully proves that the completion deadline was not met? We have just lost a case where we did not have this!!!

madelaine said:
Tuesday, May 15, 2007 @ 2:44 PM

What if developer never give a Bank Guarantee,is that against the law?

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