Investment approach
Which Decisions in a Property Project the Investor Approves
Investors usually reserve decisions that change their money or risk: budget overruns, the contractor, the sale price, debt and a pledge. The rest stays with the operator.
An investor's rights in a property project are usually built around the decisions that change their money or risk: exceeding the budget, choosing a contractor for a large sum, the price and terms of sale, new debt and a pledge over the asset, and transactions with related parties. The rest is, as a rule, decided by the operator. The exact list is set by the project contract, and the law by default gives less than people expect.
Which decisions to reserve for the investor
The parameters in the table are illustrative: set your own thresholds together with an abogado (lawyer).
| Decision | Risk it covers | How to word it |
|---|---|---|
| Budget overrun | Money leaves without your knowledge | Consent if spending exceeds the reserve or a set amount |
| Choice of contractor and large contracts | An inflated price, a related contractor | Comparison of offers, consent above a threshold |
| Sale price and terms | A sale below the expected level | A minimum price, or approval of offers below it |
| New debt, a pledge over the asset | Encumbrances and priority creditors appear | Consent to any loan and pledge |
| Transactions with related parties | Terms off the market | Disclosure and consent |
| Change of strategy or term | A different project from the one you bought into | Consent to an extension and to a change of scenario |
| Additional contributions | Dilution or a shortfall of money | The procedure and the consequences if you do not contribute |
More on controlling the estimate and comparing contractors in the articles on renovation budget control and on comparing contractors.
What the law gives by default
If the project is set up as an SL, resolutions of the meeting are passed by a majority of the votes cast, provided that at least a third of all votes are cast in favour (art. 198 Ley de Sociedades de Capital); an amendment to the articles needs more than half of all votes (art. 199). At an equal 50/50, neither side can carry a resolution without the other. The sale, purchase or contribution to another company of an essential asset falls within the competence of the meeting; an asset is presumed essential if the transaction exceeds 25% of the value of assets on the last approved balance sheet (art. 160). For an SL where the property is the main asset, this is an important rule.
The articles may require a higher majority, but not unanimity (art. 200). A member to whom the meeting grants a right or whom it releases from an obligation does not vote on that matter (art. 190). An administrador (director) must disclose a conflict of interest and not take part in decisions where they have one (art. 228–229).
If the project is set up as a comunidad de bienes over an asset in Catalonia, the Book V of the Código Civil de Cataluña applies, not art. 398 of the general Código Civil. Ordinary management is decided by a majority by size of shares, extraordinary management requires three quarters of the shares, and a sale or pledge of the asset, as acts of disposal, requires unanimity; dissenting participants may apply to a court (art. 552-7). If the parties' decisions are recorded only in an agreement between the participants, it binds the signatories but not the company itself (art. 29 LSC).
How not to turn approvals into a brake
Operators need freedom on small things, otherwise the project stalls. Agree thresholds and deadlines in advance. A worked example, not DNPI's terms: the renovation estimate has a €10,000 reserve; the operator may spend it on their own, and any spending above the reserve is approved with the investor in writing within an agreed period. Decide separately what counts as consent if the investor does not reply: silence does not become consent by itself, and the consequences need to be written down. And set up a channel: decisions and documents should stay in the cabinet or another system, not in a messenger.
The contractor and related parties
On DNPI projects, renovation and construction are carried out by BCNYARD, SLU, an independent construction company engaged under contract. As in any structure where the operator works with the same contractor repeatedly, the investor should ask how the estimate is agreed, whether it is compared with other offers and how changes to the scope of works are documented.
Which decisions the investor approves in DNPI projects
This is determined by the contract for the specific project. The published parameters of the model concern something else: DNPI's fee is 50% of profit, the investor buys and pays directly, the investor gets a digital cabinet with the budget and the status of works. The list of decisions that need your consent has to be found in the contract, not inferred from the description of the model. What exactly the investor sees in the project is covered in the article on the digital cabinet.
Who broad veto rights do not suit
If you want to approve every payment, the operator will have to work for you rather than on the project, and timelines will grow. If you are not ready to read the estimate and reply on time, a veto becomes a formality. A workable compromise is a narrow list of decisions with thresholds in euros. How to build in an exit price is described in the article on exit strategy.
Questions and answers
Which decisions should an investor approve?
Those that change their money or risk: exceeding the budget, a contractor for a large sum, the sale price, new debt and a pledge, transactions with related parties.
Does a 50/50 share give a veto?
Not automatically. In an SL with equal votes the parties block each other on matters that need a majority, but the order of decisions is set by the articles and the contract. A share of profit and votes are different things.
Can the operator take a loan secured on the asset without the investor's consent?
It depends on the contract, the articles and the form of the project. The right to borrow and to pledge is usually fixed in a separate clause. In a comunidad de bienes over an asset in Catalonia, a pledge requires the consent of all participants (art. 552-7 Código Civil de Cataluña).
What if the parties cannot agree?
A written procedure is needed: escalation, mediation, then court or arbitration. It is described in the article on exiting a project.
