Investment approach
A finished new-build from the developer: documents, taxes and handover
A finished new-build has no sales history, but it has mandatory documents, LOE liability periods and IVA instead of ITP. What to ask the developer for and how to carry out the handover inspection.
A new-build from a developer is a flat that the buyer receives in the first transfer from the promotor (the developer) after construction is complete. Taxes work differently here than on the resale market: such a purchase is subject to IVA (VAT) of 10%, not ITP (the resale transfer tax) (Agencia Tributaria), and in Catalonia AJD (stamp duty) is added. After handover, the developer and the other parties to the construction are liable for defects within the periods of the Ley 38/1999 de Ordenación de la Edificación (LOE, the Building Act): one, three and ten years.
How buying a finished new-build differs from buying off plan
A finished flat can be viewed, the building's documents can be checked, and you can move in soon after the deal. The main questions are conformity with the promised specification, the quality of the work and the price.
When buying sobre plano (off plan) the buyer pays in instalments until handover, and the main risk is the safety of the advance payments. The law requires the developer to guarantee their return with statutory interest through a seguro de caución (a surety insurance policy) or a bank aval (guarantee), with an individual document for each buyer (additional provision 1 LOE). That scenario is covered separately in the articles on buying during construction and on the guarantee of advance payments. Here we are dealing with a building that has already been built.
Which documents to request from the developer
Before signing, the buyer requests the documents that confirm the building was lawfully built, is fit to live in and is insured. The order is this:
- Licence or authorisation for first occupation and the cédula de habitabilidad. For new flats in Catalonia the cédula is valid for 25 years (Decret 141/2012, art. 9). Without it the flat cannot lawfully be transferred or connected to utilities.
- Decennial insurance (seguro decenal). For buildings whose main use is housing, ten-year insurance against structural defects is mandatory, with cover of no less than 100% of the cost of the building works (art. 19 and additional provision 2 LOE). The policy is identified by the insurer's name and number.
- Libro del Edificio (the building book). The project with approved changes, the building's completion certificate, the list of parties to the construction and the use and maintenance instructions are handed to the end users (art. 7 LOE).
- Nota simple (the land registry extract). The flat must be registered as a separate unit, and it shows whether the developer's mortgage is on it, which will be cancelled or split before the sale.
- Memoria de calidades (the specification of finishes) and plan. The specification against which the flat is compared at handover. Vague wording such as "high-quality materials" is pinned down in writing.
What the taxes come to: IVA and AJD instead of ITP
The first sale of new housing by a developer is subject to IVA at 10%, and at 4% for protected housing of the special regime. The sale of second-hand housing by a private person or a company goes under ITP. In Catalonia, a first transfer with IVA also attracts AJD of 1.5% (ATC, guia ITP).
Worked example, not a forecast. A flat priced at 500,000 € without parking.
| Scenario | Purchase tax | Tax amount |
|---|---|---|
| New-build from a developer | IVA 10% and AJD 1.5% | 50,000 € + 7,500 € = 57,500 € |
| Resale from a private seller | ITP 10% on the part of the price up to 600,000 € | 50,000 € |
At the same price, the new-build costs 7,500 € more in tax. The difference changes both the budget and the comparison with resale; more in the article IVA or ITP.
How to carry out the handover inspection
The inspection is carried out before signing at the notary, together with a technical specialist. A list of defects is drawn up with photos, and the deadline for putting them right is agreed with the developer in writing. Chips, sockets that do not work and windows that close badly are easier to sort out before the keys are handed over than through the warranty.
Liability periods run from the date the building is accepted without reservations (art. 17 LOE):
| Period | What is covered | Who is liable |
|---|---|---|
| 10 years | Foundations, supports, beams, floor slabs, load-bearing walls, if they threaten strength and stability | The parties to the construction, the developer jointly |
| 3 years | Elements and building systems that cause habitability requirements to be breached | The parties to the construction, the developer jointly |
| 1 year | Finishes and completion elements | The builder |
A claim for these defects must be filed within two years of the moment the damage appeared (art. 18 LOE). So defects are recorded in writing at once, and the claims procedure is confirmed with an abogado (lawyer).
How to check the price of a new-build
A new flat has no sales history, so it is compared with two groups: other new-builds in the area, including recently sold ones, and transactions in good-condition resale housing nearby. The difference shows how much extra the market pays for "new".
It is useful to see how the developer's price list changed by sales phase, which flats remain unsold and what is paid for separately: parking, storeroom, finish upgrades. With a developer buyers less often haggle over the base price and more often over parking, finishes or the payment schedule.
When buying a new-build is not the right fit
A new-build does not suit a buyer who needs a quick deal without doing their own quality control: the handover inspection and correspondence about defects take time. Nor does it suit someone who compares only the price per metre: IVA with AJD and surcharges for parking change the result.
If the developer cannot show the cédula, the decennial policy or the registration of the flat as a separate unit, it is reasonable to stop before the deposit. DNPI gives an independent view of a new-build's price against nearby transactions as part of a property valuation.
Questions and answers
What tax does the buyer of a new-build in Catalonia pay?
IVA at 10% on the first sale of housing by the developer and AJD at 1.5% according to the ATC guide. On the resale market ITP is paid instead, on a scale starting at 10%.
How many years is the developer liable for defects?
Under art. 17 LOE, ten years for structural defects, three years for defects that breach habitability and one year for finishes, the last being the builder's liability. The periods run from the date the building is accepted.
What is decennial insurance and is it mandatory?
It is insurance against structural defects for ten years. For buildings whose main use is housing it is mandatory, with cover of no less than 100% of the cost of the building works.
What is the Libro del Edificio and why does a buyer need it?
It is the package of documents on the built building: the project with changes, the completion certificate, the parties to the construction, the use and maintenance instructions. Under art. 7 LOE it is handed to the end users, and it is needed for maintaining the building and for claims.
Can I negotiate with a developer?
Sometimes, but usually not on the base price; rather on parking, a storeroom, finishes or payment terms. It more often works towards the end of sales or on flats that have been slow to sell.
