Investment approach
Private investor in a housing development: roles and money
A promotor under LOE is the party that decides on, programmes and finances the works. A breakdown of what the investor signs, in whose name the asset is held and where the money sits at each stage.
A private investor enters a housing development not as the buyer of a flat but as a participant in a project structure, and their position is defined by three documents: the participation agreement, the articles of the project company and the contract with the builder. A promoción is the construction of housing for sale, and the law gives the key role to the figure of the promotor. Under art. 9 Ley de Ordenación de la Edificación that is the name for anyone who decides on, programmes and finances works for themselves or for subsequent sale. An investor who finances construction fits that wording more closely than it seems, which is why the roles are separated on paper before any money moves.
Who the promotor is and why it concerns the investor
The promotor answers to buyers for the result. LOE covers new construction, full reconstruction, partial interventions that substantially change a building's external appearance, volume or load-bearing system, and a change of the characteristic use (art. 2.2). The law also sets liability periods: one year for finishes, three years for defects affecting habitabilidad (fitness for habitation), ten years for the structure (art. 19). Those periods outlive the project, and the question of who answers under them after the flats are sold is asked before entry, not after.
A separate question for an abogado (a Spanish lawyer): if an operator raises money from the public and each participant's return depends on the common result, the structure may fall under the definition of collective investment schemes (art. 1 Ley 35/2003). That is not a reason to reject the format, it is a reason to read the contract with a lawyer.
How roles are distributed in a project
| Role | What it does | What it answers for |
|---|---|---|
| Promotor | decides on, programmes and finances the works, holds the licence | to buyers under LOE, including the liability periods |
| Investor | contributes capital, approves key decisions, receives a share of the result | with the capital invested, within the limits of the contract |
| Project operator | asset selection, economics, oversight, sale | under the project management agreement |
| Builder | carries out the works to the budget and schedule | for quality and timing under the works contract |
| Technical supervision | checks that the works match the design | professionally, under its own contract |
In DNPI projects the works are carried out by BCNYARD, SLU: an independent company engaged under a works contract. Separating who manages from who builds exists precisely so that the budget and its execution are checked by different hands (technical supervision on site).
What the investor signs and who owns the asset
The set of documents depends on the structure, but the questions about them are the same. In whose name the asset is registered: the investor, a separate project company or the organiser (who owns the asset in a joint project). Which decisions the investor approves and which the operator takes (management decisions and investor rights). How the base from which the split is calculated is defined. How the investor exits if the project stops (investor exit from a project).
The terms of DNPI projects are worded as follows: DNPI's fee is 50% of project profit, and if the investor's return over the whole project after the fee is below the contractual 10%, DNPI tops it up out of its own fee. This is a return for the project, not an annual rate; the terms, the calculation base and the limits are set by the contract of the specific project; this is not a guarantee that capital will be preserved (what the 10% share compensation is). A list of questions for a lawyer is collected in the article about the participation agreement.
Where the investor's money sits at each stage
Worked example, not a forecast. The amounts are round assumptions of the example, not figures of a specific project.
| Stage | Where the money goes | What the investor gets in hand |
|---|---|---|
| Land purchase | price, taxes, notary, registry: 2 M€ | escritura (the notarial deed) and the registry entry |
| Design and licence | architect, visado, charges: 300,000 € | the project with visado, licencia urbanística (planning permission) |
| Construction | tranches to the builder on schedule: 2.4 M€ | stage certificates, supervision reports |
| Sale | commissions and conveyancing: 240,000 € | buyers' escrituras |
| Closing | taxes, then the split | project report and the share calculation |
Money in a development goes out first and comes back at the end. Between the land purchase and the first sale there are no distributions, and that is the main difference between this format and renting. The tranche schedule and budget control are covered separately; the mechanics of financing construction as it progresses are in the article on drawdown.
How to check the counterparty before entry
- Request the company's annual accounts: a limited liability company must file them with the Registro Mercantil within a month of approval (art. 279 Ley de Sociedades de Capital), so the balance sheet can be looked at.
- Check the status of the plot and the licence against documents, not against a presentation (how to obtain a licence in Catalonia).
- Read the budget chapter by chapter and find the contingency line.
- Ask who signs the works contract and who accepts the works.
- Give the participation agreement to your own abogado, and the tax part to your own asesor fiscal (tax adviser).
Criteria for choosing an operator are collected in the article how to choose a project operator, and the structure of an offer is covered in how to read an investment offer.
Who this role does not suit
An investor who wants to control the construction in person but does not live in Spain and is not ready to delegate operational decisions. An investor who needs predictable cash flow: in a development it appears on the sales. An investor with no capital reserve for an overrun and for extra months. An investor with a cheque below the threshold: residential and commercial property and land from 1 M€, hotel projects from 3 M€, whole buildings from 10 M€.
What entry looks like and which documents are prepared at each step is described in the investor roadmap.
Questions and answers
Does the investor become a promotor under the law?
It depends on the structure. The LOE wording describes whoever decides on, programmes and finances the works, so the answer is looked for in the contracts of the specific project together with an abogado, not in a general rule.
In whose name is the asset registered in a project with an investor?
There are three options: the investor, a separate project company, the organiser. This is written directly into the contract, and taxes and the exit procedure depend on the choice.
Is the investor liable for defects in the building?
The LOE liability periods are addressed to the promotor and the parties to the construction: a year for finishes, three years for habitabilidad, ten years for the structure. How that liability is allocated in your structure is checked by a lawyer.
Can you participate without travelling to Spain?
Yes, through a power of attorney and project reporting, though some steps are easier in person. A breakdown is in the article on remote investment.
How does BCNYARD differ from DNPI?
BCNYARD, SLU is an independent construction company engaged under a works contract that carries out the works. DNPI answers for the project and for relations with the investor.
