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Risks and Defects in New Developments

The Otero financial problems, and Bynok and others through the years before them, have shown acquiring ‘off-plan´ property in Spain can be riskier than only finding building defects. Financial problems in the company can result in cost-cutting, contract delays, lower material quality, workmanship standards, and missed specifications, but the buying price stays the same.

The architects and their project management team, and building contractors and the tradesmen, will all be aware this is happening, but will be too busy trying to protect their income to advise the buyers against the developer/promotor. Similarly, the bank(s) involved will be aware of the worsening situation, but again will firstly be protecting their own interests. They’ll fight over their guarantees to the buyers, if and when that problem occurs. The lawyers for the developers will be receiving notices of action from sub-contractors who aren’t being paid on time, plus complaints from buyers regarding the delays and lists of defects and missing items.

The Warning Signs: Who is Protecting the Buyers from risks and defects?

Everyone on the coast will have seen these warning signs before, but there is always the dilemma of either keeping quiet, protecting their own business and hoping it’s just a temporary ‘blip’, or shouting loudly in the hope of things being sorted, but perhaps making the problem happen worse and quicker.

At the end of the information line are the buyers, feeling their hopes and dreams disappearing into the dustbowl that is their site, facing years of stress and tears, and sometimes losing all their savings that have been ‘invested’ in the property, which may be no more than a pegged out site in an area of half-built buildings that looks like one of the bombed out Ukrainian towns. If the buyers have, presumably against legal advice, taken occupation without first occupation licences, there will only be the builder’s water and electricity supplies, which can be shut off by the supply companies because the builder is no longer paying the bills.

Ideal World vs. Reality: Challenges Faced by the Buyers

Competent independent lawyers will ensure that the legal paperwork is not unfairly biased in favour of the developer. Project managers and RICS Building Surveyors will look over the specification and contract, and check the work if being carried out correctly, on time, and to specification throughout the contract. A detailed ‘snagging’/ home inspection will be carried out at the end of the construction and the developer/contractor will make good the problems that are found.

That’s the ideal world! Demand outstripping supply due to slick marketing and apparently easy finance, can oblige the buyer to sign earlier than is prudent, as the selling agent is pointing to the ‘queue’ of potential buyers behind them, who aren’t ‘being difficult’. Once ‘locked in’, the buyer has little choice but to proceed or lose the money already paid.

The building contractor’s insurance, and a disinclination to have someone independent poking around, will unfortunately prevent the buyer’s surveyor from inspecting the construction until the developer’s architect declares it completed and all is ready to go to the Notary. Unless it’s been written into the buying contract, the buyer can even be prevented from inspecting the property until they have paid all their money and given the keys at the Notary. The developer’s own ‘snagging’ will not be nearly as detailed or correct as one prepared on behalf of the person who is going to be living in the place.

Protecting the Buyers: Role of Competent Independent Professionals

It’s essential that the buyer, or ideally a qualified Building Surveyor with knowledge of local construction techniques and conventions, immediately prepares a detailed list of defects and poorer quality/absent specification items. Then the hassle will start between the buyer and developer, and the developer and the builder, and the architect who has already signed the ‘Responsibility’ licence declaring that the property is completed to their plans and specifications and meets all the building and planning regulations. That’s the architect who depends on his fee payment from the developer, so hardly likely to be independent or unpressured.

Independent RICS Regulated Chartered Surveyors

Survey Spain are independent RICS Regulated Chartered Surveyors who work 100% on their client’s behalf, have worked here for many years, and provide authoritative ‘snagging’ lists, in English and Spanish, of defects and omissions that must be taken into account and dealt with by the developer, builder and tradesmen. Armed with that list, our client and their lawyer will be much more successful in pressuring for the work to be done.

Don’t Delay in Dealing with Defects

P.S. Don’t let work be delayed to being dealt with by the urbanisation Administrator. The first one is most likely to be appointed by … yes, you guessed it, the developer, so there isn’t going to be immediate pressure from there.

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