Bank Guarantee on New Builds
What is a Bank Guarantee?
Many questions and doubts arise when buying a new build property in Spain, as every country has different laws and rules regarding the purchase process.
There are many important factors to keep in mind when buying a new property, but one of the main factors is money.
For our customers it is always a tense moment when making payments to a third party that you barely know. This is because when we are talking about making a payment to a builder, we are not talking about small amounts of money.
It is important to us that your money is safe when making a payment, therefore there exists the bank guarantee.
In countries such as Belgium or the Netherlands, payments to the builder are being made onto a Clients Account of the notary, while here in Spain such payments are being made directly to the account of the builder.
Before such payments are being made to the builder, we at SGM make sure that the client is protected at all cost, and that the builder gives out the bank guarantee with every payment.
The bank guarantee is a document given out by the bank with every payment that has been made to the account of the builder. The money our client has to pay the builder has to be transferred onto a special account of the builder, onto which the transferred funds are blocked. This means the builder cannot access or use this money until he/she presents the signed title deed to the bank when all is signed and ready.
With every payment made, we at SGM make sure that the builder asks the bank guarantee to their bank so that written proof is given to us by the bank that the money is safe.
In theory this sounds all easy, but in reality the process is a lot harder. Although the builder has to give a bank guarantee to their client BY LAW, there are certain builders that cannot afford handing out this guarantee as this is for the builder it’s a very expensive process. This is of course something for the builder, and our clients should not be punished, nor should they live in fear when making a payment for the purchase of their property.
When a builder does not want to or cannot hand out a bank guarantee, we always try to look for solutions. Another viable option to have the money safe, is to make payment to the builder with bank cheques which are being deposited at the notary.
This means that the client has to open an account here in Spain, onto which the funds will be transferred. When the payment is due, we go and collect the cheque in the name of the client and on the same day, we go to the notary to deposit the cheque. An Acta de Depósito is then signed together with the builder en notary, and the cheque stays then at the notary, until the signing of the title deed when the property is finished.
Once all is signed, the notary hands over the cheques to the builder who can then go to his bank to put them into his account.
A third option is that the builder contracts an insurance to guarantee every payment the clients make. Every payment is being transferred to the account of the builder, and the insurance company hands out the guarantee that the money is safe onto this account.
As mentioned before, our highest priority is that the rights and money of our clients are protected at all times, and here at SGM we will always guide the client into the correct direction to make sure the purchase process is a careless and happy experience.
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