Buying Off Plan

Investors who purchase early on in the history of a development, [often before construction starts] are rewarded by very good prices, as their 30% or 40% payment [depending on the terms negotiated] allows the developer to keep borrowing to a minimum. The purchase price is written into the sales purchase contract and that is the price that will be declared on completion, when the balance of the money is paid and the Escritura is drawn up into the name of the owner.

Over the construction period [2-3 years] a property will increase considerably and an investor may decide to sell the property for a profit [this is usually just before or just after completion]. In such cases it is not the property that is sold, but the contract allowing the person named to buy at the price stated from the developer or owner stated. Usually 2 payments are made:

[1] The amount needed to cover the value of the instalments paid so far by the investor

[2] The price for purchasing the sales purchase contract [the profit for the investor]

The contract can only be transferred with the co-operation of both parties, which is why it is necessary to have a clause written into the contract allowing the transfer; otherwise the purchaser is at the mercy of the seller who may not want to cooperate.

The purchaser of the contract takes the place of the original purchaser and on payment of the final instalment becomes the owner of the property when his / her name is written onto the Escritura. The person selling the contract has never been the owner and so capital gains tax normally payable by property owners who sell does not apply.