A bank guarantee is a guarantee that a financial institution offers on behalf of a client, ensuring the fulfillment of an economic obligation to a third party. In real estate terms, this figure is especially relevant, since it allows the amounts delivered during construction to be guaranteed, avoiding any risk, in the event that the development is not started or the delivery is not completed for any reason within the term agreed by the parties.
How bank guarantees work
It is a legal obligation derived from Law 38/1999 on Building Regulations, amended by Law 20/2015. Developers are required to guarantee the amounts that buyers deliver on account during the construction of their home. This way, if construction does not start or is not completed within the agreed timeframe, the buyer can claim the return of the amounts delivered. In case of non-compliance, the bank or insurance company is responsible for returning the amounts delivered on account to the buyer.
The bank guarantee can be replaced by a surety bond, a surety insurance policy, and must cover not only the amounts paid on account during construction as stated in the purchase agreement, but also the taxes and legal interest on the money from the moment the payment is made until the scheduled delivery date.
It remains in force until a first occupancy license or equivalent document is issued, as in our case the Responsible Declaration issued by the Technical Director of the work, which certifies that the home can be handed over to the buyer.
Advantages of a bank guarantee in the purchase and sale of real estate
Below, we’ll tell you the main benefits of having a bank guarantee to help you buy your home or rent a space.
Security
One of the main benefits of a bank guarantee is the security it offers. In a sale, the buyer is assured of receiving the agreed payment, as the bank will be responsible if the seller defaults.
Is a bank guarantee or surety bond always necessary?
Yes, it is a legal obligation that the developer must comply with in new construction.
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Whether you’re looking to buy or rent, contact us for personalized advice and to learn about the best options for safely completing the transaction. We can help you find the home of your dreams!