In short.
- Every residential developer —including housing cooperatives and owners' associations— that wishes to take advance payments from buyers must guarantee their repayment from the moment the building licence is obtained, through surety insurance or a joint and several bank guarantee, and must collect them in a special account kept apart from its other funds (LOE, first additional provision, section Uno.1).
- The guarantee covers the amounts paid, applicable taxes and statutory interest (Uno.2); the policy is individual to each buyer, the developer is the policyholder and pays the premium until the deed of sale is executed, and the insurer cannot raise non-payment of the premium against the buyer (Dos.1).
- If construction does not start or is not completed on time, the buyer makes a formal demand on the developer and, after 30 days without repayment, claims from the guarantor, which under surety insurance pays within a further 30 days (Dos.1.h). Failing to provide the guarantee may be penalised with a fine of up to 25% of the amounts to be guaranteed, or as set by regional legislation (Siete).
An off-plan deposit guarantee in Spain is not a commercial courtesy designed to reassure buyers. Without it, the bank should not open the special account into which the law requires you to pay buyers' advance payments (first additional provision of the LOE, section Uno.1.b), and failing to provide it is a consumer-protection infringement, punishable with a fine of up to 25% of the amounts to be guaranteed, or as set by regional legislation (section Siete).
Put another way: for a development company or a housing cooperative, the guarantee conditions both the marketing and the cash flow of the development from the day the licence is granted. This guide walks through the national legal regime from the standpoint of the party that provides it and pays for it.
What is the off-plan deposit guarantee and who must provide it?
It is the guarantee that secures, for the buyer of a home under construction, the repayment of the amounts paid in advance, together with statutory interest, if construction does not start or is not completed within the period agreed for handover.
It is governed by the first additional provision (disposición adicional primera) of Law 38/1999 on Building Regulation (Ley de Ordenación de la Edificación, LOE). Its sections are numbered in Spanish (Uno to Ocho), and we cite them as they appear in the official text. Section Uno.1 defines three elements worth being clear about from the outset:
- Who: individuals and legal entities that develop any kind of housing, including developments carried out by owners' associations or housing cooperatives, and that intend to obtain payments from buyers towards construction.
- From when: from the moment the building licence is obtained (Uno.1.a).
- With what: surety insurance taken out with an insurer duly authorised to operate in Spain, or a joint and several bank guarantee (aval solidario) issued by a duly authorised credit institution (Uno.1.a). The provision does not contemplate alternatives such as a cash deposit or a retention.
It is one of the most demanding guarantees required by law in the real estate sector, and it should not be confused with guarantees in private construction contracts: here the beneficiary is the buyer, who advances money to the developer; there it is the developer, who requires guarantees from the contractor.
The regime in force: from Law 57/1968 to the LOE
Many sale contracts, and many searches, still refer to "Law 57/68". That law has been repealed: so provides the third repealing provision of the LOE, added by Law 20/2015. The regime in force is the first additional provision of the LOE as worded by the third final provision of Law 20/2015, in force since 1 January 2016.
Exemption by regulation
Section Ocho allows such public housing development bodies as may be determined to be exempted by regulation. For a private developer, the obligation applies across the board.
Which amounts does the guarantee cover?
Under section Uno.2, the guarantee extends to the amounts paid on account by buyers, including applicable taxes, plus statutory interest. With surety insurance or a bank guarantee, that interest runs from the actual payment of each instalment until the scheduled handover date of the home (Dos.1.b and Dos.2.a).
There is a limit that matters when sizing the guarantee: amounts whose payment is not evidenced are not indemnified, even if they are included in the sum insured because they correspond to deferred payments agreed in the contract (Dos.1.i). The sum insured reflects the commitment; the indemnity reflects what was actually paid.
An illustrative example, with invented figures: a buyer agrees advance payments totalling €60,000 plus taxes, spread across instalments over the course of construction. The guarantee must cover each instalment with its tax and statutory interest from the date it is paid until the scheduled handover date, so the cover grows with every payment. That is why the sum insured is best built from the actual payment schedule of each contract, rather than from the total price of the home. The statutory interest rate varies from year to year: please check the rate in force in each case.
Surety or bank guarantee: the requirements of each instrument
The law lets you choose the instrument, but each is subject to its own rules in the first additional provision. Neither is a mere formality.
Surety policy: minimum content (Dos.1)
Section Dos.1 sets out the minimum content of the policy:
- An individual policy for each buyer, identifying the property whose payments are guaranteed (letter a).
- Policyholder: the developer, which pays the premium for the entire period until the sale is executed as a public deed (letter c). Insured: the buyer (letter d).
- The insurer cannot raise against the insured any defences it may have against the policyholder, not even non-payment of the premium (letter e).
- Term: no shorter than that of the commitment to build and hand over; if an extension is granted, the developer may extend the insurance by paying the corresponding premium and notifying the insured (letter f).
- Verification: while the policy is in force, the insurer may check the developer's documents and data relating to the obligations undertaken towards the insured buyers (letter g).
- Law 50/1980, the Spanish Insurance Contract Act, applies on a supplementary basis (letter l). Its article 68 defines surety insurance and gives the insurer the right to recover from the policyholder whatever it has paid.
In market practice, this cover is known as surety insurance for advance payments (seguro de caución de cantidades a cuenta). Its specific terms —sum insured, extensions, counter-guarantees— depend on the wording of each policy. If you need the general framework for this line, we explain it on our surety insurance page and in our guide to surety bonds and guarantees.
Bank guarantee for advance payments
If you opt for a joint and several guarantee from a credit institution, section Dos.2 requires it to be issued and maintained for the full amount of the sums paid, plus taxes and statutory interest (letter a). It also adds a rule of its own: the bank guarantee lapses two years after the developer's default if, within that period, the buyer has not required it to rescind the contract and repay the amounts (letter c).
The first additional provision does not lay down the same rule for surety insurance: the two should not be treated as equivalent. Under surety insurance, the term is governed by the policy and by Law 50/1980.
What the guarantor looks at
With either instrument, the analysis focuses on the development —licence, financing, level of pre-sales, construction schedule— and on the solvency of the developer itself. The insurer may request counter-guarantees, and issuance always depends on its underwriting assessment. How each instrument weighs on the balance sheet and on bank credit lines is covered separately in bank guarantee or surety insurance.
Are you about to market an off-plan development? We will prepare the surety submission for your advance payments with you.
The special account and disclosure duties towards the buyer
Section Uno.1.b requires advance payments to be collected in a special account, separate from any other funds of the developer and reserved for construction costs. To open it, the credit institution must require the guarantee "under its own responsibility".
The sale contract must state (section Tres) the obligation to repay the amounts with interest if construction does not start or is not completed on time, or if the certificate of habitability or the first occupation licence is not obtained; the guarantor; and the credit institution and the special account. On signing, the developer hands the buyer the individual document evidencing their guarantee. And any advertising for the development must name the guarantor and the institution holding the special account (section Seis).
What happens if construction does not start or the home is not handed over on time?
If construction has not started or the home has not been handed over, section Cuatro gives the buyer two options: rescind the contract and recover the amounts paid, taxes and statutory interest, or grant an extension, documented in an additional clause stating the new handover date.
If the buyer opts for repayment, the sequence under surety insurance (Dos.1.h) is as follows:
- The buyer makes a formal, verifiable demand on the developer for repayment.
- If the developer has not repaid the amounts within 30 days, the buyer claims from the insurer (or directly, if it is not possible to claim from the developer).
- The insurer pays within 30 days of the claim.
- The insurer is then subrogated against the developer (letter j), which may not sell the home to a third party without first having reimbursed the insurer (letter k).
For the developer, the payment closes nothing: it opens a recovery claim with its guarantor. We cover this in detail in calling on a surety bond.
If handover is running late, we review extensions and terms before any demand arrives. Let us discuss your development.
Cancelling the guarantee: when it is released
Section Cinco establishes when the guarantees are cancelled: once the certificate of habitability, the first occupation licence or equivalent document has been issued and handover of the home to the buyer has been evidenced. The same applies if the buyer refuses to take possession.
For the developer, this point carries a direct cost: the surety premium runs until the sale is executed as a public deed (Dos.1.c). Having the handover documentation ready avoids keeping the guarantee in place longer than necessary.
A frequent nuance: the certificate of acceptance of the works records acceptance between developer and contractor (article 6 of the LOE), which is not handover to the buyer. They are distinct acts, and cancellation of the guarantee depends on the second.
After handover, the buyer's risk no longer lies in the advance payments but in construction defects: that is the territory of ten-year structural liability.
Penalties for failing to guarantee advance payments
Section Siete classifies non-compliance as a consumer-protection infringement, without prejudice to the powers that current legislation confers on the Spanish insurance supervisor, the Directorate General of Insurance and Pension Funds (DGSFP). Failing to provide the guarantee may be penalised with a fine of up to 25% of the amounts whose repayment must be secured, or with the penalty laid down in regional legislation, which may also add obligations of its own: it is advisable to review it for each development.
The role of an independent broker
An independent brokerage acts on the developer's mandate, not the insurer's. For a development that takes advance payments, that means preparing the development's underwriting submission, comparing surety terms from different insurers against the bank guarantee alternative, and arranging the issue of individual certificates at the actual pace of pre-sales. It also means monitoring extensions and expiry dates, and handling cancellation after handover. Neither the cost nor acceptance depends on us: they depend on each insurer's assessment. If your company operates in the sector, you can see the full range of covers in insurance for construction companies and developers.
We will review, without obligation, your development's guarantee programme: instrument, issue of individual certificates, extensions and cancellation after handover. Contact us.
Frequently asked questions
Can the bank open the special account without the guarantee? No. The credit institution, under its own responsibility, must require the guarantee in order to open the special account into which advance payments are made (LOE, first additional provision, Uno.1.b). Without surety insurance or a bank guarantee, the developer cannot collect them in the manner the law requires.
Does the guarantee also cover VAT and interest? Yes. It covers the amounts paid, applicable taxes and statutory interest from each payment until the scheduled handover date of the home (Uno.2 and Dos.1.b).
Is a single group policy for the whole development enough? Not with surety insurance: the law requires an individual policy for each buyer, identifying the property, and the delivery to the buyer of the individual document on signing the contract (Dos.1.a and Tres).
Does the guarantee lapse if the buyer does not claim? For a bank guarantee, yes: it lapses two years after the developer's default if the buyer has not required rescission and repayment (Dos.2.c). For surety insurance, the provision lays down no such rule; the policy wording and Law 50/1980 will govern.
What happens if handover is delayed and the buyer grants an extension? The extension is documented in an additional clause stating the new handover date (Cuatro), and the developer may extend the surety policy by paying the corresponding premium and notifying the insured (Dos.1.f).
Sources and legislation
- Law 38/1999 on Building Regulation (Ley de Ordenación de la Edificación), first additional provision (receipt of amounts on account of the price during construction), sections Uno to Ocho, and third repealing provision. Consolidated text, consulted on 12 October 2026.
- Law 20/2015 of 14 July on the regulation, supervision and solvency of insurance and reinsurance undertakings, third final provision (current wording of the first additional provision of the LOE and addition of its third repealing provision, in force since 1 January 2016).
- Law 50/1980, the Spanish Insurance Contract Act, article 68 (surety insurance).
This information is for guidance only and does not constitute legal or binding advice. The specific terms of each policy or bank guarantee —sum insured, extensions, counter-guarantees— are governed by its wording; this guide describes the national legal framework, and regional consumer and housing legislation may add further requirements. Issuance of surety insurance depends on the insurer's underwriting assessment. New Brokers Correduría de Seguros, S.L., registered with the DGSFP under reference J0140.
