Advance Payments Guarantee Insurance

Protection for your advance payments, security for your home

Advance Payments Guarantee Insurance is a surety insurance policy that guarantees the reimbursement of payments made in advance by purchasers or housing cooperative members in connection with a property development, should the property not be built or delivered in accordance with the agreed terms.

This insurance protects the amounts paid by future homeowners during the construction phase and provides the reassurance that they will recover their investment if construction does not begin, is not completed or the property is not delivered within the contractually agreed timeframe.

What does it cover?

All amounts paid in advance prior to the delivery of the property.
The VAT applicable to those advance payments.
Statutory interest, in accordance with current legislation.

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Under Spanish Law 38/1999 on Building Regulations (Ley de Ordenación de la Edificación — LOE), advance payments must be deposited in a dedicated account used exclusively for the property development. They must also be protected by the corresponding insurance guarantee or bank guarantee, ensuring that the funds are used solely for the execution of the project.

How does it work?

Each purchaser or housing cooperative member receives an individual certificate or policy setting out:

– The property covered by the guarantee.
– The amounts already paid or due to be paid.
– The cover provided.
– The duration of the guarantee.

Cover remains in force from the date the policy is issued until the development obtains the licence or administrative authorisation required for occupancy and the property is formally transferred by means of the corresponding public deed of sale.

Advantages over a bank guarantee

For property developers, Advance Payments Guarantee Insurance offers significant advantages over a traditional bank guarantee:

– It does not tie up financial resources or use up existing credit facilities.
– It is not recorded in the Bank of Spain’s Central Credit Register, known as CIRBE, helping to preserve the company’s borrowing capacity.
– It provides more predictable costs throughout the development of the project.
– It offers greater flexibility and specialist management for property developments.
– It ensures compliance with the legal obligations governing the protection of purchasers.

The IBERIAN INSURANCE solution

At IBERIAN INSURANCE, we work with leading insurers to provide advance payment guarantee solutions tailored to each property development.

We support developers throughout the entire process, from the initial assessment of the project through to the issuance of individual policies, ensuring efficient, secure management in full compliance with current legislation.