The developer won't hand over your home: get your advance back

The case, in five lines

What is brought

Action to terminate the sale for failure to meet the handover date (article 1124 of the Civil Code and paragraph Four of the first additional provision of the Ley de Ordenación de la Edificación, the Building Act), with repayment of the sums advanced, taxes included, plus statutory interest, joined with the claim against the insurer or guarantor and against the credit institution that received the advances.

Before which court

The sección civil of the Tribunal de Instancia (the civil section of the first-instance court), in ordinary proceedings where the amount exceeds fifteen thousand euros, as it usually does. With several defendants, the claimant may choose the court competent for any of them, and for claims against the insurer the court of the insured's domicile is competent. If the developer is insolvent, anything sought from it goes to the insolvency judge, in the sección de lo mercantil (the commercial section) of the Tribunal de Instancia.

Deadline

Against the developer and the receiving bank, a five-year limitation period (article 1964.2 of the Civil Code) from the day after the missed handover date. The bank guarantee lapses two years after that default if termination and repayment have not been demanded (paragraph Two.2.c of the first additional provision of the Building Act). Against the insurer, also claim within those two years, because it is disputed whether article 23 of the Insurance Contract Act applies. Before going against the guarantor, the developer, once formally required, has thirty days to repay.

Who can bring it

Claimant: the buyer or cooperative member who paid sums on account of a home for their own use, whether a main or a second residence, and their heirs; if two bought, both. Defendants: the developer, or its insolvency administrator if it is insolvent, the insurer or guarantor bank and the credit institution into which the advances were paid.

Financial risk

Costs follow the event: the losing party pays the costs, capped at one third of the amount in dispute per successful party for the fees of lawyers and other professionals not subject to a fixed tariff (article 394 of the Civil Procedure Act). Suing the bank without proving that the payments went into its accounts means losing against it and paying its costs. And a judgment against an insolvent developer alone is never collected: that is why the guarantor and the bank matter.

Late handover lets you terminate, unless you agree to it

The first additional provision of the Ley de Ordenación de la Edificación (the Building Act) is clear in its paragraph Four: if construction has not begun or the home has not been handed over, the buyer may choose between rescinding the contract, with repayment of the sums paid on account, taxes included, plus statutory interest, or granting the developer an extension, which is recorded in an additional clause to the contract. That special rule sits alongside article 1124 of the Civil Code, which treats the power to terminate as implicit in every reciprocal obligation that is not performed.

The Tribunal Supremo (the Supreme Court) has held that, in the purchase of a home under construction, failure to meet the handover date is in itself enough to justify termination at the buyer's request, without having to prove that the delay defeated the purpose of the deal, provided the buyer has not expressly or tacitly agreed to a postponement. That is why what the developer is after is your signature on an addendum with a new date: that signature is the extension of paragraph Four, and with it the door to termination stays shut until the new deadline expires. And timing counts: a buyer who stays silent for months and only seeks termination once the developer is already offering the finished home, with its licence, runs into the argument that the delay was tolerated.

Handing over does not mean finishing the structure or showing you the flat. Paragraph Three requires the contract to include the undertaking to repay what was collected if construction does not start or finish within the agreed periods, or if the habitability certificate, the first occupation licence or an equivalent document is not obtained. A home with no licence on the agreed date has not been handed over. And a clause leaving the date in the developer's hands, or calling its lack of financing force majeure, usually falls: that is a risk of its business, not an unforeseeable event. If the home was handed over but with defects, the case is a different one, that of the liability of those involved in the building process.

The guarantee covers what you paid, VAT included, even without a certificate

From the grant of the building licence, a developer taking advances must guarantee their repayment with statutory interest through a surety insurance policy or a joint and several guarantee from a credit institution, and the guarantee extends to the sums paid, including applicable taxes, plus statutory interest. The VAT you paid with each instalment is covered. Under the insurance, the sum insured includes statutory interest from the payment of each advance until the scheduled handover date.

The law shields the buyer from problems between the developer and its insurer. The insurer cannot raise against you the defences it has against the developer, and non-payment of the premium is never an admissible defence. Paragraph Three also requires that, on signing, you be given the document proving the guarantee, individualised for you. The fact that you were not given it is one more breach by the developer, not a waiver on your part: the Tribunal Supremo has held that, where a collective policy or guarantee existed for the development, the institution is liable even if the individual certificate was never issued.

There are two limits worth knowing from the outset. The guarantee covers the sums paid and their interest, not other losses: the rent you pay while you wait, or the costs of a mortgage that is now useless, can only be claimed from the developer, under article 1124. And the Tribunal Supremo has denied this protection to those buying as professional investors or for speculation, for example several homes in the same development to resell before completion; it does protect those buying to live in the home, whether as a main or a second residence.

The bank that took your payments is liable even if there was no guarantee

The situation we see most often is not a guarantee that goes unpaid, but a guarantee that never existed. That is what letter b) of paragraph One.1 is for: the developer must collect advances through credit institutions, in a special account kept apart from its other funds, and to open those accounts the credit institution, on its own responsibility, must require the guarantee. The law makes the bank the watchdog, and makes it liable if it fails to watch.

The Tribunal Supremo has held that the bank that received the advances is liable to the buyer for their repayment even if they were paid into an ordinary account of the developer rather than the special one, where it knew or could have known they were payments on account of homes under construction. It requires active, professional vigilance: the transfer references, its customer's business and often the financing of the development itself gave the bank that information. With the developer insolvent, this bank is often the only debtor able to pay.

That liability has precise limits. It covers what was paid into the developer's accounts at that institution, not what was paid in cash, at another bank or outside the contract's payment schedule with no possibility of control. That is why the case against the bank is won or lost on the payment records: the destination account, the date and the reference of each transfer. A development may have one bank financing it, another collecting the advances and a separate insurer, and each is liable on its own footing.

Each defendant has its own deadline, and the guarantee's is the shortest

Against the developer, the action for termination and repayment is a personal action with no special period: it is time-barred after the five years of article 1964.2 of the Civil Code, running from when performance could be demanded, that is, from the day after the missed handover date or the end of any agreed grace period. The same general period applies to the liability of the bank that received the advances. If handover fell due before October 2015, a transitional regime shortened the old fifteen-year period, and without interruptions the action is almost certainly lost.

The bank guarantee has its own, much harsher rule. Letter c) of paragraph Two.2 provides that, two years after the developer's default, if the buyer has not demanded termination of the contract and repayment of the advances, the guarantee lapses. This is a lapse period, not a limitation period: conversations and promises do not save it, only that demand does. With handover agreed for 31 December 2025, the demand must be made well before two years have passed since that date, and we send it to both the developer and the guarantor bank.

With surety insurance there is a debate. For contracts signed before 2016, the Tribunal Supremo applied the general Civil Code period rather than the two years of article 23 of the Insurance Contract Act. But the current wording of the provision refers to insurance contract law for everything not expressly covered, and insurers argue for those two years. It is unwise to leave that argument open: we make a formal claim against the insurer within the two years, because article 1973 of the Civil Code interrupts the limitation period through an out-of-court claim by the creditor.

Before suing: formal demand, thirty days and a settlement attempt

To claim against the insurer or guarantor, the law requires first making a formal demand on the developer for repayment of the sums paid, taxes and interest included, and letting thirty days pass. If it does not repay, the claim goes to the institution, and the insurer must pay within thirty days of the claim. Where a prior claim against the developer is not possible, because it has vanished or cannot be located, the law allows you to go directly to the guarantor.

In addition, article 5 of Organic Act 1/2025 requires, as a condition of admissibility in civil matters, a prior attempt at an appropriate dispute resolution method, with identity between what is negotiated and what is later claimed. This claim is not among the excepted matters and, without that attempt, the claim is not admitted. Negotiation may take place directly between the parties or through their lawyers, so the burofax that terminates the contract and demands repayment also carries a concrete payment proposal, and it is sent to each future defendant: developer, insurer or guarantor, and bank.

That letter does four things at once: it exercises the option to terminate, starts the thirty-day period against the guarantee, stops the guarantee from lapsing and interrupts the limitation period. If there is no settlement, the claim is brought in ordinary proceedings before the sección civil of the Tribunal de Instancia. With several defendants, the law allows the claim to be filed before the court competent for any of them, and for the insurer the Insurance Contract Act gives jurisdiction to the court of the insured's domicile, which is yours.

If the developer goes insolvent, the guarantee and the bank are still there

A development that stalls usually ends in insolvency proceedings. Once they are opened, anything sought from the developer goes to the insolvency judge, in the sección de lo mercantil (the commercial section) of the Tribunal de Instancia, and you must notify your claim to the insolvency administrator within one month of the notice being published in the Boletín Oficial del Estado (the Official State Gazette). That notification is not a lawsuit and needs no prior settlement attempt. Against the developer, your claim will be paid, at best, late and in part.

What insolvency does not touch is the guarantee or the bank's liability. The insurer, the guarantor and the institution that received the advances are not insolvent and can still be sued before the civil section. The developer's insolvency is, moreover, the typical case in which a prior claim against it is not possible, which opens a direct claim against the guarantor. And an insurer that pays steps into the buyer's rights against the developer, which cannot sell the home without first reimbursing it.

The typical mistake at this stage is to wait. Many buyers let months go by awaiting news from the insolvency administrator while the guarantee's two years keep running, and insolvency does not stop them. Others sign the new date the developer proposes to rescue the project without requiring the insurance or guarantee to be extended, and later face an institution that disputes whether it covers the new period. The useful sequence is different: notify the claim on time and, in parallel, claim against whoever can actually pay.

How we run the case, step by step

1. 1

   Reconstruct the money and the guarantee

   We list every payment with its date, amount, VAT, destination account and reference; we locate the policy or guarantee and the bank that collected the money; we check with the town hall the status of the first occupation licence and in the public insolvency register whether the developer has filed for insolvency.

2. 2

   Sign nothing and decide: terminate or extend

   Before replying to the addendum with a new date, we assess whether you are better off terminating or granting the extension. If you grant it, we first require the extension of the insurance or guarantee in writing. If you terminate, no new date is accepted and no further payment is made.

3. 3

   Burofax terminating, demanding and proposing

   We send the developer the formal demand for termination and repayment of the sums paid with taxes and interest, with a concrete payment proposal that serves as the settlement attempt, and at the same time we send it to the insurer or guarantor and to the receiving bank, each with its own subject matter.

4. 4

   Claim against the insurer or guarantor

   Once thirty days pass without repayment, we claim against the guarantor with the records of each payment. The insurer has thirty days to pay; if it does not, its delay becomes part of the court claim.

5. 5

   Joined claim in ordinary proceedings

   We file before the civil section of the Tribunal de Instancia the claim for termination and repayment against the developer, the guarantor and the receiving bank, each on its own footing and up to its own limit, with statutory interest from each payment and the losses owed by the developer alone.

6. 6

   Insolvency and enforcement against whoever pays

   If the developer is insolvent, we notify the claim within one month of the notice and pursue the guarantor and the bank. Once judgment is obtained, we enforce against the solvent debtor without waiting for the insolvency distribution.

The law that applies

• DA 1.ª Uno LOE. Requires anyone developing homes who wishes to take advances to guarantee, from the grant of the building licence, their repayment with statutory interest through surety insurance or a joint and several guarantee, in case construction does not start or is not completed within the agreed period, and to receive them through credit institutions in a special account; the institution, on its own responsibility, must require the guarantee. The guarantee covers the sums paid, taxes included, plus statutory interest. BOE-A-1999-21567
• DA 1.ª Dos LOE. Requires an individual policy per buyer, with statutory interest from each advance until the scheduled handover date; bars the insurer from raising the defences it has against the developer, not even non-payment of the premium; allows a claim against the insurer or guarantor if the developer, formally required, does not repay within thirty days, or directly where that demand is not possible; obliges the insurer to pay within thirty days and declares the bank guarantee lapsed two years after the default if the buyer has not demanded termination and repayment. BOE-A-1999-21567
• DA 1.ª Cuatro LOE. If construction has not begun or the home has not been handed over, the buyer may choose between rescinding the contract with repayment of the sums paid on account, taxes included, plus statutory interest, or granting the developer an extension, which is recorded in an additional clause to the contract. BOE-A-1999-21567
• Art. 1124 CC. Treats the power to terminate as implicit in reciprocal obligations where one party fails to perform, and lets the injured party choose between performance and termination, with damages and interest in either case; the court decrees termination unless there are justified reasons to set a period. BOE-A-1889-4763
• Art. 1964.2 CC. Personal actions with no special period are time-barred five years from when performance of the obligation could be demanded. BOE-A-1889-4763
• Art. 1973 CC. The limitation period is interrupted by bringing the action in court, by an out-of-court claim by the creditor and by any acknowledgment of the debt by the debtor. BOE-A-1889-4763
• Art. 23 LCS. Actions arising from an insurance contract are time-barred after two years for property insurance and after five for personal insurance. It is the period surety insurers invoke for contracts signed after 2016. BOE-A-1980-22501
• Art. 5 LO 1/2025. Makes prior resort to an appropriate dispute resolution method a condition of admissibility in civil matters, with identity between the subject negotiated and the subject of the claim, a requirement also met by direct negotiation between the parties or their lawyers; this claim is not among the excepted matters. BOE-A-2025-76

Each article checked against the consolidated text published in the BOE (the Spanish official gazette).

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