Construction contracts in Spain are mainly governed by the Spanish Civil Code (chiefly in articles 1588 to 1600), which sets out the basics for the provision of construction services, and by the Spanish Building Act 38/1999 of 5 November 1999 (Ley de Ordenación de la Edificación) that governs the construction process, laying down the obligations and responsibilities of the various parties involved in the process. The Spanish Technical Construction Code (Código Técnico de la Edificación) provides for technical standards for buildings. Also to be taken into account are the Urban Planning Law of the region where the real estate is located and the relevant town council's building ordinances.
Last modified 22 Mar 2024
There are four main permits required in Spain to carry out construction works and operate the resulting building. These permits are granted by the local authorities.
The purpose of this permit is to verify that the projected works comply with the applicable urban planning regulations. It is required for any type of construction, including the refurbishment or fitting-out of existing buildings, and for demolition works.
In order to obtain a works permit it is necessary to submit details of the proposed works signed by an architect who is licensed by the relevant professional association. The grant of any works permit involves the payment of the relevant taxes and, in some cases, the provision of an appropriate guarantee, generally given by a bank, to ensure that the authorised building works are actually carried out.
The purpose of this permit is to confirm that the project complies with the health and safety standards laid down in the urban planning regulations. The permitted use for the building and the activities to be carried out there will depend on the uses permitted in the applicable urban planning regulations. If the activity is classified as disruptive, unhealthy, harmful or dangerous, the permit will lay down some requirements that must be fulfilled by the holder of the permit. In order to verify that it complies with all relevant requirements, a 'Permit to Open' (Actividad de Puesta en Marcha) is required.
It is always advisable to obtain the activity permit at the same time as the works permit, since the latter does not, in itself, authorise a specific use to be carried on in the building.
This permit confirms that the construction has been built in accordance with the technical specifications contained in the relevant works permit. It is usually granted following an inspection of the building by the relevant local authority's technical experts.
This permit confirms that the technical specifications laid down in the activity permit have been properly complied with and, as a result, that the building can be used for the purpose described in the activity permit.
Last modified 22 Mar 2024
Law 31/1995, of 8 November, on the Prevention of Risks at Work sets out, among other things, that companies must have 1) a risk prevention plan, 2) a risk evaluation and 3) an emergency plan. Companies are obliged to provide their employees with information and training on health and safety issues, and carrying out periodical medical checks on them.
In addition, there are various statutory regulations setting out specific obligations relating to the supervision and maintenance of a safe working environment, noise in the workplace, measures relating to pregnant employees, etc.
The most important regulations on health and safety issues in the construction industry are the following:
Whilst Decree Law 1627/1997 and Law 32/2006 apply only while the construction is being undertaken, the obligations set out under Law 31/1995 and Decree Law 171/2004 must be complied with after the construction is completed.
Finally, it is also worth noting that an infraction of the obligations contained in these regulations may give rise to the imposition of severe sanctions of an administrative nature. Likewise, companies and their managers may be found liable under administrative, civil or even criminal law regimes.
Last modified 22 Mar 2024
The Land Pollution Act controls pollution of land due to uncontrolled waste.
Legislation on air quality, such as the Air Quality Act controls emissions of environmentally harmful gases, smoke and other airborne pollutants.
Water quality is protected by water related Acts and Regulations which control issues such as pollution, surface water, groundwater and discharge to sewers.
A wide range of duty of care legislation controls the generation, transportation and disposal of waste ensuring that the waste is handled and disposed of safely.
The Environmental Impact Act regulates the procedure for the analysis and correction of the effects of a construction project which is likely to have a significant effect on the environment by virtue of factors such as its nature, size or location. Such projects may require an environmental impact assessment before planning permission is granted.
In recognition of the need for sustainable development, minimum energy requirements for new and refurbished buildings are contained in the Spanish Technical Construction Code and the Energy Efficiency Act.
Many regulations have been developed and supplemented at a regional level.
Royal Decree 235/2013, of 5 April (now replaced by Royal Decree 390/2021, of 1 June), which introduced Energy Performance Certificates established that as from 1 June 2013 buyers and/or tenants of housing, retail and office buildings must be provided with an Energy Performance Certificate, allowing them to compare and evaluate the energy efficiency and CO2 emissions of buildings, or their individual units.
This Certificate is not required for all buildings: Paragraph 2 of Section 3 of Royal Decree 390/2021 excludes (i) protected buildings, provided that the Energy Performance Certificate would unacceptably alter their character or appearance; (ii) temporary buildings with an expected period of use of two (2) years or less; (iii) non-residential industrial, military and agricultural buildings, or parts thereof, with low energy demand; (iv) free-standing buildings, i.e. not in contact with other buildings and with a total useful floor area of less than 50 sqm. and (v) buildings that are purchased for demolition or for the purpose of renovation.
Finally, Law 8/2013 of 26 June, on rehabilitation, regeneration and urban reform sets out the basic regulations for environmentally friendly development in urban projects and promotes rehabilitation, reform and regeneration of the urban fabric in order to provide citizens with adequate living standards. This law forms part of the amended text approved by Royal Legislative Decree 7/2015, the 30th October, which amends the Rehabilitation Law and the Spanish Building Act.
Last modified 22 Mar 2024
Depending on the nature of the development, the developer will enter into specific agreements with the utility companies. The location of the project will also determine which reports and authorisations from different authorities are required (eg from the roads department, rail network authority, coastal authority etc) within the licensing process.
Last modified 22 Mar 2024
Apart from the obligation on the contractor to fulfil the technical requirements set out in the Spanish Building Act, the Spanish Technical Construction Code, the Energy Efficiency Act and other technical regulations, there are only few legal provisions implied specifically into construction contracts.
One of these provisions implied by the Civil Code is the right for the developer to terminate the contract early without cause, being obliged only to pay costs to the contractor.
An additional specific provision implied into construction contracts is that subcontractors are entitled to claim against the developer, even if no contractual relationship exists between them, for any debt owed by the contractor to the subcontractor and up to the amount owed by the developer to the contractor.
Last modified 22 Mar 2024
There is no standard form of contract in Spain for construction projects.
International forms of agreement, such as FIDIC contracts, are still rarely used in Spain, and then mainly in projects where they are a requirement when international financing is involved.
Last modified 22 Mar 2024
The Spanish Building Act lists the main parties involved in a construction project, who will also be the parties to the various contracts involved, as follows:
The party carrying out the project and procuring the work (typically, a landowner or professional developer).
The party who prepares the plans and specifications for the implementation of the development.
The contractor engaged by the developer to carry out and complete part or all of the works. This contractor will usually, in turn, engage sub-contractors to carry out and complete specific parts of the works. One main contractor or various contractors may be involved in the works depending on the development and the contract procurement method used.
Responsible for the implementation of the project and very important from a practical point of view and in relation to the construction agreement, as the completion of any part of the works must be certified by the works manager.
These technicians assess whether the works comply with technical regulations. They must be involved in the construction process for the relevant building to obtain decennial insurance (a 10-year insurance policy giving cover against defects arising in the works).
Last modified 22 Mar 2024
Traditionally, the building contractor is responsible for the construction of the works, but not for the design. In more modern turnkey oriented contracts, the building contractor may also take on responsibility for design.
The contractor usually assumes the risk of damage or destruction of the works until delivery of the completed building to the developer.
Since May 2000, buyers of newly built property have benefited from a legal 10-year warranty, under which developers are liable in the event of a collapse or serious structural defects. The term of the warranty runs from the date on which the building is completed.
Force majeure is construed strictly (including usually only fire caused by lightning, floods, and strikes which affect other companies besides the contractor) and is relevant mainly in relation to possible delays to the works, which may not then give rise to penalties on the contractors and will involve additional time being given to the contractor to complete the works.
Last modified 22 Mar 2024
Spain has a long and successful tradition of implementing public private partnerships (PPPs), in particular in the form of public works concessions, which are suitable in situations where third party users pay a fee for the use of a public facility (eg toll motorways). To provide a more modern framework, a Public Contracts Act was enacted in 2017 which laid down a definition of PPP and introduced a standard form of PPP contract which provides for service output specifications (inspired by PPP in the UK PPP).
Although a lack of funding is holding back the PPP market, the Spanish government continues to support PPP as a way of spending on infrastructure and stimulating the economy. Regional governments are also active in the PPP market, in particular through Private Finance Initiatives in the healthcare sector.
Last modified 22 Mar 2024
Depending on the how the construction contract is structured, it may be possible to provide for a fixed price which is not dependent on the final costs incurred by the contractor.
In such fixed price contracts, the only grounds for varying the price are variations to the works instructed by the developer (other factors, as fluctuations in the price of materials are absorbed by the contractor). Contracts in this form are usually more expensive.
Last modified 22 Mar 2024
The only insurance which is legally required is a decennial insurance policy providing cover against structural defects to be obtained in respect of residential property by the developer after completion of the works.
During the construction process, it is common for general contractors to take out
Consultants involved in the works, in particular architects and designers, usually take out professional indemnity insurance.
Last modified 22 Mar 2024
Two forms of security are commonly provided by the contractor to the developer:
Last modified 22 Mar 2024
Payments under a construction contract are normally made against the certification of partially completed works by the works manager, which usually happens monthly. In fixed price contracts, the works to be delivered and payments to be made are normally set out in a payment schedule.
An inspection of the works in order to authorise a payment does not normally imply either acceptance or delivery of the works.
Commonly, payments are reduced by 5 percent, with that amount being placed in a deposit account aimed at guaranteeing the quality of the works.
Payments to professional consultants may be calculated in accordance with the recommended practice of the relevant professional society (eg the Society of Architects), and are normally made on delivery of the documentation or on a periodical basis.
Last modified 22 Mar 2024
Construction contracts always require the works to be completed by a specified date. Contracts often include a specific penalty for delay, usually a certain amount per day of delay. These penalties replace claims for losses or damage unless otherwise agreed by the parties. The application of such penalties is always construed restrictively under Spanish law and the amount may be always limited by the relevant judge.
The payment of such penalties is normally secured by a completion guarantee delivered by the contractor when the construction contract is entered into.
Last modified 22 Mar 2024
Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested:
The developer may request reasonable changes to the works at any time. After such a request, the contractor gives an estimate of the additional time and money involved in the variation and the developer is normally free to hire another contractor at a reduced price to carry out the works. In such cases it is very important to agree with the general contractor in advance any coordination fee to which it may be entitled should new contractors become involved in the works.
Where variations are necessary because of the building contractor's error, delay or default, the contractor is not usually entitled to any additional time or money under the contract. He is also liable for any delays caused to the project by these variations, or where the variation means that the work has not been carried out in accordance with the contract.
If the general contractor assumes responsibility for design, the obligation to adapt the works in the event of a change in the law is imposed on the contractor. Liability for this obligation is, in any case, usually capped.
Last modified 22 Mar 2024
The Spanish Building Act provides for a process known as handover of the works, which must happen within 30 days of the issue by the works manager of a certificate of completion (certificado de final de obra). Handover of the works transfers the risk of damage to the works to the developer.
Normally there will be a provisional handover, even if there are some minor defects still outstanding (a punch list) that the contractor undertakes to make good within the guarantee period normally lasting for one year. Once the guarantee period has elapsed, a final handover takes place.
For legal purposes, the initial handover is recorded in 'handover minutes' (acta de recepción) to be signed by both the developer and the contractor. The legal periods of guarantee start to run from the date of these minutes.
If relevant defects are detected, partial handover minutes (acta de recepción parcial) are signed. In these partial handover minutes, the developer accepts the building, but points out the defects detected, and the contractor is obliged to repair them within a short period of time the length of which may vary depending on the extent of the defects. Once the period for repairing the defects has elapsed a new inspection takes place in order to make sure that the defects have been properly made good, and the handover minutes are then signed.
The construction contract will normally include the conditions precedent which must be fulfilled before the handover can take place.
Last modified 22 Mar 2024
In Spain, the general rule is that claims in respect of a breach of contract must be brought within five years of the date of the breach. Despite this the Spanish Building Act, lays down specific time periods during which a claim may be brought against the party involved in the construction depending on the type of the defect affecting the building.
Last modified 22 Mar 2024
Every party involved in the construction process is liable for its part in the project. Additionally, the developer is jointly and severally liable to end users in relation with the development. These legal liabilities to end users may not be excluded. This liability is without prejudice to any contractual liability of the developer to the end user.
Last modified 22 Mar 2024
Every party involved in the development is liable for its part in the project. This liability exists objectively and arises where any defect becomes apparent. Evidence that the work was carried out diligently is no defence. Only force majeure can exclude the liability. If it is not possible to determine which party is responsible for the defect, all parties are liable. This liability may not be excluded.
Last modified 22 Mar 2024
Purchasers of a building, both the initial purchaser or any subsequent ones, are protected by the principle of objective liability for construction defects which is imposed on all parties involved in the construction process and in particular on the developer as the guarantor of this liability.
This protection is afforded to owners, but not to tenants or funders, who may only claim in respect of non contractual liability.
The seller is liable, for up to six months following the handover of the property, for ensuring that the purchaser receives legal and peaceful possession of the property and that there are no hidden defects. The parties can waive this liability contractually, but the waiver is ineffective if the seller acted in a dishonest manner.
Since May 2000, buyers of newly built property have benefited from a legal 10-year warranty, under which developers are liable in the event of a collapse or serious structural defects. The term of the warranty runs from the date on which the building is completed.
Last modified 22 Mar 2024
In Spain proceedings are commenced by issuing a claim form accompanied by all the original documentation on which the plaintiff bases its claim. Civil claims in Spain are brought in the Court of First Instance and commercial claims (related to bankruptcy proceedings, unfair competition, industrial properties, and corporate matters such as challenging the decisions of a shareholders' meeting) are brought in the Commercial Court.
Rulings issued by the Court of First Instance and Commercial Court may be appealed in the Provincial Court (Recurso de Apelación). In Spain the parties have a 20-day period for the appeal to be filed. In the event that the losing party does not file the appeal within the time allowed, the court will treat the appeal as abandoned or waived, and the judgement becomes final. In an appeal the parties cannot bring forward, or file, new evidence other than documents dating from after the trial or which could not be obtained previously for reasons beyond the control of the party bringing the evidence.
Last modified 22 Mar 2024
In Spain, in accordance with the Arbitration Act, construction matters can be resolved by arbitration proceedings. Please note that although the Spanish Building Act does not refer to arbitration or mediation in construction matters, it is common for these matters to be referred to arbitration.
Arbitral institutions to which disputes are commonly referred in Spain include:
Arbitration proceedings are less formal than judicial proceedings in Spain and less time is required to obtain a resolution (an arbitration award). Notwithstanding this, however, arbitration proceedings are sometimes more expensive than judicial proceedings.
Last modified 22 Mar 2024
In Spain there are no requirements to attempt any of these methods of dispute resolution before commencing proceedings and these matters are not usually resolved by means of ADR.
Last modified 22 Mar 2024
What official permissions, licences or consents are required by a building or engineering contractor before it can start work?
There are four main permits required in Spain to carry out construction works and operate the resulting building. These permits are granted by the local authorities.
The purpose of this permit is to verify that the projected works comply with the applicable urban planning regulations. It is required for any type of construction, including the refurbishment or fitting-out of existing buildings, and for demolition works.
In order to obtain a works permit it is necessary to submit details of the proposed works signed by an architect who is licensed by the relevant professional association. The grant of any works permit involves the payment of the relevant taxes and, in some cases, the provision of an appropriate guarantee, generally given by a bank, to ensure that the authorised building works are actually carried out.
The purpose of this permit is to confirm that the project complies with the health and safety standards laid down in the urban planning regulations. The permitted use for the building and the activities to be carried out there will depend on the uses permitted in the applicable urban planning regulations. If the activity is classified as disruptive, unhealthy, harmful or dangerous, the permit will lay down some requirements that must be fulfilled by the holder of the permit. In order to verify that it complies with all relevant requirements, a 'Permit to Open' (Actividad de Puesta en Marcha) is required.
It is always advisable to obtain the activity permit at the same time as the works permit, since the latter does not, in itself, authorise a specific use to be carried on in the building.
This permit confirms that the construction has been built in accordance with the technical specifications contained in the relevant works permit. It is usually granted following an inspection of the building by the relevant local authority's technical experts.
This permit confirms that the technical specifications laid down in the activity permit have been properly complied with and, as a result, that the building can be used for the purpose described in the activity permit.
Last modified 22 Mar 2024