Seven clauses to check before signing with a Spanish builder

There is one moment in any building project when your negotiating position is strongest: immediately before signing. At that point the builder wants the contract and will concede. One minute after signature, that balance reverses for the rest of the project.

Which is why the contract deserves far more attention than it usually gets. These are the seven points I always review.

1. Fixed price or remeasurement

The clause with the greatest consequences, and the one most often signed without being understood.

• Fixed price (precio cerrado). The builder commits to a total for a defined scope. If they mismeasured, that is their problem. It gives certainty, but only works if the scope is described precisely — otherwise every future argument will be about whether something was included.
• Remeasurement (precio por mediciones). Unit rates are agreed and you pay for what is actually built. Fairer and more transparent, but the final total is not known until the end.

Neither is better in the abstract. What is dangerous is the ambiguous hybrid: a contract that says "fixed price" but contains provisional sums and refers back to design quantities. That is not a fixed price. It is a deferred argument.

2. Price adjustment

On projects lasting more than a year, builders commonly ask for an indexation clause. That is not unreasonable in itself, but it must be bounded:

• Which specific index applies, and who publishes it
• From which month it starts to apply
• Whether there is a cap, and what it is
• Whether it also works downwards when prices fall

An indexation clause with no cap and no start date is an open cheque. One that only adjusts upwards and never downwards is simply unbalanced.

3. Completion date and delay penalties

A contract that states a date without consequences for missing it does not state a date. It states an intention.

Typical delay damages run between 0.05% and 0.2% of the contract sum per calendar day, with an overall cap usually between 5% and 10%. The precise figure matters less than the fact that it exists and is written down.

With equal care, define what justifies an extension of time. Documented adverse weather, client-approved variations or delays in licensing are legitimate grounds. An open-ended list of excusable causes cancels the penalty in practice.

4. Payment terms and valuations

The governing principle: never pay ahead of what has been built.

Payments should follow monthly valuations of work actually completed, certified by the site director. Be wary of payment schedules tied to fixed calendar dates regardless of progress. If the works slip and you keep paying to the calendar, you will end up having paid 70% for 40% of a building — and you will have lost all leverage.

If there is an advance payment, it should be backed by a bank guarantee. This is standard practice and a solvent contractor should not object.

5. Retention

A percentage of each valuation is withheld, typically 5%, and not released until handover and the correction of any defects.

It is the most effective tool you will have for getting the snagging finished properly. Without retention, the final phase — the finishes, the part you actually see — is done in a hurry and with no incentive. It can be replaced by a bank guarantee for the same amount if the builder prefers.

6. Variation procedure

This clause prevents the most common problem of all. It must state, unambiguously:

• That no change is executed without a variation order signed by both parties
• That the order includes an agreed price and time effect, both settled before the work is done
• How rates are set for items not in the contract: normally by applying the contracted unit rates, and where no comparable item exists, an agreed reference schedule
• That work carried out without a prior variation order is not payable

That last point sounds harsh, but it is precisely what prevents surprise valuations. And it cuts both ways: it also protects the builder from being asked for things verbally and then not paid for them.

7. Insurance and guarantees

Verify, and obtain copies of, the current policies:

• Public liability cover for the contractor, at a level appropriate to the contract value
• Contractors' all risks, covering damage to the works during construction
• Seguro decenal, the ten-year structural warranty, if you may sell within ten years
• Certificates confirming the builder is up to date with social security and tax, which is worth requesting periodically throughout the build

That last item is not a formality. If the contractor accumulates social security debts while building your house, you can find yourself secondarily liable for them under Spanish law. It is an unpleasant surprise and an avoidable one.

And one more thing: who signs

Check that the person signing has authority, and that the company signing is the one that will actually build. It is not unusual to find a contract with a shell company holding no assets, while the entity with the track record and the balance sheet is a different company in the same group.

A search at the Registro Mercantil, the Spanish companies register, takes very little time and avoids considerable trouble.

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