Distressed development acquisitions

Unfinished or stalled developments can offer value, but they carry layered legal risks: expired licences, unpaid contractors, buyer claims, charges on title and unresolved planning issues. Careful legal review is what separates an opportunity from an inherited problem.

Acquisition routes

• Direct purchase from the owner, sometimes under financial pressure.
• Purchase within insolvency proceedings, subject to court and insolvency administrator procedures (Spanish Insolvency Law, Real Decreto Legislativo 1/2020 as amended).
• Acquisition of the secured debt, followed by enforcement or negotiated transfer.
• Purchase of the company that owns the project, inheriting its liabilities.

Key legal risks

• Licence status: whether building licences have lapsed or can be extended.
• Existing buyers: pre-sale contracts, deposits and guarantee claims.
• Charges: mortgages, attachments and preferential claims.
• Contractor and supplier claims, and the condition of works.
• Planning compliance of the works already built.
• Environmental or judicial measures affecting the site.

Insolvency sales

Sales within insolvency can offer cleaner transfer of assets in some respects, but they follow strict procedures and timetables, and assets are often sold in their existing condition with limited warranties. Due diligence must therefore be completed within tight windows.

Hypothetical scenario: the example below is invented for illustration. It does not describe any real property, project, company or person. An investor considers buying a half-built apartment block from an insolvency process. Review reveals that the building licence has lapsed and that earlier buyers hold contracts. The investor prices in the cost of a new licence and negotiates how existing buyer contracts will be treated.