Can a Developer Increase the Purchase Price After a Reservation Agreement in Spain Due to Rising Costs Linked to the Gulf Conflict?

A recent case that has come across our desk highlights an issue that, while not widespread, is becoming increasingly relevant in the current context of rising construction costs and geopolitical tensions, including the conflict in the Gulf.

A buyer signs a reservation agreement for an off-plan property at a fixed price. Some time later, the developer claims that material and construction costs have increased and seeks to revise the purchase price — or alternatively proposes to cancel the transaction and refund the deposit.

This raises a key legal question:

Is the developer entitled to do so under Spanish law?

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The legal starting point: price certainty and binding force

Under Spanish law, once the parties agree on the essential elements — the property and the price — the agreement becomes binding.

The price must be certain and determined, and the performance of the contract cannot be left to the discretion of one party.

In this context, a reservation agreement that clearly identifies the property and fixes the price may go beyond a simple holding document and operate as a binding pre-contract.

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The key issue: consumer protection limits on price increases

In cases involving private buyers, the analysis does not stop at contract law.

Spanish consumer protection law plays a central role.

Where the buyer qualifies as a consumer — which is typically the case in residential property purchases — the developer is subject to strict limitations:

• The developer cannot unilaterally modify essential elements of the contract, including the price
• Any clause allowing such modification must be clear, specific, and objectively justified
• Clauses that allow the developer to alter the price at their discretion may be considered abusive and therefore null and unenforceable

This is critical.

Even if the contract contains a vague reference to possible adjustments, it may not be valid under consumer law if it lacks transparency or objective criteria.

In addition, Spanish law provides that the content of the offer, promotion, and advertising becomes binding, even if not fully reproduced in the final contract. This reinforces the expectation that the price initially offered to the buyer must be respected.

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The developer’s argument: rising construction and material costs

In the case we have reviewed, the developer justified the proposed price increase by referring to:

• Increased cost of materials
• Market volatility
• External factors affecting the construction sector
• Recent geopolitical tensions impacting supply chains

While these factors may be commercially relevant, they do not override consumer protection rules.

From a legal standpoint, market risk — including fluctuations in construction costs — generally lies with the developer, not the consumer.

Unless there is a valid and enforceable price adjustment clause, the developer cannot shift that risk after the agreement has been reached.

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Is there any exception?

Spanish housing regulations do allow limited adjustments in very specific circumstances, such as unforeseen technical changes affecting the construction.

However, even in those cases:

• The change must be properly justified
• It must be communicated in advance
• The buyer must expressly accept the exact amount of the increase

Without the buyer’s consent, the price cannot be modified.

A general reference to increased construction costs — even when linked to geopolitical events — does not meet this legal threshold.

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The practical approach: refunding the deposit

In the case in question, when the buyer did not accept the revised price, the developer offered to cancel the reservation and return the deposit.

This is a common practical response.

However, from a consumer law perspective, this approach may also raise concerns.

If the agreement is binding and the price was clearly fixed, the developer cannot simply rely on cancellation as a way to avoid their obligations — particularly where the contract does not expressly allow such withdrawal.

In such cases, the buyer may have the right to:

• enforce the contract at the agreed price, or
• claim damages for breach

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Final remarks

Although situations like this are not yet widespread, they are beginning to emerge in the current economic and geopolitical context.

From a consumer law perspective, the position is clear:

A developer cannot increase the purchase price unilaterally simply because construction or material costs have risen.

Any attempt to do so must be assessed not only under contract law, but also under strict consumer protection rules, which tend to favour the buyer.

Each case will ultimately depend on the specific wording of the agreement, but in many instances, the buyer’s legal position is stronger than it may initially appear.

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If you are facing a similar situation

If you have been informed of a price increase after signing a reservation agreement, it is advisable to review the documentation carefully before taking any decision.

A proper legal assessment — particularly from a consumer law perspective — may determine whether the original purchase price can still be enforced.

If you are facing a similar situation

If you have been informed of a price increase after signing a reservation agreement, it is advisable to review the documentation carefully before taking any decision.

A proper legal assessment — particularly from a consumer law perspective — may determine whether the original purchase price can still be enforced.

At our firm, we regularly assist international clients in these situations, including reviewing reservation agreements and representing buyers in negotiations with developers. If you would like us to assess your case, you are welcome to contact us for a tailored legal opinion.

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