Legal risks in real estate development

The following case study is a composite drawn from actual legal issues encountered in various coastal mixed-use developments in Spain over the past decade. Imagine the company you work for is very active on the hospitality and retail sector in other countries and is considering to acquire a stake of the developer and be one of the shareholders. Prepare a brief and simple report (maximum 1,500 words) covering: – List of 3 different key legal risks including risk assessment – Identify the top priority risk – Recommend an action plan if possible – Takeaways from the 1st session focused on legal risks for future real estate developments PROJECT OVERVIEW Location: Conil de la Frontera, Cdiz, Province, Andalusia, Spain Developer: Development MRED Partners S.L. (Spanish company, 60% owned by a UK investment fund, 40% by a local Spanish family business) Project Description: A large-scale mixed-use development comprising: 180 luxury residential apartments (ranging from 85m2 to 250m2) 45 private villas with sea views A 150-room five-star hotel operated under an international franchise agreement 8,500m2 of commercial retail space (restaurants, shops, spa facilities) Underground parking for 420 vehicles Beach club with direct beach access Total Investment: 185 million Current Status: Under development (construction 40% complete) Timeline: Planning permission granted: March 2024 Construction commenced: September 2024 Expected completion: Q4 2026 Initial sales launched: January 2025 BACKGROUND FACTS Site History and Acquisition The 45,000m2 site was acquired in December 2023 for 32 million from three separate sellers: Plot A (25,000m2): Former agricultural land owned by a local family Plot B (15,000m2): Abandoned hotel site (closed in 2019) purchased from a distressed developer Plot C (5,000m2): Coastal strip purchased from the municipality The site is located partially within 100 metres of the coastline and borders a protected natural area (Parque Natural) to the west. Financing Structure 95 million senior debt from a Spanish bank (Banco Espaol de Crdito) 45 million mezzanine financing from a German alternative lender 45 million equity from the developers Pre-sales target: 60% of residential units before construction completion Pre-sales Status As of January 2026: 95 apartments sold (53% of apartments) 28 villas sold (62% of villas) Buyers: 45% Spanish residents, 45% other EU nationals, 10% non-EU nationals Total pre-sales: 78 million Deposits held: 15.6 million (20% deposits in escrow accounts) Current Construction Status Main structure: 75% complete Hotel block: 65% complete Infrastructure (roads, utilities): 85% complete Commercial area: 45% complete