1. Background to the reform

Modular and prefabricated construction manufacturers accumulate significant value at their plants (modules, panels, façades) before delivering it on site, without having effective security in rem over those assets: a mortgage over real property only extends to these elements once they have been incorporated into the building and, where applicable, in favour of whoever finances the development. To address this, article 15 of Royal Decree-law 29/2026 (the “RDL”) amends the Chattel Mortgage and Non-Possessory Pledge Act (Ley de Hipoteca Mobiliaria y Prenda sin Desplazamiento, the “LHMPSD”) with the stated aim of “removing obstacles to accessing credit for the production of industrialised components”. The measure is complemented by a State guarantee facility of up to EUR 280 million, which will partially cover financing granted by the Instituto de Crédito Oficial (ICO), the Spanish state-owned financial agency, to SME manufacturers and developers using industrialised construction systems.

2. What changes?

Article 12 LHMPSD now includes as mortgageable assets “the set of industrialised components intended for the industrialised construction of buildings, manufactured in a controlled environment for subsequent transport, receipt, assembly and installation on site”. The mortgage is created by public deed and registered with the Movable Property Registry; registration is a requirement for the mortgage to be validly created.

3. Practical relevance

The reform allows manufacturers’ working capital financing to be secured over the components held at the plant, combined, in the case of SMEs, with cover under the aforementioned guarantee facility. Since the manufacturer’s lender and the developer’s lender will coexist, it is advisable to agree on the release of the security against payment of the price, control over sale proceeds and advance consent to the sale. Furthermore, as mortgageable assets cannot be subject to a non-possessory pledge, existing pledges over manufacturers’ inventory should be reviewed, given that the RDL contains no transitional provision in this respect.

When structuring transactions, it will be key to review the manufacturer’s traceability system, which underpins the registry description, and to provide for information undertakings, inspection rights and insurance covering manufacturing, storage and transport.

4. Risks and uncertainties

The approved regulation raises several risks and interpretative uncertainties.

The legislator has opted for a mortgage rather than permitting a non-possessory pledge, with the resulting additional tax cost arising from the creation of such security.

The obligation to identify the specific assets covered may make its creation even more complex and costly, as it is not structured as a floating mortgage over inventory but as specific security over identified assets.

In addition, the RDL does not address what happens to the security when the mortgaged assets are incorporated into the final building. It could be inferred that, once incorporated into real property, the mortgage over that property will extend to those components, particularly if the beneficiary of the mortgage over the real property is a third party acting in good faith. Nevertheless, it would have been advisable to coordinate both types of security in light of this potential conflict of interest, where the secured creditor under the chattel mortgage may not be the same as under the mortgage over the real property.

Nor has the rule determining which registry office has territorial jurisdiction for each type of asset (article 69 LHMPSD) been adapted, so it is unclear where the mortgage should be registered where, for example, the assets may be transported between several locations.

Finally, it is unclear how the mortgaged assets should be described, as the implementing regulations of the LHMPSD have not been amended, which raises doubts, particularly where the assets do not bear an identifying serial number.

Until implementing regulations or registry practice clarify these issues, we recommend addressing these risks contractually and coordinating the security with the other creditors of the development.

For further information:

Pablo Rodríguez Abelenda

This publication is for information purposes only and does not constitute legal advice.