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ENGLISH SPEAKING LAWYERS IN MALAGA (ANDALUCIA / COSTA DEL SOL) SPECIALIZED IN PROPERTY LAW & CONVEYANCING

Archive for non developable land

RENOVATING YOUR HOME? DO IT RIGHT AND PAY LESS TAX WHEN YOU SELL

Renovating house in Andalusia: tips & save on Capital Gain Tax

One of the first things many people do when buying a property is renovate it.

The expenses from the renovation and improvement of a property can reduce the tax on capital gains in the event that it is evidenced in the future sale of the property. It is important to clarify that repair or preservation costs for the property are not deductible. Deductions only apply to renovations or improvements that increase the value of the property compared to before they were made.

The cost of improvements would be added to the price paid in the sale, resulting in lower capital gains due to the difference between the price to transfer the property and the purchase price, which means less tax would be paid to the Tax Agency. This will be so provided that such renovation and improvement works can be evidenced so that the Tax Agency can accept them. Below, you will find what I consider to be the most important aspects to be able to prove the works carried out for tax purposes.

TECHNICAL PROJECT

Having an architect draft a project and oversee the execution of the works is not a minor issue. If the works to be carried out are of a certain scale, it is always best to have a professional perform follow-up and control since he or she would be liable if something goes wrong. Likewise, having carried out the works with a technical project and a final works certificate can be used to evidence the improvements made in be property before the Tax Agency.

BUILDING PERMIT

If you are going to renovate a property, it is always necessary to get a building permit for both major and minor works. It is true that this is often not requested to save money, for instance when renovating the inside of a home or a room, as there are less chance you will be found out.

Having a building permit will help you on three important aspects:

  • To evidence the lawfulness of the works –provided that it complies with the permit granted–. Likewise, it is important for you to know that, if there is an accident at the building site, not having a permit may entail consequences of criminal liability for the owner.
  • When it comes to works where the distribution of the property will change, the constructed area will be enlarged or a new home will be built, the building permit –among other documents, such as the final works certificate and the permit for initial occupation– will be necessary to register this new construction in the Property Register.
  • When selling a home with profit, the building permit will serve to prove to the Tax Agency that improvements were made so as to request that these are taken into account as part of the purchase price of the home.

Having a building permit is more important in terms of urban-planning and criminal law than in terms of taxes.

CONSTRUCTION CONTRACT

It is very important to sign a contract for the works to be carried out with the builder. The construction contract will mainly evidence which is the construction company that performs the works, the type of works to be carried out, their estimated cost and the location where they will take place.

INVOICES AND PROOF OF PAYMENT

Without a doubt, in terms of taxation, this is the most important requirement for the Treasury to recognise this improvement or renovation.

We often find homeowners who have spent a lot of money on improving their properties but who have no invoices issued by the builder or proof of payment for these works. It is essential to prove to the Tax Agency that these amounts have been paid by bank transfer or personal cheques made out to the construction company. If you have no way to prove these payments, it will be impossible for you to include these improvements in the purchase price of the property. You must always request an invoice and keep proof of payment.

The costs of the improvements will be added to the purchase price because of which you will pay less Capital Gain tax. The Capital Gain tax of this moment is 19% over the profit between the purchase and sales price minus the deductions.

WORKS WITHOUT A PERMIT THAT CANNOT BE LEGALIZED

It is possible that, for the works you intend to carry out in your home, it is not possible to obtain a building permit, for instance in works to enlarge a home in non-urban land –rural land–, increasing the surface area beyond the development potential –such as when enclosing a balcony– or building to a height higher than that allowed. The first thing you should take into account is that, as the owner, you will assume the legal liability that may arise if legal proceedings are brought in connection with these works without a permit.

If you will be carrying out such works, it is important for you to sign a construction contract with the builder, for you to obtain an invoice for each payment and for payments to be made by bank transfer or cheque. Even if you do not have a permit, it would be possible for these improvements to be taken into account when selling the property.

The Tax Agency cannot reject improvement works for not having a building permit –inspecting urban planning law is outside their jurisdiction–, for which reason it is important for you to be able to evidence the works that were effectively carried out, what their cost was and submit payment documents.

In these cases, it would not be a bad idea to have a technician draw up some type of report –not a project– explaining how the property was before and the works that have been performed, providing photographs and documentation from the owner. This is an additional document that can be used to prove improvement works.

NEW CONSTRUCTION DEED

The New Construction Deed is a document signed before a Notary Public to register a building in the Property Register in Spain. Even when the construction does not have a building permit, it is possible for it to access the Property Register in Spain –which does not mean it is legal– provided that a series of requirements are met.

If you have built a pool, garage, storeroom, etc. in Andalusia without a licence, it is possible for you to get an architect to issue a certificate of age six years after completion, to evidence the new construction and its age. This certificate can be used to sign a Deed of Declaration of New Construction before a Notary Public and register the construction in the Property Register. In some cases, it would not be possible to register it in the Register, such as when the land is especially protected.

VALUE OF THE CONSTRUCTION DECLARED IN THE DEED

The value of New Construction assigned in the Deed cannot in itself be used to prove to the Treasury how much was spent on the property at the moment of selling.

For instance, if you declare, in the Deed, that you have spent 50,000 euros on the pool and garage you built, unless you have proof of payment and invoices from the construction company, the Treasury will reject this expense. This is so because what you do before the notary is nothing more than a statement, which means that the Notary does not check if you really spent that amount or if it was more or less –and isn't required to do so–.

In my opinion, if you are going to do a Declaration of New Construction for works without a licence, you should include a copy of the invoices and/or proof of payment to the constructor in the Deed, as this would evidence the value you declared and make it easier for the Treasury to accept it when selling the property.

Lastly, if you are thinking about doing any work on your property, I wish you all the luck in the world and, most of all, lots of patience; I almost ran out of it myself when I renovated mine...

 

Author: Gustavo Calero Monereo (C&D Solicitors / Lawyers, Torrox Málaga)

TIME LIMITATION FOR RESPONSIBILITY: ILLEGAL SUBDIVISIONS RUSTIC LAND ANDALUSIA (DAFO)

illegal subdivision rustic land andalucia

illegal subdivision rustic land andalucia

On 6 August, the amendment of article 183.3 of the Urban Planning Law of Andalusia (LOUA) came into force.

The main objective of this amendment was to introduce a statute of limitations for subdivisions in non-developable land that contain buildings. Since 2003, the Administration was able initiate the administrative proceedings for the grouping of these plots divided illegally at any time, which entailed an order to demolish anything built illegally on such lands. There was no time limit, i.e. the legal responsibility never expired.

What this amendment has done is introduce a statute of limitations of six years for such subdivisions, provided that they contain buildings over six years old. This statute of limitations introduced for buildings constructed in non-developable land, results in the legal responsibility expiring after six years without the administration initiating proceedings against such subdivision.

It should be made clear that subdividing rural land means the segregation or division of a plot of land into several more plots, usually for the purpose of selling these plots independently and building there. These subdivisions are illegal unless they comply with the smallest unit for crops, which, in dry lands, is usually between 20,000 and 25,000 square metres. The general idea is to limit plots in rural land from being divided to form new independent properties as much as possible.

This is not a minor issue as, both before and after the passage of the LOUA in 2003, thousands of illegal subdivisions of rural land that did not comply with the smallest unit for crops took place in Andalusia. This situation was widespread until 2009, when the economic crisis put an end to frantic speculation in the property market.

The existence of thousands of such subdivisions led to the sale of many properties originating from illegal subdivisions, which were then transferred to other buyers, whom were also transferred the legal “problem” represented by the possibility of the Administration initiating procedures against them.

This was a situation that created a high level of legal uncertainty, as the offence of dividing such land illegally never expired. The sale of these plots led to the appearance of third parties acting in good faith.

In practice, the Administration in general and City Councils in particular did not have –and do not have– any interesting in pursuing proceedings against these subdivisions to re-establish legality in urban planning. In fact, the enforcement of the resolutions of these proceedings, by grouping all segregated plots into a single property in the Land Registry and in the cadastre, with the demolition of anything built illegally on such plots, seems a complicated task, not to say an impossible one.

In addition to this, the fact that there was no statute of limitations caused a situation of comparative tort, as the offence of having built on non-developable land, on a plot that did not come from a subdivision, would expire after six years. However, if the building was located on a plot divided illegally, the building could be “attacked” with no temporal limit as the offence of subdivision did not expire, i.e. despite the building being over six years old.

I think this amendment is sensible, as it equalises the statute of limitations for plots with buildings and that of buildings constructed on non-developable land. This will lead to greater legal certainty, with the ability to determine the legal regime applicable to these properties clearly.

The logical consequence of this amendment is that buildings that are over six years old and that are built on land subdivided illegally will able to apply for the Assimilated-Outside-of-Planning Procedure (DAFO).

This procedure does not entail the legalisation of the building as the situation of illegality is always maintained but it can lead to greater legal certainty, as the City Council will certify the situation of the property on which legal liability has expired, without the possibility of being “attacked” again by the Administration itself, provided that, of course, no new buildings, renovations or improvements are made on said building.

This recognition, in addition to being a relatively significant financial outlay for the owner, will also entail the certification of a series of limitations for buildings on rural land, despite the fact that, with or without DAFO status, these limitations still exist. It will be up to each owner or new buyer to decide whether he or she is interested in requesting that recognition for the property in question, without forgetting that the City Council can require the owner to initiate it ex officio.

Author: Gustavo Calero Monereo, C&D Solicitors, Malaga, Andalusia

HOME BUYERS ACTING IN GOOD FAITH, MORE PROTECTION IN THE CRIMINAL FIELD

Spanish home buyers acting in good faith

Spanish home buyers acting in good faith

Yesterday Thursday 26 March, the Lower House of the Spanish Parliament ratified the amendment to article 319 of the Spanish Penal Code, approved by the Senate last 12 March. A paragraph has been added to section 3, which reads:  “In any event, the Judges or Courts of Law may issue a reasoned order to demolish the works and restore the physical reality altered at the expense of the principal thereof, without prejudice to the compensations due to third parties in good faith, and, assessing the circumstances and after hearing the competent government body, shall temporarily subject the demolition to the constitution of guarantees that ensure their payment. In any case, the seizure of the earnings from the offence shall be available, regardless of the transformations that these may have undergone”.

This new regulation will be into force next 1st July.

Until now, in proceedings regarding an Offence against Town and Country Planning, the judgment ordered the demolition of what had been built illegally and compensation was set by way of civil liability for the developer, in favour of buyers acting in good faith. The problem is that, in most of these cases, collecting said compensation was very complicated since the developer was either insolvent or had disappeared. However, enforcement of the demolition was not stopped, for which reason we could find ourselves before an unfortunate scenario where a buyer acting in good faith and recognised in a judgment could have his home demolished without being effectively compensated.

From now on, in criminal proceedings for Offences against Town and Country Planning, the judge may stop the demolition of the home until due compensation to the third-party acting in good faith is guaranteed.

From the literal wording of the amendment introduced, it seems that the judge will be the one who, after assessing the specific situation in each case, will stop said demolition, for which reason I understand that it will be an essential requirement to prove that the buyer is really a third party acting in good faith.

Likewise, it seems interesting that, in assessing whether to stop the demolition, it is required for the competent Government Body, which I take to be the City Hall, to be heard in the proceedings. I suppose that, in these cases, the City Hall can provide relevant details leading to stopping the demolition. Also, since the City Hall is the one responsible for executing the demolition, it may argue on the suitability of stopping it until it can ensure compensation for the third party acting in good faith.

Lastly, this amendment refers to stopping the demolition temporarily, i.e., a specific period of time is not established but, in any case, it should not perpetuate over time. However, the concept of “temporarily” is very wide and it may be interpreted as sufficient time to guarantee compensation to buyers acting in good faith.

I can say, with full knowledge, that this amendment of the Penal Code has been possible mainly thanks to the work of two associations in Andalusia that have been working on protecting buyers acting in good faith for several years: SOHA and AUAN, especially noting the great work done by Gerardo Vázquez, a colleague of mine, attorney and legal adviser at AUAN. The efforts of these organisations and their mobilisation have made this amendment possible.

The aforementioned organisations, along with many others that have been created, are justified by the great problem faced in Andalusia, which has 300,000 homes built in non-developable land (NDL). On the Andalusian coast, due to foreign residential tourism, many buyers are foreigners and this has led these owners, facing the legal problems with these homes, to move to defend their interests, to strengthen and to tell authorities about the existing situation.

The main problem, at least in Andalusia, has been the complete inactivity and inefficiency of Urban Planning in Andalusia, which has led to a failure in regulating non-developable land in Andalusia and to the existence of many homes built on non-developable land.

Regulations with very fixed and strict criteria governing construction on non-developable land were approved. However, Autonomic and Local Governments have completely neglected to provide the necessary oversight to enforce these regulations.

From the beginning of the years of the housing bubble, the competent government bodies have shown no predisposition to initiate and solve disciplinary procedures against offenders, with all the legal consequences that this entails, such as demolishing what has been illegally built. The governing party in City Hall should have assumed the “feared” political price that these unpopular measures may have entailed.

Most of these buildings have everything: registered deed, pay IBI (Property Tax), are registered in the Property Register, have electricity and water, and have paid autonomic taxes such as ITP (Tax on Asset Transfer) and AJD (Stamp Duty).

Many of the properties have changed owners, meaning that the person responsible for construction is no longer the owner of the home. When these properties enter legal proceedings, third parties acting in good faith appear, affected by this situation that the Local and Autonomic Governments, with full knowledge, have allowed due to their complete inaction in the field of Urban Planning.

The regulations provided in the Urban Planning Law of Andalusia (LOUA) to govern the very strict use of non-developable land were based on environmental protection and on maintaining the rural value of a large portion of the Andalusian territory so as to preserve this environment and its values.

However, its lack of application due to a lack of real and effective control of what was being done on non-developable land has given rise to the failure of regulations on the use of non-developable land provided in the LOUA.

In reality, this has resulted in large rural areas becoming full of unregulated buildings, achieving the opposite effect, as the lack of protection of the rural environment is clear in these cases.

In practice, a total lack of protection of rural land has occurred in some areas under greater urban pressure, where, without controls or any type of criteria regarding what was being built at the architectural level, construction has been allowed, of palaces, warehouses, terraced houses, one-storey homes, towers and everything in between. There has also been no control of the necessary infrastructure or facilities for these homes to be used: discharge of sewage, illegal wells to obtain water, etc. Furthermore, many of these homes did not pay local building taxes, as the majority were not eligible to obtain a licence under the LOUA.

However, as we explained in a previous post, it should be noted that, in some cases, the licenses for segregation, building and initial occupancy were indeed granted for some of these homes. The fact that the Government is responsible in these cases is more than obvious and the damages suffered by owners, who purchased the homes in good faith, are completely reprehensible.

This situation of deregulation of non-developable land has an undesirable effect on citizens, as there is a feeling that there are citizens who ignore the law and go unpunished and that there are others who are required to comply with it.

If the urban planning disciplinary proceedings had been started quickly and efficiently at the beginning of that frenzied period of real estate development on non-developable land, the message that citizens would have received would have been very clear and many buildings would not have been built. There would still be homes on non-developable land but the magnitude of the problem would be quite different.

Faced with this situation, the legal response to solve this problem should be consistent with the reality that exists and that has been tolerated by the Government itself for so many years. This is why the necessary legislative reforms in this area must be tackled rigorously and without propaganda messages, avoiding a focus on the debate on “amnesty for everyone” or “offenders must pay” because the situation is much more complex.

In the administrative field, the majority of these homes should be regularised as, in many cases, penalties for using land illegally would have expired and many of the developers-builders are not the current owners.

In the future, there should be a debate regarding the effectiveness and efficiency of Urban Planning under current regulations, as well as regarding whether the regulation of non-developable land in the LOUA is adequate for the purpose it intends to fulfil.

 

Author: Gustavo Calero Monereo, C&D Solicitors (lawyer)

Torrox-Costa (Malaga/Costa del Sol/Andalucia)

 

 

 

 

FUTURE REFORM IN ANDALUSIA FOR THE OWNERS OF HOMES CONSTRUCTED ON NON-DEVELOPABLE LAND

Andalucian houses constructed non-develople land

Andalucian houses constructed on non-develople land

Three weeks ago the Junta de Andalucia (Andalusian Regional Government) announced a reform of the Urban Development Law for Andalusia (LOUA) which aims to provide further legal security for owners of homes that are built on non-developable land (rustic land).

With the current LOUA regulations, for those buildings constructed on rustic land in Andalusia and which are within a zoning plot, the prescription period of six years that the administration has to "attack" these constructions on rustic land does not apply. In other words, no time limit is established, therefore the government leaves open the possibility to begin administrative procedures against said plot and the constructions that are on it, when it deems convenient, even if it has been over six years since the home was built.

The above has the main effect that a building on rustic land, built over six years ago on a property that has not been segregated, cannot be penalised or "attacked" by the government, whereas if the construction is part of a segregation/plot division it could be penalised in spite of being built over six years ago, and demolition of the homes built on this plot could be ruled, as established in article 49 of the Regulations on Urban Development Discipline. Regarding this article, I point out that in spite of it and in my opinion, I do not think that it is feasible to carry out any demolition under this precept due to several legal reasons.

The problem with current regulations since the LOUA came into effect in 2003 is that no serious monitoring or inspection policy has been implemented by the Junta de Andalucia and the Town Halls on rustic land. This has led to the proliferation of thousands of new homes and plot divisions throughout Andalusia, especially during the times of the real estate boom, and more so on the Costa del Sol, where this speculation reached unsustainable proportions.

In spite of the fact that it was feasible to control these constructions, it was not done and this led to the buildings entering the legal level, with many owners purchasing in good faith with all the appearances of legality. This has shown that current regulations in Andalusia on rustic land, and specifically on plot zoning, are pointless, because no one has made sure that they were enforced, making them inefficient at best.

Now the intention is to modify the LOUA and provide the possibility for isolated constructions located on plots of rustic land to regularise their situation through the figure of assimilating it as unregulated, that was introduced by the Decree of 2012. This will be so provided that the period of 6 years has elapsed without the government beginning any penalisation procedures against these buildings, therefore to these purposes the legal situation is considered as equal to those homes that are not located on a zoning plot.

It will take a period of 5 or 6 months for this reform to be approved, and it will be approved by parliamentary proceedings, therefore changes will be included during its approval.

I understand that this initiative by the Junta de Andalucia is a first step towards solving this problem. We all would have preferred for this not to have happened and that rustic land would never have been part of town planning speculation, but this problem started many years ago and the issue is clear; what to do with thousands of homes that cannot be demolished now?

Most of these homes are inhabited and they are still being bought and sold between private persons, therefore it is necessary to regularise them so that third parties acting in good faith have legal security as owners of these properties. Likewise, it is reasonable that those that were built without a building permit, which is most of them, should assume a cost for the regularization procedures and they should contribute the same as any citizen who wishes to build a house, and this bearing in mind that the acknowledgement by AFO is not the cure-all either. From an ecological and environmental standpoint, the legalisation procedure must guarantee that these homes do not cause any further damage to the area where they are located, and that their waste water is completely purified by autonomous installations, because as long as they are fully illegal, and cannot be "attacked" by the government, each owner will do what they see fit and damage to the environment will be higher.

In short, given the current situation and bearing in mind the problem that has been created due to the inactivity and lack of control by the public administrations, from a legal, financial and environmental standpoint, we must establish a regularization procedure for these homes. If not, if we continue with the current situation, it would be a great mistake and it would only continue to aggravate the problem as the years go by.

 

Author: Gustavo Calero Monereo, C&D Solicitors (lawyer)

Torrox-Costa (Malaga/Costa del Sol/Andalucia)

RECENT CONTROVERSIAL DEMOLITION OF TWO PROPERTIES

Controvercial demolition properties Andalucia

Controvercial demolition properties Andalucia

Last Monday October 14th, the Regional Andalusia Government Junta de Andalucia carried out the demolition of two houses which  were built without construction permit on non-developable land in the rural area of Las Terreras, in the municipality of Las Canteras, Almeria.

In this case, the developer did not have construction permits to build both properties. This is a different situation from that explained in our blog post in March, but there are also involved third parties in good faith, who bought the aforementioned properties to the developer/seller. The demolition of these properties means the infringement of a fundamental property right according to the interpretation of the European Court of Human Rights (ECHR), which has demanded that:

-          People affected by court or administrative proceedings which may imply the loss of their assets shall have the effective and real opportunity to defend their situation.

-          Property loss due to general interest—for example, the compliance of planning legality over ownership of assets—shall be previously compensated to the owner.

Therefore, upon consideration of this European case law, it is not sufficient that in these two cases the judgment has assessed civil liability and the seller-developer is sentenced to compensate owners who bought these properties, but this compensation should be made effective prior to demolitions to avoid the risk that the seller fails to pay or is not able to pay and, as a result of this, third parties in good faith are not compensated. It should be noted that subsidiary liability of public administrations is not observed, as no construction permit was granted.

In order to guarantee the payment of compensations, appropriate actions should be taken prior to execute demolitions in the same proceedings for the enforcement of judgments. If this were possible, this situation should be determined as a reason to stop the judgment enforcement until compensations are paid to the affected owners. Obviously, each case should be analysed in order to determine whether the owner knew about the absence of construction permits and even though he was aware of the risk involved, he bought the property. In these cases, protection for these owners should be different.

Regarding certain information compiled by different means, there is a chronological perspective to be pointed out in respect of these two demolitions, which reveal the inefficiency of inspection and penalty procedures in regards of town-planning regulations, as well as the belligerent approach of public administrations participating:

-          In 2004, the Andalusian Regional Government initiated a proceeding against the developer and he was fined because of the earthmovings in this area. Then, he was obliged to restore it to its original state. Obviously, the developer failed to comply with this order to restore it to its former state. In addition, the Town Council or Andalusia Regional Government should have acted in this moment, as well as they have done now, when carrying out the demolitions.

-          In 2007, the Andalusia Regional Government officially ordered to the Town Council the demolition of the properties, as they have been built on non-developable land without construction permits. From 2004 to 2007, 3 years have elapsed. During this period of time the 4 properties were built and no competent public administrations did paralyze the works before they were completed. As a result of this, the completed houses were entered into legal transactions and then new owners arised. Why were construction works not paralyzed within these years?

-          Once that the 4 properties were completed, the Town Council authorized water and electricity supply for them; this illegal authorization granted by the Town Council implied that these homes were appropriate to be occupied, as these supplies were essential for their sales.

-          In 2012, The Andalusia Regional Government seemed to request the Town Council to execute the demolitions.

-          In October 2013, the demolition of two properties was carried out by the Andalusia Regional Government, because the Town Council did not do so. The other two properties are also pending to be demolished.

Nine years have elapsed since the construction activities without permits are known until their demolitions were indeed executed. During this period of time, third parties in good faith have appeared and been affected by this situation. Have public administrations really done their utmost? Could have they acted earlier and with greater accuracy since 2004?

It would be a rather difficult task to think that the Andalusia Regional Government and Town Councils are not liable for a large number of homes built without permits on non-developable land in Andalusia—liability becomes obvious for those properties built with construction permits—since they had aerial images of each area, cadastral information and documents from the Payments Offices for transfer tax collection, which may have allowed them to protect non-developable land and enforce Andalusia town planning Act (LOUA). But they did not want to do so. Accordingly, as town planning duties have not been complied in respect of inspection and penalty procedures, the liability of Andalusia Regional Government and Town Council is joint and shared.

It is also worth mentioning the existence of certain arbitrariness on the part of public administrations when judgments were enforced, since older proceedings are still pending to be enforced and no actions are being taken on them.

Foreign residential tourism is a key factor for local economies in many areas; different national newspapers have been looked up and all of them echoed the new demolitions, which is a very harmful publicizing. They stressed the absence of economic compensations before demolitions were carried out, rather than demolitions itself.

It is not a question of implementing a general amnesty for all irregular acts executed on non-developable land without permits, since this may lead to a negative message for people who meet regulations. However, the fundamental property right should not be further infringed in conformance with the European Court of Human Rights (ECHR) case law and property right should be protected in Spain as a fundamental right. In addition a legal  system which protects third parties in good faith should be provided in order to ensure legal certainty; inspection and penalty procedures should be carried out and should not go on forever due to the lack of interest of public administrations, so that their effectiveness may paralyze these type of constructions before they are entered into legal transactions; common sense and realism should be imposed and Regional Governments should be consistent with what has been accepted in these years, due to their failure to act or interminable penalty and enforcement procedures.

It seems understandable that town-planning legality will be now strictly enforced and hopefully it will be watched over. However, solutions should be provided from a logic and legal perspective for all previous cases.

 

 

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

 

 

 

BUILDING PERMIT INVALIDITY AND CONSEQUENCES FOR THIRD PARTIES IN GOOD FAITH

Invalid Andalucian building permit/licence

Invalid Andalucian building permit/licence

One of the legal problems affecting some owners of properties on non-developable land has originated in the last ten years with the invalidity of building permits, which protected these constructions on non-developable land. This invalidity has been obtained in most of the cases by means of the corresponding contentious-administrative court proceedings.

First of all, the invalidity of a building permit would imply the demolition of what has been built under this permission on specially protected non-developable land; in case of common non-developable lands (without special protection), this invalidity may imply the demolition if more than four years has not elapsed between the end of the construction and the beginning of contentious-administrative proceedings or the invalidity procedure ex-officio by the Town Council. After March 2012 six years should have elapsed.

From a legal point of view, the main problem lies in the third party in good faith, included in Article 34 of Spanish Mortgage Law, who purchases a property to the former owner who had a building permit to build, and later on, he finds out that this permit has been challenged by contentious-administrative jurisdictional courts and found null and void by final judgment before the sale execution; or he finds out that there is a contentious-administrative proceedings going on when he bought the property and has not been finished yet. Therefore, sooner or later a judgment may be received stating that the permit is invalid.

The third party in good faith is not able to know about these facts because until the 1st of July 2011 it is not compulsory to register in the Land Registry the invalidity of the building permit ordered by final judgment or resolution ex-officio by the Town Council. This modification was incorporated by the Spanish Royal Decree-Law 8/2011 approval modifying some articles of Spanish Land Law. For this reason, this third party purchaser is not able to know about this situation, becausethe Land Registry has not recorded in most of the cases the decisions taken on building permits which may affect their property rights.

The abovementioned Royal Decree-Law approval has set the compulsory registration in the Land Registry of the legal condition of the property, so that the Public Administration bodies will be responsible if this notification is not served to the Land Registry when contentious-administrative proceedings are affecting the building permit granted to the property. Articles 51 and 53 of Spanish Land Law (Royal Decree-Law 2/2008 of 20th of June) set forth this compulsory registration, so that the third party in good faith may be able to know about the legal situation of the property by looking up the Land Registry and then decide about buying or not this property knowingly and intelligently.

However, regarding the abovementioned information, a problem arises when considering the facts previous to the 1st of July 2011—whether the proceedings are finished at this date or they are not resolved yet, because the abovementioned compulsory registration in the Land Registry was not in force as to this date as former regulations were applied.

In my opinion, the main problem of Spanish legislation in this field and its most frequent interpretation by Spanish case law, lies in the fact that the third party in good faith accessing the Land Registry is not protected by the Registry certification and the legal certainty that the Land Registry must provide, prevailing the planning legality support over the registry certification. We understand that is not abiding to law, because the third party in good faith, legal owner and unaware of the legal situation concerning the building permit, shall not be subject to the negligence of Public Administration.  In the interest of legal certainty, the rights of the third party in good faith should prevail over the planning law enforcement.

Apart from the abovementioned situation of the third party in good faith, the core problem lies in the fact that the property right in Spain does not enjoy a special protection. It is also worth mentioning that Spain is subject to comply with the Rome Convention, which considers the property right to be a fundamental right with a special protection. Concerning its interpretation of property right, The European Court of Human Rights (ECHR) itself has demanded the following:

1) Those affected by administrative or court proceedings which may imply the loss of their assets shall have an effective and real opportunity to defend their situation.

2) Any deprivation of a property to his owner due to the general interest—as the enforcement of planning law, requires a previous compensation for this deprivation. In fact, a recent resolution of the ECHR of the 31st of January 2013 by cautionary measure has cancelled a demolition in Cañada Real (Madrid) until the Town Council provides an alternative accommodation to the family occupying the property and the outlined underlying matter is resolved. In this case, we refer to the demolition of a property in a shanty-town located in specially protected land and without building permit.

Therefore, the Spanish legal system should reconsider certain substantive decisions providing the property right with a fundamental nature and protecting it. As a result of this, the protection of the third party in good faith should be one of the cornerstones of this protection, because this third party must not bear the damage of the unlawful conduct of Public Administration when granting these building permits, both in these cases where the invalidity proceedings were not entered in the Land Registry and were not available and those cases where proceedings are initiated against the building permit once the third party in good faith is the new owner.

In addition, these owners, who built their properties with the corresponding building permits granted by Town Councils, should not be deprived of their property right by means of the property demolition without compensation to cover their loss, as this demolition is originated by the negligence of the Town Council and not by the owner.

Spain should ensure compliance with its obligations as an EU Member State, as the property right concept of the Rome Convention and the European Court of Human Rights (ECHR) case-law is obvious in this regard. Therefore, we understand that this Convention is being infringed by Spain, apart from the fact that the current situation contribute to legal uncertainty.

 

 

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

 

 

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