“Land Grab”

The fact that some legal questions affecting foreign real estate buyers in Spain are covered by the media in their countries, especially in the press and on the television, should, at first sight, be very useful, since constructive information on these topics helps buyers in their difficult decision of investing in a country whose laws and language are unknown. However, much of the information offered in these articles and television programmes does not clear the way for potential buyers to understand the situation in the slightest. Instead it causes confusion among them.

One of the topics that has caused greatest controversy over recent months has been the application of the “Ley 6/1994 Reguladora de la Actividad Urbanística de la Comunidad Valenciana” (Law 6/1994 Regulating Development Activity in the Valencia Region) known as the LRAU and its “devastating effects”. These effects supposedly include the possibility that “Real estate owners may be dispossessed of part of their property or that they have to pay astronomical quantities of money to the developer”, as has been published in some media.

The first thing I would like to clarify is, as the name of the law indicates, that the area of application is limited to the Valencia region, i.e., the provinces of Alicante, Valencia and Castellón. The law is not applicable in the regions od Murcia, Barcelona or Almería. Therefore, people reading any information published on this subject should check in the first instance, whether the property they intend to buy is located in these provinces.

In any case, only a very small minority of buyers in the Valencia region may be affected by this Law, as we hope to make clear below.

The LRAU classifies three types of land:

• developed (urbanizado)
• land for development (urbanizable)
• rural (rural)

and there precisely lies the key to the question, which is centred on these definitions. I shall try to simplify my explanation of the meaning of these land-tyes to make it more effective.

Developed land

Most foreign buyers aim to buy a residence already constructed or under construction (apartment, terraced house, bungalow, etc). For that reason they contact the developer who owns the site where the residence is located. In all cases this land has the classification of either “developed land” (suelo urbano), in which case its development is entirely complete, or that of “land for development” (suelo urbanizable) in which case the land has the corresponding approved development programme. When the land is listed as ready for development (suelo urbanizable) the plans for all infrastructure have already been established. These plans incude roadways, electricity, drainage, plumbing and other basic necessities
As a result, buyers should realise that the purchase of any of these residences cannot be affected, in any case, by the so-called “effects” of the LRAU and that buyers can therefore be completely reassured.
Bearing in mind the clients of the firm of which I am a member and those of professional colleagues that I know, such buyers form at least 90% of the total.

Land for Development

On the other hand, buyers who intend to acquire or build a residence on land classified as “rural” or “land for development” without an approved development programme must carry out surveys in advance to know exactly whether or not they may be affected by the development administrative process and in what time period. (In this case, I am referring to what is known in the jargon as “fincas” – estates.)

Should the property in question be on land classified as “rural”, a check has to be made with the town council as to whether there is an approval study or a Development Plan in process, envisaging the change of classification to “land for development”.

If the check proves positive, the buyer must know whether, in the medium term, the land could be subject to a programme establishing urban development of the area and the carrying out of new infrastructures. If, on the other hand, it were negative, the buyer could be certain that the land will remain for a great number of years in the same situation.

In the event of the land already being “land for development”, checks have to be made as to whether the approval of a development programme exists and how this might affect the land where the residence is located.

In all these cases, it is recommended to seek specialist legal advice to estimate the time that may pass before the land is affected by any future development activity, since, as is well known, the approval of planning instruments, especially Development Plans, is very complex and subject to many complications and, therefore, may take an extremely long time.

In conclusion, the “devastating effects” to which we have referred are not a direct consequence of the letter of the law mentioned. The law basically intends that the owners of “rural” land, benefiting from the change of its classification, contribute obligatorily to the development process. The costs generated by this participation, such as its economic contribution or supply of land, are more than compensated by the benefits of a substantial increase in value to the property.

The isolated abuses that do arise, (which are those that have appeared in the British press) have generally derived from the corrupt application of these regulations carried out in very specific cases by some developers, who, with border-line legality, look to become property developers of large areas of land that they do not even own, prejudicing the legitimate owners.

In any case, despite what has been stated, there are enough measures in the legislation to correct the mentioned problems easily by means of collective action of the affected parties and the control of the respective town councils.

José-María Martínez-Abarca
Martínez-Abarca & Muñoz, Solicitors