The New Spanish Land Law (LEY 8/2007 de 28 de Mayo de Suelo)

A new Spanish Land Law (Ley8/2007de 28 de Mayo de Suelo) has been passed which is set to change the property development sector in Spain, and the reputation it has gained for corruption highlighted by the arrests in the last year of local officials in the Malaga region.

This new law came into force on 1st July 2007.

The general purposes of this Law are, in essence:

• to achieve a sustainable & controlled urban land development
• to increase transparency and efficiency at the real estate market
• to improve the participation of the citizens in making decisions of urban planning
• to avoid speculation & corruption

What does the Land Law say?

1. Land legal system

Land is defined as a "scarce non-renewable natural resource" so the sustainable development of land is an imperative goal.

Land is classified in two general categories: rustic (rural) and urbanized (urbanizado) and the use of each category is governed in great detail, so authorised and forbidden activities are now listed.

City growth is to be controlled and limited (i.e. it will be necessary to undertake a global review of Planning Scheme if a development activity comprises - either solely or in addition to those passed in the last two years - an increase superior to 20% population or local urbanised land surface area).

Protection of the environment is emphasised. It will be necessary to produce certain reports to be consider prior to the urbanization and development approval been granted.

Essential duties and obligations arising from the urbanization and development activity are listed.

The transfer of land is ruled in detail, including specific implications for notaries (officials involved in land purchase in Spain who work alongside solicitors/abogados) and registries in order to ascertain that urban planning regulation is adhered to (i.e. building licenses need to be evidenced to the notary who can additionally request a report from the local authority to verify legal situation; four years liability which allows the affected buyer to resolve the contract if planning obligations are not accomplished).

2. Property valuations

The new Law includes a comprehensive regulation on the general valuation system applicable to land, buildings, constructions and the rights on those. It states the criteria to be used when valuing the two categories of land mentioned above (rustic and urbanised). It expressly refers to how compensation will be calculated.

In essence, the land will be valued on the basis of its real actual value instead of valuations been given based on the future expected condition and value of the land (and properties on it), so this will avoid speculation and fraudulent classifications of land.

3. Citizens’ rights & duties

Landowners will need to know and understand the Law as it expressly rules on the ownership rights and obligations in connection to their own properties. However the new Law also refers to rights and obligations of those who are not landowners but are still impacted by the new law.

The law specifically refers to protected housing or social housing guarantees and state that a % of land should be reserved to help moderate the price of free housing and to make it easier for people to access free housing.

One of the main goals of the law is to increase the transparency of the planning process so building trust in the process. This is to be achieved, in part, by improving people’s access to planning information for example planning schemes must now be on the Town Hall’s website; and schemes and urban agreements are subject to public notification. By making public the private activities and estate of local authorities, or identifying who will be the beneficiary of land re-classification, it is hoped that people’s trust in the process will increase.

The law does imposes more duties on Spanish local and public authorities in connection with social housing and planning schemes, and provides an opportunity to deal with the land/property political scenario more effectively. This does mean that the local and public authorities will be required to make increase their efforts in these areas.

However as with all laws in Spain, there are some critics. These mainly come from the building sector and speculate that the new guidance on valuation may mean that some owners of agricultural land wishing to sell land for development may lose out. They also predict that property prices may rise and speculate on the appearance of urbanising agents.

Even though the law was initially widely accepted as a positive move to address some of the public scandals of recent years and to improve people’s trust in the planning system in Spain, there have been several Autonomous Communities which have already claimed that the law is not according to the Spanish Constitution in what regards the distribution of competences. In fact the regional government of Madrid, La Rioja and Canary Islands have already submitted claims at the Spanish Constitutional Court

For more information on the new Spanish Land Law, contact the tem at Irwin Mitchell Abogados on 00 34 902 150 105 or email spainenquiries@irwinmitchell.com.