The new Land Act came into force on 1st July 2007 last, replacing the former Land System and Valuations Act 6/1998, 13th April.

Its purpose is to: 

    • Preserve landscape and environmental character 
    • Curb property speculation and rising house prices 
    • Stop excessive development.

This Act will regulate the basic conditions guaranteeing equality in the exercise of and compliance with land-related Constitutional rights and duties throughout the territory of Spain. Similarly, the new law provides for the economic and environmental basis underpinning the legal framework of land, land valuation and the Public Administrations’ patrimonial liability in this matter.

MEASURES

Novelties:

The following are noteworthy among the measures included in the new Land Act in that they are new:

(i) The rights of all citizens are specifically regulated.

(ii) A requirement that 30% of new residential land be set aside for publicly protected housing.

(iii) All planning instruments and agreements must undergo a public information procedure before being approved.

(iv) Change in the zoning of land.

(v) Expectations not to be applied in the valuation of land.

(vi) A requirement that new developments allocate to the public stock of land a percentage ranging between 5% and 15% of the land.

a) Subjective Basic General Citizens Status

In our analysis we would like to highlight that, under Title I, this Act regulates the rights of all citizens and not only of landowners as in the repealed law. Accordingly, a subjective basic general citizens status is established with respect to land and housing, so that all citizens may enjoy and take part in planning the environment they live in, and have access to collective amenities, services and spaces on an egalitarian basis.

Indeed, it is provided that all citizens shall be entitled to live in a decent house and have access to use of public amenities and collective equipment, and to the territorial and urban planning and environmental assessment information available to the Public Administrations. They shall also be entitled to be informed of the planning rules and requirements applicable to a given property, and to effectively take part in procedures for drawing up and approving any territorial or town planning and implementation instruments and for environmentally assessing the same.

In addition, this Act also makes provision for a number of duties, in keeping with its stated purpose, namely contributing to preserving the environment, the national heritage and the natural and urban landscape, respecting and rationally and properly using publicly-owned property and infrastructures and urban services, refraining from engaging in any activity entailing a risk for public or third-party property in breach of applicable laws, and complying with the conditions and requirements set by the laws for troublesome, unhealthy, noxious and hazardous activities.

Furthermore, Title I of the Act also establishes the system of private enterprise in the development activity, which is an economic activity affecting both property rights and free enterprise, and the status of land ownership, defined as a combination of powers and duties.

b) Residential Land Reserved For Protected Housing

Another novelty, based on the Constitutional mandate that all individuals must have a decent house and which touches upon the basic land use criteria, is that 30% of new residential land shall be set aside for publicly protected housing.

In this sense, Public Administrations with territorial and urban planning authority, in fulfilling their duty to allocate sufficient, suitable land for productive uses and for residential use, shall always be bound to reserve the aforesaid land, as set out in the preceding paragraph.

We must however point out that there is a means of mitigating such requirement, because territorial and urban planning laws may also exceptionally provide or allow for less land to be reserved in certain towns or transactions. This shall always be a possibility in the case of new developments, provided that the planning instrument guarantees total compliance with the land reservation referred to above within its territorial scope of application, and that its location is distributed observing the social cohesion principle.

c) Transparency

In the strive to encourage transparency, the involvement of citizens and statutory controls on urban development, the Act provides that all planning instruments and agreements shall undergo a public information procedure before being approved.

In addition, this Act provides that the competent Public Administrations shall urge online publication of these instruments and of notice of their submission for public information.

In this same sense, with the aim of encouraging transparency, additional provision one provides that the General State Administration shall, together with the Autonomous Communities, define and encourage the application of basic policies and principles which may, working and liaising with the administrations having authority on the subject, allow a general public integrated land and urban development information system to be set up and be permanently updated, a further aim being to achieve compatibility and coordination with all other information systems and, in particular, with the land registry.

d) Basic Land Situations

Furthermore, one of the most outstanding new features of this legal text is the new zoning of land. Curiously, no reference is specifically made to “land classes” and the expression “basic land situations” is instead used to distinguish between possible two land types.

Therefore, land shall henceforth be designated either rural land, taking that to be land that is not functionally integrated within the urban web, or developed land, which shall be all land that has been effectively and properly transformed by development.

This change in the zoning of land will result in the former land eligible and ineligible for development being included in the first of these new land categories, whereas urban land shall now be considered developed land, with the major implications resulting from this change, particularly as regards land valuation.

e) Land Valuation Criteria

One of the most striking novelties with respect to the previous law is to be found in the valuation criteria for land and constructions and buildings. This change, which may be inferred from the preamble to the Act, seeks to stand as a measure against speculation. It is above all surprising that expectations will no longer be valued, and the valuation will instead focus on what actually exists at the time, and not on what planning regulations may provide as a future building potential.

Now, therefore, irrespective of the land planning classes and categories, the starting point is the two basic situations (rural land/developed land) and both shall be valued having regard to their nature.

In developed land, that nature defines its use for planning purposes, for that shall be its real use. From this viewpoint, the set valuation criteria seek to determine the market replacement value of the property with another similarly characterised property.

The following shall be done to value developed land that has not been built on or where the building in existence or in process of construction is illegal or is a physical ruin: 

  • The benchmark use and building potential shall be considered to be whatever is allocated to the site by the planning law. If the planning law has not assigned a building potential or private use to the land, the land shall be allocated the average building potential and the general use designation within the uniform spatial area in which the planning law shall have included that land.
  • Such building potential will be applied the applicable value of the land based on the relevant use, to be determined by the static residual method. The value of outstanding duties and charges, if any, to be able to realise the expected building potential shall be taken from the resulting amount. In the case of land with a building or with a building in process of construction, the appraisal value shall be the higher of the following: 
    • The value determined by jointly appraising the land and the existing building if it is lawful, using the comparison method, applied exclusively to the uses of the existing building or the construction already in place.
    • The value determined using the above-mentioned residual method, applied exclusively to the land, without considering the existing building or the construction already in place. In the case of developed land subject to development improvement or renovation actions, the aforementioned residual method shall consider the uses and building potentials originally allocated by the planning law.

However, in the case of rural land, in finding the land value, the comparison method gives way to the income capitalisation method, which shall take into account the income to be obtained by the owner having regard to the return on the use, enjoyment or operation of the land, regardless of whether that price is less than the price of neighbouring properties or indeed less than the price for which it was purchased, and without regard to development expectations.

However, it is noteworthy in this sense that the land value thus obtained may be scaled up to not more than twice that value, based on objective location factors. As for buildings, constructions and facilities, if they are to be valued independently of the land, the appraisal method to be used shall be the replacement cost method based on the state they are in and how old they are at the time to which the valuation must be deemed to refer.

In any event, in the case of both developed and rural land, and regardless of the value of the land, if the land is undergoing a development or building transformation, the expenses and investments incurred shall be indemnified along with a premium compensating the risk taken on.

f) Public Stock Of Land

We would also like to highlight that the Act lays down the duty to set up a separate public stock of land consisting of land clear of the relevant development charges and which shall be allocated above all to building protected housing.

Therefore, there is an additional duty in promoting development transformation actions to deliver to the competent Administration land clear of development charges, to be used as public stock of land, a percentage of between 5% and 15% being generally established. However, this percentage is exceptionally allowed to be reduced or increased proportionately and reasonably by up to not more than 20%.

The land acquired by the Administration by virtue of this duty, and allocated to building houses under any public protection system, may not be awarded for a price in excess of the maximum applicable value of the land for the type of house at issue.

Other Measures

On the other hand, and although they are not new, we would also succinctly refer to certain aspects for which provision is made in the Act, namely as follows:

(i) the rules of the previous Act are included in regard to compulsory purchase and patrimonial liability, and

(ii) the legal system of the surface right in rem is also regulated.

a) Compulsory Purchase and Patrimonial Liability

In regard to compulsory purchase, the same rules contained in previous laws have substantially been provided for, and those rules have been brought to the new Act for reasons of lawmaking technique and to avoid the dispersal of the laws including the same.

There is no doubt that in setting the fair value of the expropriated assets and rights based on the valuation criteria referred to above we may find that the Administration is authorised to expropriate land designated as being eligible for development under the former Act for a value significantly lower than what would result from the previous laws, because this type of land is now designated as rural land and expectations are no longer valued In regard to of reversion and patrimonial liability, they conform in each case to how public stocks of land and development actions are respectively conceived in this Act, and otherwise the criterion of the former Act is also maintained.

It is only noteworthy in relation to these aspects that a reappraisal right is introduced where there is a change in the planning laws increasing the value of land expropriated to carry out a development action, in order for there to be an assurance that fair compensation will be paid without putting the efficiency of public planning management at stake.

b) Surface Right

We would lastly refer to the surface right for which provision is made in the articles of the new Act. Under this surface right in rem, which only the landowner may grant, a rightholder shall be entitled to construct or build under, on or above ground within another’s property, and hold temporary title to the constructions or buildings erected.

That right may also be granted with respect to constructions or buildings already erected or with respect to houses, business premises or exclusive elements of constructions or buildings, the rightholder having temporary title to them, without prejudice to the landowner’s separate title.

As for the arrangement of this surface right, it is noteworthy that in order to be validly granted, it has to be originated in a public deed and the deed must be entered in the Land Registry. The deed needs must set the term of the surface right, which shall not exceed ninety-nine years.