Market spotlight

Trends and prospects

What are the current trends in and future prospects for the real estate market (both commercial and residential) in your jurisdiction?

After a boom from the mid-1990s until 2007, followed by a violent setback when the internal real estate bubble burst as a result of the global financial crisis, the Spanish real estate market has enjoyed continued growth since 2014, attracting increasing interest from both institutional and private investors. At present, almost all sectors of the market (eg, office, retail, hotel and leisure, logistics, residential) are thriving ‒ to such extent that a lack of availability has become apparent, particularly in the office and logistics sector. As a result, interesting new development projects are emerging to meet heightened demand and appetite for high-quality real estate targets. For 2018, experts place growth expectations for the real estate sector above the European average.

This trend is driven by the attractive prices and rental prospects available in the Spanish real estate market, in addition to macro factors such as political stability, increased gross domestic product, highly developed infrastructure, increased internal demand, constant population density and Spain’s location as a European tourist hub. Even the unemployment rate ‒ while still too high ‒ has begun to fall considerably. The growth of the Spanish economy in the last four years was consolidated in 2017 and the expectations for growth in the following four years are equally good.

Rights and registration

Rights

What types of holding right over real estate are acknowledged by law in your jurisdiction?

The types of holding right over real estate are as follows:

  • sole ownership;
  • co-ownership; and
  • condominium and time sharing (part-time easement).

The types of charge are as follows:

  • easements;
  • administrative charges;
  • covenants;
  • liens;
  • mortgages;
  • usufruct (beneficial use);
  • right of use and right of residence;
  • heritable building right;
  • leasehold; and
  • land easement.

Are rights to land and buildings on the land legally separable?

Due to the principle of ownership by accession, rights to land and to buildings on the land are not separable. There is one exception: the heritable building right. In this case, ownership of the building and the land is separate. The beneficiary of a heritable building right is entitled to build on or under the land of the property owner in exchange for a periodic rent. However, this arrangement is temporary: once the agreed duration has expired, ownership of the building passes to the property owner. For individuals, this duration may not exceed 99 years; whereas for legal entities, there is no limit. It is compulsory for formal validity that the heritable building right be recorded in a public deed and entered in the Spanish Property Registry. 

Which parties may hold and exercise rights over real estate? Are there restrictions on foreign ownership of property?

Natural persons and corporate bodies ‒ both private and administrative ‒ may hold and exercise rights over real estate. Since 1992, the regulations governing foreign investment have liberalised all investments in Spain. Nonetheless, express authorisation may be required in special zones of interest for national security reasons, and in coastal zones and islands where foreign property ownership can be restricted. However, for EU citizens these provisions mostly lapsed following Spain’s accession to the European Union in 1986.

Moreover, since 1999 transactions are considered foreign investments only if the amount involved exceeds 3,005,060.52. In such cases, a simple retroactive notice to the government is required in order to satisfy governmental formalities. On the other hand, there is a formal obligation to report any investments that originate in so-called ‘tax havens’ prior to carrying out the investment. Together with the current anti-money laundering legislation, a considerable amount of information is requested from foreign investors. The rules on investment are always linked to the place of origin of the investment, rather than to nationality. EU citizens are exceptions to this rule.

How are rights, encumbrances and other interests over real estate prioritised?

The Property Registry is governed by the rule of chronological inscription. Thus, the first-ranking right has precedence over all subsequent rights, according to the principle of prior tempore potior iure (ie, earlier in time, stronger in law).

Registration

Must real estate rights, interests and transactions be registered in your jurisdiction? What are the legal effects of registration?

As a general civil law rule, real estate rights, interests and transactions need not be registered at the Property Registry to be legally valid. Therefore, registration is merely declaratory, not mandatory. Nonetheless, there are important exceptions: for example, mortgages must be registered first in order to take effect. However, it is recommended that all rights be registered in order to protect their position against third parties (the erga omnes effect). As a consequence, as a matter of practice, every real estate transaction is recorded in the Property Registry.

What are the procedural and documentary requirements for entry into the national real estate register(s)? Can registration be completed electronically?

In order to enter a transaction in the Property Registry, a public notarial deed is required. Access may also be provided to enforceable proof of indebtedness, court decisions and other official court documents. Full electronic registration is not available, although notaries can file public deeds first electronically in order to secure first ranking in the Property Registry. The registration can then be finalised through submission of the original documents ‒ in either hard-copy or electronic form, depending on the complexity of the transaction and the region where the property is located.

What information is recorded in the national real estate register(s) and to what extent is such information publicly available?

All information recorded in the Property Registry is publicly accessible, including the name of the registered interest holder, except personal data which is protected under data protection rules. The information recorded includes:

  • the exact plot registration figures;
  • a general description of the property; and
  • an indication of existing charges and encumbrances, both private and public.

Is there a state guarantee of title?

Article 34 of the Mortgage Law provides as follows:

A third party who, in good faith and in return for payment, acquires a right from a seemingly entitled person according to an entry in the real estate registry, is protected in his acquisition from the moment in which the right is recorded, even though, subsequently, the title of the transferor is annulled or terminated for reasons that did not themselves emanate from the real estate registry.

The unregistered ‘real’ owner has a right to seek compensation from the party from which it acquired the right.

Sale and purchase

Brokerage

How are real estate brokers regulated in your jurisdiction (eg, through caps on commission or disclosure obligations)?

Spanish law regulates only the general statutes of the Association of Real Estate Agents and its General Council (see Royal Decree 1294/2007 Approving the General Statutes of the Association of Real Estate Agents and its General Council). Certain other conditions which must be fulfilled in order to act as a real estate broker are set out in Article 3 of the Law on Liberalisation Measures in the Real Estate and Transport Sectors (10/2003).

However, Spanish autonomous regional authorities may also impose rules on real estate brokers operating in their territory. For example, in Catalonia, these have been implemented through Decree 12/2010 on the Creation of the Real Estate Broker Registry.

Due diligence

What due diligence should be conducted before conclusion of a real estate sale contract?

The due diligence conducted before the conclusion of a real estate sale contract should cover the following:

  • proof of ownership (Property Registry/ownership title);
  • charges, encumbrances, easements and other title restrictions;
  • condominium aspects;
  • public law permits:
  • the legal validity of the building (permits and zoning plans) and other mandatory documents, such as the energy performance certificate or occupancy certificate in the case of residential buildings, and business operation permits in the case of commercial buildings;
  • environmental law aspects;
  • the effect of the real estate sale on existing contracts (eg insurance policies, lease agreements, employment contracts, maintenance contracts);
  • the effect on litigation or other legal proceedings; and
  • the tax implications.

Preliminary agreements

Are any preliminary agreements typically entered into before conclusion of a sale contract?

Preliminary agreements are typically used for real estate transactions (eg, letters of intent, reservation agreements, different types of non-binding private purchase agreement, purchase options, further agreements with the real estate broker representing the vendor’s interests).

Contracts

Must sale contracts be concluded in writing? If so, must they be notarised?

In general, according to Article 1450 of the Civil Code, sales contracts are considered consensual contracts ‒ that is, they become effective once the parties have reached mutual agreement on the object and its price. Article 1278 of the Civil Code specifies that sales contracts are legally effective regardless of form ‒ in other words, they need not be executed in writing. In practice, however, every real estate transaction or contract is concluded in writing. Further, Article 1280.1 of the Civil Code provides that contracts concerning the transfer of real estate must be notarised, although failure to do so does not nullify the transfer. On the other hand, Article 1279 of the Civil Code entitles the counterparty to request that the transfer be completed in the legally required form.

In order to record a change of ownership in the Property Registry, the sales contract must be documented in a public notarial deed.

Can sale contracts be concluded electronically?

Yes. In addition to the general obligations set out in the Civil Code, certain special legal provisions must also be considered.

The legal requirements and conditions governing electronically concluded sales contracts are set out in the Law on Information Society Services and Electronic Commerce (34/2002). The Law on Electronic Signatures (59/2003) should be considered, as this type of signature is increasingly used in electronic commerce. Finally, data protection provisions should also be considered.

If the buyer is a consumer, the Spanish consumer protection rules ‒ in particular, the consolidated text of Royal Legislative Decree 1/2007 on the Protection of Consumers and Users ‒ will apply.

Finally, as mentioned, an electronically concluded sales contract cannot be recorded directly at the Property Registry; it must first be recorded in a public notarial deed.

What provisions are usually included in a sale contract?

The specific provisions included in real estate sale contracts generally reflect the outcome of the due diligence process, from both the vendor’s and the purchaser’s perspective.  The negotiation of detailed representations and warranties is common. Otherwise, only the statutory warranties of the Civil Code apply, unless there is a waiver. Further, real estate contracts are freely negotiable between the parties (freedom of contract).

Obligations and liabilities

What are the seller’s disclosure obligations and other liabilities, and what are the consequences of breach?

Unless the parties have agreed otherwise, from a civil law perspective, according to Article 1461 of the Civil Code, the seller is obliged to transfer the property and is liable for any hidden defects, as well as for facilitating quiet possession of the property.

The consequences of breach are as follows:

  • In case of non-transfer of the property, Article 1124 of the Civil Code stipulates that the purchaser is entitled to decide whether it wishes to demand compliance or withdraw from the contract. In either case, it is also entitled to claim damages, where applicable. 
  • In case of hidden defects, Article 1486 of the Civil Code provides that the purchaser is entitled to withdraw from the contract (and recover costs) or to reduce the sales price proportionately. If the vendor was aware of the hidden defects and the purchaser decides to withdraw from the sales contract, then the latter is also entitled to claim damages.
  • In case of third-party claims, Article 1478 of the Civil Code provides that the purchaser is entitled to reimbursement of the sales price and all incurred expenses (eg, litigation costs, contract costs, damages and interest).

There are also several disclosure obligations under specific regulations with regard to different areas of law, such as administrative, tax and environmental law.

What contractual warranties are usually given by the seller?

Apart from statutory liabilities, the parties are free to agree on any contractual warranties which may be necessary following the due diligence (eg, additional guarantees concerning the status of the building, the remediation of defects or cancellation of encumbrances, charges, easements and even payment guarantees or insurance policies). For instance, in the case of a new residential building, the developer must hand over, among other mandatory documents, an insurance policy covering a 10-year period for any major structural defects. 

Are there any other obligations on the buyer, aside from paying the purchase price?

Generally, and unless otherwise agreed, no. However, some important formal requirements must be met in order to buy real estate in Spain. The Número de Identificación para Extranjeros (NIE) is the taxpayer’s account number for foreign natural persons, irrespective of whether they reside in Spain; while the Número de Identificación Fiscal (NIF) is the taxpayer’s account number for legal persons. The same rules apply for foreign companies (NIFs) and their shareholders or directors, who must apply for a NIE. Otherwise, neither tax handling and compliance nor entry in the Property Registry is possible.

Taxes

What taxes are payable on the sale and purchase of real estate? Are any exemptions available?

A sale and purchase contract generally triggers the following tax implications on the vendor’s side:

  • tax on the increase on urban land (plusvalía), which is levied on the appreciation in value of the land during ownership of the property according to objective criteria and is calculated based on the cadastral plot value (not the value of the building);
  • capital gains tax. If the vendor is not resident in Spain, the buyer must retain 3% of the purchase price and pay it directly to the Spanish tax authorities in order to secure the capital gains tax obligations of the vendor; and
  • income tax or corporate tax, as appropriate, on any profits from the sale, for both residents and non-residents.

A sale and purchase contract generally triggers the following tax implications on the purchaser’s side:

  • value-added tax (VAT) at a rate of 10%, where a new property is purchased. If the transaction is subject to VAT, notarial documents will also be subject to stamp duty (AJD), levied by the regional government of the place where the property is located; or
  • land acquisition tax (ITP), where the property purchased is not new; this is levied by the regional government of the place where the property is located.

VAT generally does not apply to private sales of a property or to the second or subsequent transfer of the property, which instead is subject to ITP. However, the purchase of land and corporate property is subject to VAT at the normal rate of 21%, which can be reduced to 10% if the acquisition involves housing as well as necessary fittings (eg, garages, a limited number of storage rooms).

VAT is levied by the vendor as part of the purchase price and is then paid by the vendor to the tax authorities in its monthly or quarterly VAT tax return. ITP and AJD must be paid to the tax authorities by the purchaser. Nonetheless, in the case of second and subsequent transfers, if the purchaser is a VAT payer (eg, a company), the parties under certain circumstances can waive the statutory exemption from VAT which applies to second and subsequent transfers.

Transfer of title

When does title in the property transfer?

The ownership of property is transferred through:

  • an underlying transaction, such as a sale contract, swap contract or donation; and
  • the actual transfer of the property, such as by means of a notarial deed or the simple handover of possession.

Timeframe

What is the typical duration of a sale transaction?

The duration of a real estate transaction will vary depending on specific factors relating to the parties involved and any additional requests for documentation as a result of due diligence red flags or other findings that must be resolved before closing. If complex negotiations are required, the entire process may be significantly extended. As a general guide, however, the typical duration of a standard private sale transaction is between one and two months, whereas commercial sale transactions usually take between two and three months.

Leases

Contracts

Must a lease agreement be concluded in writing?

A lease agreement concluded informally or orally is perfectly valid. However, according to Article 37 of the Law on Municipal Tenancy (29/1994), either party can request that the lease agreement be formalised in writing. Particularly in the case of commercial leases, the lease agreement should also be formalised through a public notarial deed in order to be entered in the Property Registry, so that the tenant can benefit from stronger protection (eg, binding effect of the lease against third parties).

Are there any regulations setting out mandatory or prohibited provisions in lease agreements?

In the case of both residential and commercial lease agreements, both the provisions on deposits (one month’s rent for residential leases and two months’ rent for commercial leases) and procedural law provisions are mandatory and cannot be waived or modified.

Otherwise, in the case of residential lease agreements, only a few provisions on tenant protection are mandatory, as most can be waived. For instance, several provisions on minimum rent duration and corresponding notice periods, as well as the tenant’s right to terminate the contract after a minimum six-month period, are mandatory. In this regard, penalty clauses are also maximised.

In the case of commercial lease agreements, except for the provisions on deposits and procedural law provisions, all conditions are subject to the disposition of the parties and general tenant protection provisions can be waived.

What provisions are typically included in lease agreements?

The main contractual clauses of lease agreements generally cover the following:

  • the parties;
  • the property to be leased;
  • the term of the lease;
  • the requisite prior notice of termination;
  • the rent;
  • the method of rent review;
  • the legal deposit and additional guarantees;
  • sub-leasing;
  • works; and
  • insurance policies.

Unless they are explicitly waived, certain provisions of the Law on Municipal Tenancy in relation to the following will apply:

  • the rules on maintenance and improvements, as well as works in general;
  • the basic conditions of the property;
  • the conditions for rent increases due to improvements;
  • pre-emption rights in case of sale of the property;
  • assignment and sub-letting;
  • death or change of control rules; and
  • compensation payments when terminating the lease agreement.

Often, additional rights on early termination are agreed in case of certain breaches by either party ‒ in particular, with regard to:

  • non-payment of rent;
  • wilful damage to the property;
  • disturbance or other dangerous or unlawful activities on the property; or
  • changes to the property without the landlord’s prior approval.

What are the standard forms of lease agreement used in your jurisdiction?

The Law on Municipal Tenancy generally distinguishes between residential rental agreements and rental agreements for “other purposes” (eg, commercial lease agreements, seasonal rental agreements). There are also specific provisions on agriculture rental agreements. Certain rental agreements are also explicitly excluded from the law (eg, rental agreements for parking spaces and for the temporary touristic use of apartments). For instance, there are no specific provisions on leaseholds, although these do exist.

There is also no real standard form for lease agreements, apart from some general recommendations and basic drafts of certain institutions (eg, the Chamber of Urban Property Owners).

Length of term

Are there any regulations on minimum and maximum terms of leases?

The duration of rental agreements is freely negotiable. There are no specific regulations on the minimum or maximum term of commercial lease agreements. Residential lease agreements with an agreed term of less than three years are renewed automatically until the minimum three-year term has expired. Thereafter, annual extensions are possible if neither party decides to terminate the contract. Otherwise, there are no maximum term provisions or restrictions.

Are long-term tenants accorded any special rights as to extension or renewal of leases?

Previous rental law provisions, together with interim regulations of the current Law on Municipal Tenancy, set out a complex system of special rights in relation to ‘old’ long-term tenants. However, in 2015 these protections effectively came to an end. Nonetheless, there are still some exceptions to keep in mind.

Rent

What regulations (if any) govern rent increases?

In the case of residential lease agreements, rent increases must be contractually agreed; otherwise, the rent may not be increased. If the parties agree that the rent will be increased but include no further specifications in this regard, a tricky system for calculating the rent increase based on the annual Competitiveness Guarantee Index will apply.

There are no specific legal provisions with regard to commercial lease agreements. Therefore, the parties normally agree on market evaluation methods after a certain period, often in combination with the Competitiveness Guarantee Index, or will simply agree on another method to keep the contract in balance. 

What regulations (if any) govern rent security deposits?

Article 36 of the Law on Municipal Tenancy requires the tenant to provide a mandatory rent security deposit. For residential lease agreements, the deposit is equivalent to one month’s rent; for commercial lease agreements, it is equivalent to two months’ rent. In either case, additional guarantees can be agreed (eg, bank guarantees or larger deposits). The landlord must lodge the mandatory security deposit with a specific public institution (eg, in Catalonia, Incasol).

Can the tenant withhold rent payments on any legal grounds?

In the case of residential lease agreements, the tenant cannot directly withhold rent payments under any circumstances. Instead, the tenant must request contractual performance (eg, reparation of damages). However, in case of major repair or improvement works which interfere with the peaceful residential use of the property, the tenant is entitled to reduce the rent in proportion to the part of the property which cannot be used for that reason.

In the case of commercial lease agreements, the described regulations apply, if they are not expressly excluded by the parties. The parties are free to agree on what is best for their interests.

Sub-letting

Under what circumstances is sub-letting typically allowed?

According to Article 8 of the Law on Municipal Tenancy, properties leased under residential lease agreements can only be partially sub-let, and only with the prior consent of the landlord. On the other hand, in accordance with Article 32 of the law, properties leased under commercial lease agreements can be either totally or partially sublet, without the consent of the landlord, unless a waiver has been agreed. In such case, the landlord has the right to increase the rent within the established legal or agreed margins.

Obligations and liabilities

What are the general obligations and liabilities of the landlord in respect of the property and what are the consequences of breach?

In the case of both residential and commercial lease agreements, the landlord has two main legal obligations:

  • to hand over the property to the tenant; and
  • to ensure that the tenant can enjoy quiet possession of the property. This means that the landlord must carry out all necessary repairs in order to maintain the property in good, habitable condition or in order to ensure that the agreed commercial purpose can be fulfilled.

In the event of a breach, according to Article 1124 of the Civil Code, the tenant is entitled to request compliance or to withdraw from the contract. In both cases the tenant may request compensation for damages.

What are the general obligations and liabilities of the tenant in respect of the property and what are the consequences of breach?

The tenant’s main obligations are as follows:

  • to pay the rent;
  • to maintain the property according to the agreed purpose; and
  • to return the property to the landlord once the lease agreement has terminated.

In case of breach, the landlord may commence civil law proceedings in order to obtain payment and eviction of the tenant.

Taxes

Are any taxes payable on rental income? If so, are any exemptions available?

Both tax-resident and non-tax-resident property owners (whether natural or legal persons) must pay tax (normally, either income tax or corporate tax) on the rental income and upon the occurrence of different taxable events. In general, no exemptions apply, although interesting tax incentives are available for Spanish real estate investment trusts (called SOCIMI) and a special corporate tax regime applies for companies that rent dwellings.

Insurance

Are the landlord and tenant bound by any insurance requirements?

There are no mandatory legal provisions under the Law on Municipal Tenancy; but in general, the landlord should have building insurance and the tenant should have homeowner’s insurance or business insurance that covers damage and similar to the interior of the property. 

Termination and eviction

What rules and procedures govern termination of the lease by the landlord and the tenant’s eviction from the property?

Termination of the lease by the landlord and the tenant’s eviction are governed by the Civil Procedure Code (Law 1/2000). Depending on the circumstances, the litigation process can be quick. It is also possible to obtain both outstanding rental payments and eviction through a single litigation process.

Finance

Finance providers

What are the typical providers of real estate financing in your jurisdiction? Are there any restrictions on who may provide financing?

In general, real estate financing is typically provided by credit entities, which can be sub-divided into commercial banks and savings banks, credit cooperatives and the Official Credit Entity. All credit entities must meet the requirements of the Organisation, Supervision and Solvency of Credit Entities Law (10/2014) in order to provide financing. There are also credit financing establishments which cannot accept deposits from the public and are regulated by the Promotion of Company Financing Law (5/2015).

Financing structures

What are the most common structures used to secure real estate financing and how are these security interests perfected?

In the context of a standard real estate transaction, nearly all financing providers will request a mortgage as the main security. Under Spanish law, a mortgage must be granted by means of a notarial public deed and must be registered at the Property Registry in order to be valid. Additional common securities include pledges over the debtor’s assets (eg, bank accounts, receivables, shares) and additional bank guarantees, which must also be granted by means of a public notarial deed.

What covenants are typically made in financing agreements?

The loan to value covenant is part of almost every real estate financing. Further common covenants include the interest coverage ratio and the debt service coverage ratio.

Enforcement of security

How are security interests enforced in the event of default?

Security interests are enforced by means of foreclosure, which includes claims for both the mortgage principal and interest.

The procedure may vary depending on whether the secured property is the debtor’s main residence.

What is the typical timeframe for the enforcement of security?

The average length of an enforcement procedure, from commencement to eviction, is 12 to 18 months. However, this period may vary significantly, depending on which court is competent to hear the case (ie, the region in which the property is located).

Investment

Investment climate

What is the general climate of real estate investment in your jurisdiction?

In general terms, the real estate investment climate has been very positive since 2014. Investment hit record highs in 2015 and 2017, due to the entry of international investment funds and increased activity by Spanish real estate investment trusts. In 2016 there was a slight dip, although investments in non-residential assets nonetheless amounted to about €9 billion that year. The forecasts suggest that the Spanish real estate sector will remain one of the most attractive in the Eurozone, and for 2018, experts place expectations for growth above the European average. The most relevant markets are the office market, the logistics sector and investment in shopping centres. Madrid and Barcelona are the most attractive cities for real estate investors due to opportunities for development, refurbishment and the increase in rent. Additionally, investments in student and elderly residences and hotels are becoming more significant.

Investors

Who are the most common investors in real estate?

The most common real estate investors in the Spanish market are property investors and international investment funds. Investors mainly focus on the office, retail and logistics sectors ‒ sectors that have a significant impact on the real estate market and that have seen increasing demand since 2014. In 2016, 2017 and 2018, the number of transactions made by Spanish real estate investment funds (SOCIMI) has increased considerably.

Are there any restrictions on foreign investment in real estate?

Spain has enshrined the principles of freedom of establishment and non-discrimination, and there are thus no legal restrictions to foreign investment. Nonetheless, special zones of interest for national security reasons may require express authorisation; this may be the case in coastal areas and islands where foreign property ownership can be limited to a certain percentage.

Since 1999 transactions are considered foreign investments only if the amount involved exceeds 3,005,060.52. In such cases, a simple retroactive notice to the government is required in order to satisfy governmental formalities. On the other hand, there is a formal obligation to report any investments that originate in so-called ‘tax havens’ prior to carrying out the investment. Together with the current anti-money laundering legislation, a considerable amount of information is requested from foreign investors. The rules on investment are always linked to the place of origin of the investment, rather than to nationality. EU citizens are exceptions to this rule.

Investment structures

What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?

As a general rule, foreign investors invest in the Spanish real estate market through direct investment. However, a significant number also invest through investments funds, real estate investment trusts or partnerships in a Spanish corporation. In 2016, 2017 and 2018, the number of transactions made by real estate investment funds has increased considerably.

Planning and environmental issues

Planning

Which government authorities regulate planning and zoning for real estate development and use in your jurisdiction and what is the extent of their powers?

In general terms, planning and zoning powers are shared between autonomous communities and local governments. The former legislate on territorial planning, the latter on urban zoning. Meanwhile, the Spanish state is responsible for establishing the basic legislative framework regulations (see Royal Decree Law 7/2015).

What are the eligibility, procedural and documentary requirements to obtain planning permission?

Issuing planning permission falls within the competence of local governments and the process thus may differ significantly depending on relevant local regulations and the type of works to be performed.

In general terms, the process is initiated through the submission of a request accompanied by details of the technical project. The administration will then gather all relevant governmental reports and will generally issue a decision within one to three months. The process takes about six months in total. If this period elapses without a final decision being issued, this generally means that a planning permit has been denied.

Can planning decisions be appealed? If so, what is the appeal procedure?

An appeal against denial of a planning permit may be lodged within one month of notification of the decision. The appeal, which is heard by the same authority that issued the decision, will be decided upon within one month. 

The applicant then has an additional two months in which to appeal this decision to the administrative courts. Once the claim is admitted, the court will summon the administration to submit a statement of defence. A trial will then be held, unless the court and the parties consider this is unnecessary in light of the facts of the case, in which case the court will issue its judgment directly.

What are the consequences of failure to comply with planning decisions or regulations?

Breach of planning regulations may result in demolition of the building or the application of economic sanctions. Exceptionally, the administration may authorise the works, provided that this is in the public interest and the works are not located in a special protection area. The consequences may vary, depending on the classification of the land on which the works have been performed.

In this regard, land in Spain is generally classified as follows:

  • urban land;
  • non-urban land; or
  • land that is designated to become urban land.

What regime governs the protection and development of historic and cultural buildings?

Buildings of historic and cultural interest are subject to a special protection regime. As a consequence, no works can be performed on them without previous and express authorisation from the competent body.

Government expropriation

What regime applies to government expropriation of real estate?

Government expropriation is regulated by the Law on Forced Expropriation of December 16 1954.

What is the required notice period for expropriation and how is compensation calculated?

Expropriation commences with notification to the property owner with a view to establishing fair compensation; following payment of such compensation, possession will be taken of the property. The owner thus knows about the procedure from its initiation.

Compensation can be determined in three different ways:

  • through an agreement between the owner and the administration;
  • through a proposal by the owner or the administration which is accepted by the other party; or
  • as a last resort, by decision of the provincial expropriation jury.

Environmental issues

What environmental certifications are required for the development of real estate and how are they obtained?

Although this is not always required, most development projects should incorporate a geotechnical report on the land on which the works are to be performed and a plan for waste collection management.

What environmental disclosure obligations apply to real estate sales?

As far as environmental disclosure obligations are concerned, it is only necessary to provide an energy performance certificate issued by a private technician and a technical inspection of buildings certificate, where applicable. In the event that a piece of land has been declared and registered as contaminated or that a potentially contaminating activity has been carried out on the land to be sold, the vendor must include a declaration in this regard in the purchase deed.

What rules and procedures govern environmental clean-up of property? Which parties are responsible for clean-up and what is the extent of their liability?

Environmental clean-up of land is regulated by European and national rules under civil, criminal and administrative law, especially Law 22/2011.

The applicable regulations provide that the party which actively contaminated the land and the owner of the land at the time of contamination are primarily responsible for the clean-up. Nonetheless, if the land is sold, the new owner will be considered vicariously liable.

Are there any regulations or incentive schemes in place to promote energy efficiency and emissions reductions in buildings?

The central government and some autonomous communities have offered in the past ‒ and presumably will continue to offer ‒ grants to make existing buildings more energy efficient. These grants are temporary and thus may vary throughout the year.

With respect to regulations, the most important is Royal Decree 56/2012, which implemented the EU Energy Efficiency (2012/27/EU) and other complementary regulations.