First Occupation Licence in Andalusia (LPO) and the RTA rental licences
First Occupation Licence in Andalusia (LPO) and the RTA rental licences
Big news for Andalusian house owners that don´t have their First Occupation Licence (LPO) yet which is obliged to present when applying for the RTA rental licence of the Registro de Turismo de Andalucia. This was a problem because many houses don´t have this licence as it wasn´t a standard requirement for new build houses until the eighties.
On March 12, the Andalusian Government published in its Official bulletin (BOJA) a Law Decree which has as its main purpose to simplify the regulation of some procedures in Andalusia. This regulation has affected a multitude of procedures and among these the new article 169 bis of the Urban Planning Law of Andalusia (LOUA) of 2002 was approved, which affects the First Occupation Licence (Licencia de Primera Ocupacion or LPO in Spanish).
Likewise, article 169.3 of the LOUA has been modified with a second paragraph that establishes that those acts that are subject to a responsibility declaration do not require a licence. As a general statement, we can say that the new decree allows obtaining the right to occupy or use the majority of buildings located on consolidated urban land throughout Andalusia, by submitting the responsibility declaration together with the required legal documentation by the interested party.
In other words, it will no longer be necessary for these buildings to obtain the First Occupation Licence (LPO) from the city council since the new ´Declaration of occupation or use´ replaces the Occupation Licence. The responsibility declaration of occupation grants the owner the same rights that the First Occupation Licence granted from the day of its presentation.
The responsibility declaration is a document signed by the interested party in which he declares that he meets a series of requirements according to specific regulations and therefore allows him to acquire a right. From the date of presentation (also by a certified architect) the right that is intended to the interested party is recognized, so from the legal point of view it is equal and replaces the earlier First Occupation Licence (LPO) granted by the City Council.
This type of procedure is becoming more common in the Spanish administration. This is because from the presentation of said responsibility declaration the right is recognized and, therefore, it is possible to avoid the waiting time and delay of the administration which in the case of the First Occupation Licence was months.
Article 169 bis commented above, establishes in its section c that it can be obtained by responsibility declaration “the occupation or use of the works of the previous section, provided that the buildings and facilities are finished and their destination is in accordance with the regulations of application". These works in section b) of article 169, whose occupancy rights would be obtained by means of a responsibility declaration, are: “Works in existing buildings and facilities, on consolidated urban land and in accordance with urban planning, that do not alter the occupation and height parameters, nor involve increases in buildability or the number of homes ”.
Therefore, in section c, existing buildings that have never had a First Occupation Licence are enabled so that they now can obtain their right of occupation, by filing a responsibility declaration. Section d includes the possibility of obtaining the first occupation or use, through a responsibility declaration for new buildings: “d) The first occupation and use of new buildings, provided they are finished and their destination is in accordance with the application regulations and with the works licence granted”.
It is important to say that this change does not affect dwellings on undeveloped land, rustic dwellings, since they cannot obtain the First Occupation Licence as they officially are not part of the urban planning.
The interested party who signs a responsibility declaration to acquire the right to occupy a property is responsible for the fulfilment of the established requirements to be able to enjoy said right. Along with the aforementioned declaration, he must present the required technical and legal documentation that certifies compliance with the requirements. Likewise, it will undertake to maintain compliance with said requirements once the declaration is presented.
Therefore, it is evident that responsibility declarations for the occupation or use of a building should not be presented when the requirements demanded by the norm for their presentation are not complied with. It must previously be analysed whether the house in question can obtain this right. It should not be forgotten that the presentation of the responsible declaration supposes assuming a legal responsibility. Presenting said declaration with falsification of the data or documents provided or not attaching all the required legal documentation may suppose legal responsibility for the interested party by the administration.
This regulatory change is evident that it will allow many homes, which up to this date do not have a First Occupation Licence for various reasons but still complied with the requirements. These can now obtain this legal recognition with the presentation of the responsibility declaration and required documentation. Since the Andalusian Government legislated tourist homes and forced their registration in the Andalusian Tourism Registry (RTA), requiring the First Occupation Licence, there are many homeowners in Andalusia: Malaga, Costa del Sol or Costa Tropical for example, who have applied for such a licence for their homes. Due to the slowness of the municipalities in granting the First Occupation Licences, many of the owners that have applied for said licence are still waiting for this to be resolved.
Many owners from towns such as Nerja, Málaga, Marbella, Vélez-Málaga, Benalmádena, Fuengirola, Almuñécar, Torrox ... etc, and many other municipalities on the Costa del Sol and Costa Tropical will now be able to obtain their right of occupation through a responsibility declaration and hence comply with the requirement of the LPO. This way they can carry out the registration of their home in the RTA for the tourist rental of the property.
There are more than a few foreign clients of our office who have spent months or years "fighting" with their City Council to obtain their First Occupation Licence and now they will be able to obtain said right with the responsibility declaration, easily and quickly. Of course, for these homes, this regulatory change has meant a very important and positive change since one of the main attractions for a foreigner who wants to buy a property in Andalusia is its profitability through tourist rental. With the current crisis of the coronavirus COVID-19, these types of changes help the economic activity.
Most of property purchases by foreigners in Andalusia are existing homes and some of these do not currently have an LPO. It is evident that the responsibility declaration will, from now on, facilitate the process of obtaining the right to occupy a property. This due to the fact that it is understood that the right of occupation or use has been acquired since the presentation of the responsible declaration. Well, from the buyer's point of view it is very important that, when buying on urban land, carefully check whether the property can obtain said right of occupation or not if the occupancy rights have been acquired by the seller through the presentation of the responsibility declaration.
The potential buyer must request a copy of the technical documentation presented together with the declaration from the seller, so that his lawyer and / or architect can review it and confirm that said property meets the requirements to obtain the right of occupation or use. If the future buyer does not make this verification, there is a risk that the seller of the property, in order to make it appear that his home has the right of occupancy, presents or is going to present the responsibility declaration despite the fact that the property cannot obtain said right for not complying with the requirements.
In this scenario, the buyer and new owner of the property may encounter a problem. Obviously, the seller could be held responsible for this situation but in most cases of foreign sales, the sellers are non-resident, it would be expensive and complicated to initiate legal proceedings. Always check with your lawyer about the situation of the property you are going to buy.
As we have previously mentioned, also for this type of housing it is possible for the developer to obtain what was previously the First Occupation Licence (LPO), through the declaration of occupation or use. The Urban Planning Law of Andalusia (LOUA) with this regulatory change, establishes that an occupancy licence for new homes is not required in Andalusia, it is possible to present the responsibility declaration of occupation.
In other words, even if the developer wanted to he or she could no longer obtain the LPO from the City Council as a result of this regulatory change. This means that, even if it is stated in the signed private purchase contract that the developer is required to obtain the LPO it would now be sufficient for the developer with the responsibility declaration as it would prove that the new house has the right of first occupation. The promoter by means of the declaration fulfils the private contract of sale.
The City Councils have an obligation to review whether or not the responsible statement meets the requirements to obtain the right of occupation or use, and may declare the cessation of occupation in the event that the requirements are not met and may also demand legal responsibility from the promoter for said actions.
If within the first six months from the presentation of the declaration, the City Council has not adopted the necessary measures for the cessation of the act or use, in the event that the requirements for that occupation are not met, the City Council would be liable for damages caused to third parties in good faith. In other words, the City Councils would answer to the people who bought these homes with the conviction that the sale could be carried out, since these the day they signed the Deed of Sale, they had the declaration responsible for the promoter of occupation or use (former LPO) .
The foregoing gives leaves us to understand that if the Town Hall reviews said declaration in those first six months and understands that the cessation of the occupation must be decreed, the developer would be responsible for the damages to the buyers. However, I understand that in most cases there should be no damage to the buyers, since the optional management of the works (mainly architects and surveyors) will ensure that their final works certificate is in accordance with the law since they would be the main responsible along with the promoter if this was not the case. The final works certificate is the most important technical document to obtain the right of occupation in a new home.
It is true that to this date few municipalities have approved specific procedures for this process such as Malaga, Marbella, Seville or Córdoba. The Andalusian Government has published a practical guide to this decree, along with the models for the responsibility declaration and the necessary documentation, so that the Town Councils can use it. In our opinion, such models can also be used by citizens since the right of occupation can only be obtained through a responsibility declaration, and not through a licence granted by the City Councils as of March 13th 2020.
It is true that since most of the municipalities have not approved this new procedure through their municipal ordinance, it is likely that they do not agree with obtaining said right of occupation by presenting the responsibility declaration, unless that City Council has previously approved that specific procedure.
Notwithstanding this Decree in the tenth transitory provision, allows those interested who prior to March 13 have initiated a procedure to obtain an urban planning license, can request the application of this new procedure and therefore may obtain the right of occupation through the responsibility declaration.
If the new regulation provides for the possibility of changing the procedure already initiated, we understand that since it entered into force it allows obtaining the right of occupation by means of a responsibility declarations, even though the City Council has not published its municipal ordinance.
The answer is categorically YES. Although it is very likely that it will be necessary to explain and discuss, at least during these first months since probably several of the supply companies for electricity and water will not have obtained this information or guidelines of said legal modification and will continue to demand the LPO. As you can understand, the best thing to do if you are an owner is to consult with your lawyer or architect about the specific situation of your property.
Of course, if you are in the process of buying a home or thinking about it, it is very important to contact a specialized lawyer who can advise you in the process of buying and selling the property and who knows these urban issues well.
Author: Gustavo Calero Monereo, C&D Solicitors, (Málaga, Spain)
Purchase or sales contract during COVID / Corona crisis
It is clear that the healthcare crisis caused by the Coronavirus (COVID-19) has had a huge impact on all areas of our daily lives. The state of alarm decreed by the Spanish government, as well as many other governments in foreign countries, has caused movement restrictions and limitations, the closure of the airspace, the paralysis of the business fabric and government agencies, etc. People's everyday lives have been severely affected from a social and economic standpoint.
With this article, we would like to respond, as much as possible, to the doubts and uncertainties of foreign clients buying homes in Spain, as well as their sellers. We are referring to sales between individuals that were already underway with signed contracts but which were 'surprised' by the COVID-19 crisis and the measures adopted by the Spanish government decreeing the state of alarm.
At the end of the article, we will comment briefly on the legal situation of sales of new homes or off-plan sales from developers.
The first thing that must be said emphatically is that, under Spanish law, the clauses agreed in a contract have the force of law and, therefore, the parties are required to fulfil them. In other words, the impossibility of fulfilling what has been agreed in a contract is an exception and is interpreted very restrictively.
The Spanish Supreme Court, when dealing with potential breaches of contract and to avoid the loss of the money paid, has established that the party in breach has to evidence and argue the reasons behind said breach, as well as prove that it did everything possible to perform the contract.
However, even after establishing the impossibility of complying with the contract, if it is possible to amend or adapt it so it can be fulfilled, the parties must seek to modify the contract in that way, to solve the problem arising from the situation caused by the state of alarm and the COVID-19 Corona crisis. In other words, when faced with the potential avoidance of the contract by one of the parties, they must always attempt to reach an agreement to fulfil it.
In my opinion, the conveyance contracts that may be affected are those that required either of the parties to fulfil a requirement or condition agreed in the contract before the execution of the public deed of sale and that condition is affected by these months of paralysis.
Due to the paralysation of activities and movement limitations, it is very possible that some of the requirements established in a conveyance contract cannot be fulfilled, as the estimated time to process or manage these were calculated based on a normal situation, which has not existed since 13 March. As an example, we can mention the following:
Well, the first thing is to see if the private contract contains any clause that governs these situations since, as I've mentioned, the sales or purchase contract has the force of law and binds the parties. However, in conveyance processes where the deed cannot be signed for reasons arising from the coronavirus crisis, what both parties should do would be to amend the contract and extend it, to give time to the party that needs it in order to complete the sale. In most situations, it is only a matter of time for that circumstance or condition that is currently impossible to fulfil to be fulfilled later on.
Likewise, in the event of inflexibility and the refusal of either of the parties to grant such an extension to the conveyance contract, in most cases there would be no legal grounds to terminate the contract and/or claim damages. As mentioned above, the parties must always attempt to reach an agreement to comply with the contract.
Withdrawing from a conveyance contract due to a sudden drop in house prices and in the face of an economic crisis is a complex issue. In this case, we are referring to the buyer having to accredit meeting one of the requirements established in case law for terminating purchase contracts, this being that there has been an extraordinary change in the circumstances leading to the execution of said contract.
In other words, the buyer would have to evidence that the current economic crisis, resulting in a deep and prolonged economic recession, could be openly considered an economic phenomenon able to generate a severe disruption or change in the circumstances leading to the execution of said contract.
In Spain, the courts have been rejecting the possibility to terminate a sales or purchase contract based on this circumstance. However, this possibility should not be ruled out and individual factors should be analysed, such as whether the home will be a primary home or a holiday home, if the buyer was in need of mortgage financing, if the financial situation of the buyer has changed significantly, etc.
With this question, what we want to address is the situation of a buyer who made a decision to purchase a home at a specific price a few months ago, based on an economic situation that is in no way similar to the current one.
Let's imagine Dutch, Belgian, English, Swedish or other foreign people who wanted to invest in property in Malaga or the Costa del Sol, either to obtain a profit or to let it. Clearly, the sales price they agreed was based on the value of that property under the earlier economic situation. For instance, let's imagine a home in the historic centre of Málaga or Nerja, highly sought-after areas with tourist attractions before COVID-19, with great possibilities for letting in the tourist market, which is currently suspended.
Well, as a buyer, in the event that continuing with the purchase of the property would lead to incurring significant levels of debt, the first thing to do would be to analyse two things:
For sellers, they are most likely the most interested in completing the sale of the home as, certainly, the price set in the sales / purchase contract signed before COVID-19 will be higher than what they can obtain in the short or medium term. Without a doubt, the current situation will lead to a general drop in house prices, even though no one knows how long this will last.
That said, it is possible for sellers who already have a signed contract and who see that buyers are hesitating to complete the conveyance to be interested in making it easier for buyers to complete the purchase. In other words, in this context, negotiating a lower price so that the seller can sell doesn't seem far-fetched. In the end, the price drop would depend on whether it is very important for the seller to sell right now or they can wait, or whether the money already paid by the buyer is enough compensation for the seller to agree to keep that amount as a penalty instead of negotiating.
In sales of this type, in terms of the performance of the contract by the buyer, the situation is the same as explained above, in terms of both compliance with the contract and its termination clauses. In my opinion, the buyer's potential doubts would be determined by the progress of the works and the expected completion date of the development, also thinking about the financial solvency of the developer.
If the buyer signed the sales contract over one year ago, when the market was experiencing a good time and prices were rising, it is very likely for the price agreed at that time to be lower than what they could find at the beginning of this year, for instance. On the other hand, if the works are close to completion, there would be little doubt as to whether the developer will complete them, as they would be almost completely sold and few buyers would be thinking about terminating the purchase contract, since they would have already made significant payments on account for their homes. In this case, the scenario for the buyer is safe.
In the case of developments where construction has not yet started but which were already being marketed, with expected completion likely coming in a year or two, the scenario is different. In this case, buyers who are in doubt and recently signed the private contract must assess the price of the property and its completion date, as well as find out the number of homes with signed contracts sold by the developer, in order to make a decision. However, if the private contract has not yet been signed and only a reservation had been agreed with the developer, they can withdraw from it and recover the amount paid. They can also wait longer, as developers are likely to lower prices, depending on how long the crisis lasts.
In terms of the solvency of developers, due to the obligation to guarantee all the amounts paid during construction once the private contract has been signed, the buyer would have complete legal certainty in the event that the developer is unable to complete construction. This situation is in no way similar to the 2008 crisis, where many buyers lost their payments on account.
However, these sales processes starting prior to the COVID-19 crisis can lead to complex situations that should be analysed individually and always with the advice of a lawyer. This is not the time to make decisions without the appropriate legal knowledge, taking into account that a private conveyance contract has already been singed. Rushing is never a good idea.
Author: Gustavo Calero Monereo, C&D Solicitors (Malaga, Spain)