Uncertainty Over Extension Of “Anti-Bankruptcy” Law: RE Firms On Tenterhooks

9 April 2015 – Expansión

The real estate sector is still waiting to see whether Mariano Rajoy’s Government will extend (the term of) Royal Decree Law 10/2008. The legislation has been in place for seven years now, even though it was initially designed to last for only two. The law allows companies to avoid being wound up when the losses they incur result from real estate, real estate investments or stocks.

The Royal Decree was passed to limit the impact of the decrease in the value of real estate assets, which generated millions of euros of losses for many of the key companies in the sector. Therefore, the Government granted them two years to rebalance their accounts and maintain their production activity.

Year after year, first the Government of José Luis Rodríguez Zapatero and then that of Mariano Rajoy, has extended this law. Had it had not done so, several large companies, such as Reyal Urbis and Quabit, would have gone under by now.

Even if the law is not extended (this time around), neither of those two listed real estate companies will be effected (given that the first has already filed for bankruptcy and the second has increased its capital), but many others in the sector will be.

Companies and experts in the real estate sector had assumed that a decision would be announced at the most recent Council of Ministers in March. However, given that no announcement has yet been made, many now believe that it will not be extended.

Last year, the term of the Royal Decree 10/2008 was extended at the beginning of March. Then, CiU used an amendment to a piece of legislation that did not have any clear link to the real estate sector (the bill for the privatisation of the state insurance company Cesce) to make the request for another extension.

The business fabric

Sources close to the Government say that a final decision has not yet been taken. “Activity is now returning to the real estate sector; as such it would be incomprehensible that companies that have survived an unprecedented crisis have to file for liquidation now, just because the Royal Decree Law 10/2008 is not extended for another year. The destruction of the business fabric that took so many years to establish, as well as the job losses, make us think that an extension of the term of the Royal Decree is justified”, says Juan Antonio Gómez Pintado, Chairman of the association of real estate companies in Madrid (Asprima).

Companies in the sector are not the only ones interested in extending the term of the Royal Decree. Wind and photovoltaic companies, affected by cuts in premiums for those types of energy, have also made use of this legislation to avoid being wound up.

Original story: Expansión (by R. Ruiz)

Translation: Carmel Drake