Tag: legislation

Land Expropriations Will Be Cheaper After Latest Law Reform

3 February 2016 – Cinco Días

After everything that has happened in the real estate sector since property prices and the production of housing came crashing down, perhaps few will remember the major impact that resulted from the approval of the Land Law (8/2007 and RDL 2/2008). The new legislation was created with the aim of stopping judges from using their discretion in administrative litigation cases, so as to prevent them, in certain cases, from assigning fair values to plots of land subject to expropriation, on the basis that, spurred on by strong demand during the boom times, the values being assigned were leading to a speculative phenomenon that was having serious repercussions on the accounts and financial viability of numerous companies.

In this way, the legislator reduced the categories into which land had been divided historically and established the existence of just two classes: urban (plots) and rural (all others). As such, if land that had been used for agricultural production until that time, was going to be expropriated for the construction of a highway, then it would be valued as rural land (…) and not on the basis of the value of the asset to be constructed on it. (…).

In October last year, the new revised draft of the Land Law was approved, which is going to have an even greater influence of the original objective (to lower the cost of expropriations) and which is going to govern the conditions surrounding urban land in a more specific way. In terms of the valuation framework, it is based on a ruling issued by the Constitutional Court in 2014, which declared that setting the location coefficient (correction factor) at a maximum of two was null and unconstitutional.

In other words, the original law established that rural plots could be assigned a location coefficient to correct the value obtained by capitalising the income from the land. In these cases a correction coefficient (up to a maximum of two) could be applied, if the plots were located near to an urban centre or a centre of production or had certain environmental characteristics…. This represented a relief, in the event of an expropriation valuation, for those plots of land that many developers had stockpiled in outlying metropolitan areas of large cities in the hope of obtaining huge profits and which saw their value fall sharply as a result of the new legislation in 2008.

Nevertheless, the high court declared that the coefficient limit of two was unconstitutional and argued…that “it was not justified by the Law or by the preamble and could end up being whimsical, and prevent the real value of the land from being obtained. The court considers that…this limit is contrary to article 33.3 of the Constitution”. That article refers to the fact that “nobody can be deprived of their assets or rights, except on justified grounds for the public good or in social interest, provided proper compensation is paid and in accordance with the provisions of the law”. (…) .

According to Andrés Lorente, Director of Land at Tinsa, the method for valuing rural land involves dividing the land yield (calculated by capitalising the income from the land) by a capitalisation rate and applying that correction factor based on location to the result, where appropriate, where the correction factor may not exceed two.

“The provisions established in the new revised draft reflect higher rates, which means that the resulting land valuations could be significantly lower than those calculated under the previous legislation. Whereas before, the internal yield of the secondary market for public debt with a term of between two and six years was taken as the reference rate, now the average interest rate over the last three years on the State’s debt over 30 years is taken (3.663%)”, say sources at Tinsa.

As such, since the applicable rates have risen significantly, so the resulting land valuations are significantly lower. There are even cases in which expropriations now, under these new rules, result in a cost for the Administrations that is between five and six times lower than it would have been under the legal framework in force in 2008, says Lorente.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

Tourist Sector Hits Back At Airbnb, HomeAway & Niumba

18 May 2015 – Expansión

The sector is demanding a stronger institutional fight against the intermediaries. The Government says that each region is responsible for its own response.

The main Spanish tourism companies have teamed up in an offensive with the aim of limiting the power of the proliferation of unregulated tourist rental accommodation, which do not pay taxes and do not meet the safety, hygiene and space requirements and other guarantees offered by legal accommodation. The sector wants to curb the platforms (websites such as Airbnb, 9flats, Wimdu, Rentalia, Niumba and HomeAway, amongst others) that make money by acting as intermediaries. And to that end, it has been pressuring the Spanish Government for some time to prohibit them, since they think that the autonomous communities are not fulfilling their regulatory duties.

Over the last few months, the tourism association Exceltur, whose members include prestigious companies such as NH, Melia, Iberia, American Express, Hotusa and Globalia, has been holding conversations with the Secretary of State for Tourism (who reports into the Ministry for Industry, Energy and Tourism). Exceltur thinks that the Executive “could do a lot more” to regulate the operations of these rental companies, which it considers are unfair competition and which threaten its business. The main trade association for Spanish hoteliers, Cehat, estimates that between 2010 and 2013, the number of customers staying at these establishments increased by 300%, and it calculates that the number of foreign tourists who use them represents more than 20% of the total.

To support its position, Exceltur has commission the consultancy firm EY (Ernst & Young) to conduct a study analysing the impact that this illegal rental accommodation is having on the tourism sector as a whole, not just on the hotel segment. To date, EY has prepared a report about the consequences for the Balearic Islands if this rental accommodation continues to grow at its current rate over the next ten years. According to its calculations, the hotel sector would lose between 5,000 and 13,000 jobs and forgo a gross added value of between €211 million and €529 million.

Regional jurisdiction

The Government says that tourism is a regional jurisdiction, and so the Central Administration cannot do much beyond trying to standardise the regional regulations as much as possible. Moreover, the upcoming regional and general elections are likely to scupper any attempt at reform.

To date, the regions that have endeavoured to do the most to regulate tourist rental accommodation are Madrid and Cataluña, although the former received a blow from the National Competition and Markets Commission (CNMC) in March when it ruled that the Madrid law (which only allows accommodation to be rented provided the minimum stay is five days) is a barrier to free competition.

Meanwhile, the Catalan Generalitat requires intermediary websites to ensure that each property offered for rent has a kind of identification number plate to accredit it as accommodation with its license in order. Last summer, Cataluña imposed a fine of €300,000 on the web portal Airbnb for allegedly failing to comply with that standard.

On an international level, cities are taking a variety of decisions. Thus, for example, New York has declared war on tourist rental accommodation, with coordinated teams of tax inspectors, police and lawyers; and the town hall of Amsterdam has just approved an agreement with Airbnb, which requries the platform to coordinate the collection of the tourist tax that is applicable to the activities of its users.

The so-called “collaborative economy” represents a real headache for legislators, both in Spain and across Europe. In Spain, Article 16 of the Law for Information Society Services (2002) states that intermediaries (such as Airbnb, Uber and others) are not liable for the possible unlawfulness of the people they host, unless they have specific knowledge thereof. Meanwhile, the European Commission is drafting a directive that may ease restrictions on the European market and facilitate the activity of these platforms.

Original story: Expansión (by Yago González)

Translation: Carmel Drake

New European Setback For Spanish Mortgage Law

14 May 2015 – Cinco Días

The European court considers that the legal period granted to challenge evictions (under Spanish legislation) was illegal.

The ruling is just one of half a dozen negative sentences from the EU regarding mortgages.

The European Justice system has again called into question Spain’s legislation regarding mortgages. A ruling published yesterday by Maciej Spunzar, the attorney general of the European Union’s Court of Justice, considers that (the legislation) “is not reasonable” and that the period and way in which the mortgage reform permitted those affected by evictions to oppose foreclosure on the basis of the application of abusive clauses, contravenes EU regulations.

That possibility, to paralyse eviction proceedings arguing that they are based on an illegal clause, did not exist in Spain and was one of the pillars of the mortgage reform that the Government supported in 2013 when adapting Spanish legislation to EU law.

That is what the European Court demanded in a key ruling, which preceded another preliminary sentence similar to the one published yesterday. These are the basis of the final judgements that, in 80% of cases, the institution issues with the same findings a few months later.

That mortgage reform, which came into effect on 15 May 2013, established that any new people affected by an eviction would have a period of 10 days to oppose it from the date of notification.

However, for mortgage foreclosure processes already underway, the regulation established a transitory provision, which obliged all interested parties to oppose the measure within a period of one month following the publication of the law in the Official State Gazette (BOE), i.e. no later than 15 June 2013.

According to the letter issued by the Court of Justice yesterday, the problem is that the EU directive on abusive clauses “precludes any national provision, like this one in Spain”.

Although it considers the period of one month to be sufficient, “what causes problems is precisely the fact that the period started from the day after the publication of Law 1/2013 in the BOE, when the parties involved in the foreclosure processes had not been notified”, detailed the document.

The European ruling responds to a question raised by the Judge of First Instance nº4 in Martorell, involving two people subject to a mortgage foreclosure by BBVA, who logged their opposition to the eviction on 17 June 2013, i.e. two days after the period expired. The affected parties complain that the aforementioned limit violated their EU rights.

The fact that they were given one month without being notified directly “made it impossible or too difficult to exercise the rights granted to consumers” and generated “a high degree of legal uncertainty, unadmissible in the field of consumer protection”, argued the attorney general of the European Court.

“The period was not sufficient to (allow affected parties to) prepare and lodge an effective appeal”, insists the general attorney, underlining the importance of procedures in which consumers risk losing their properties in an irreversible way.

A definitive decision in this sense would have consequences for the “hundreds of thousands (of people)” affected by the foreclosure procedures resulting from the approval of the mortgage reform. The Court considers that they should have been notified about the period, as well as about the options that they had to oppose (the decision).

Original story: Cinco Días (by J.P.C.)

Translation: Carmel Drake

Gov’t To Modify Legislation For Home Buyers’ Insurance

12 May 2015 – Expansión

The Government is going to modify the insurance (legislation) that covers payments made by house buyers against possible breaches by property developers.

The Popular Party has presented an amendment in Congress to the Law for the Regulation and Supervision of Insurance Companies to modify its coverage, which (to date) “has not been sufficient to address the deficiencies that prevent effective protection for buyers, including advanced payments for these purchases”, says the justification for the amendment, signed by the PP.

The governing legislation requires that property developers take out collective insurance policies, through insurance bonds, and then subsequently sign individual policies with (house) purchasers.

But in practice, these second policies are not being signed and the coverage for buyers is not working. Several changes are being introduced “to eliminate this false appearance of insurance”, including the requirement to deposit advanced payments in a special account managed by credit institutions, where the funds may only be allocated to the property developer concerned.

The Law for the Regulation and Supervision of Insurance has completed the first stage of the parliamentary process and has now moved onto the Senate. This law transfers EU legislation (Solvency II) into Spanish legislation and is expected to come into force on 1 January 2016.

Original story: Expansión (by E. del Pozo)

Translation: Carmel Drake