If you have a property in the province of Valencia then there is every chance that you have heard of the so called Valencian Land Grab. There are rumours and counter rumours doing the rounds and nobody quite knows where they stand but there is no doubting that it is having a serious impact upon the local property market and will continue to do so until the situation is resolved.
So what is the Valencian Land Grab all about?
While you will see some press releases claiming that the Valencian Land Grab is a myth which has been created to cause as much concern and confusion as possible in Spain, it does actually have its origins in a law which was passed by the Spanish authorities back in 1994. However, the scare stories which you hear on the TV and read in the press are not a true representation of the reasons for instigating the land reclassification law.
Background to the rumours
Many years ago as Spain began to grow into one of the largest tourist destinations in Europe it soon became apparent that land which the authorities had originally declared as for agricultural use would be required at some stage for commercial and residential property. The authorities also realised that a reclassification of the land had the potential to cause a seriously large up lift in the value of the land in question, which would all go to the landowner.
The government were very conscious that local developers who took on the reclassified land would be hit with massive costs for introducing simple utility services such as electric, etc and came up with a plan to share the costs and the rewards. The land reclassification law they introduced throughout Spain saw many owners of land which had been reclassified for commercial use hit with the cost of introducing utilities services to the land, whether they wanted this at the time or not.
While in some cases these costs literally ran into tens of thousands of pounds there was a feeling that this was a small price to pay for what was a substantial increase in the value of the land in question, whether the authorities wanted to buy the land or not. By charging the property owner after day one of the reclassification they would ensure that at least some of the uplifted value of the land was being invested for the good of the community, and more importantly taking some of the strain off the local authorities and developers.
If the local authorities wanted to compulsory purchase the land or a developer was looking at the land they would need to pay the new market rate which ensured that all parties benefitted from the deal. However, while the law was drafted province by province and went very smoothly overall there seem to have been issues with the likes of Valencia and more recently rumours of similar problems in Murcia. So what is going on?
How the law is abused
The problem which has become commonly known as the Valencian Land Grab only became an issue after it was noted that the draft of the law was very weak and open to interpretation in many areas. It was then that local authorities and local developers in Valencia stepped in to quite literally abuse the system at the expense of the land owners.
It now appears that land which was reclassified from rural to commercial use was now in the sights of the local Spanish authorities and they had found an intriguing way of claiming back the land for the ‘good of the community’ at the expense of the land owners!
While it is perfectly legal in the eyes of the law, but morally bankrupt, the authorities within Valencia and now Murcia served a number of notices on unsuspecting land owners obliging them to pay for local utilities, roads, etc to be developed on their land and then the tricky part. Again, using the badly drafted law, in Valencia to start with, the authorities are alleged to have reclaimed large areas of land at zero cost after forcing the land owners to pay for the privilege of adding the various utilities and services mentioned above!
How can you protect yourself?
If you acquired land which has been reclassified after 1994 then you need to return to the parties from whom you took legal advice. Did they warn you about the issues? Were there any provisions added to your contract?
The vast majority of regulated lawyers in Spain are well aware of the issue and have been since 1994 so ignorance is not an excuse. However, if you feel that you may have a problem or you are looking at acquiring property in the area you really do need to cover your back with the best legal advice around.
Unfortunately the instances which have been highlighted by many property owners amount to day light robbery with rumours of land owners being charged 90,000 Euros to add the various services to their land. Indeed there are also unconfirmed reports of property owners losing their land with no compensation and then being offered the chance to repurchase the land for tens of thousands of pounds.
Initially many people had assumed that the so called Valencian Land Grab was one of those urban myths which come and go but have no actual basis in fact. However, this has been something of a nightmare for many land owners who have received the dreaded call from the local authorities. These are people who may have acquired land after 1994 which was classified as for commercial use and might not even know the lands history. In many media streams this is being billed as an attack on the British investor but in fact it encompasses a whole range of nationalities, including Spanish.
There have been a number of complaints to MEPs and the issue has been discussed in the EU but to no avail as yet. It is only a matter of time before the law is amended or scrapped but until then, if you have property in any of the affected areas you need to be very careful.