The Spanish Government has proposed changes to the much berated Ley de Costas, or Coastal Law, including much longer concessions of use. In practice, the Government of 2093 will probably offer a new administrative concession – for a price. It’s like when you buy an expensive property in London that actually belongs to the Duke of Westminster, you are really only leasing it for a period, a very long one. In any case, I wouldn’t lose sleep over it; I won’t be alive to see it and neither will you.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
8^th of November 2012

Introduction

Normally I would not write a legal article on legislation which still has to be enacted. I’m doing an exception only because I find the subject highly relevant and, in all likelihood, it will be approved with few amendments.

Spain’s ruling Coastal Law (Ley 22/1988, de 28 de julio, de Costas) establishes a zone of protection from the shoreline in which nothing can be built unless expressly authorised (by what is known as administrative concession). This law has gone largely ignored over the last decades mainly because administrative authorities have done little no nothing to enforce its own stipulations. The law in itself, as usual, is excellently drafted but there was no political will to back it. As it stands to logic, there is little point in drafting laws and enacting them if there is a lack of political willpower to enforce them. After all, a law is only effective in the manner that its coercive threat remains credible. Otherwise it’s all barking and no fangs.

From a personal point of view, the intent of this PSOE law was very good as it devised a cohesive sustainable development model that attempted to balance a respect of Nature and the legal right of landowners to develop land. It is a social responsibility of our generation to preserve natural habitats for the enjoyment of future generations. It’s almost an intergenerational solidarity and it is even key for our own survival as a species to respect and protect Mother Nature.

I was lucky to be born and raised in the privileged Marbella of the 70s. Marbella was once renowned for its sand dunes, believe it or not! When I was a child some of my fondest memories were to be taken by my parents – or school – to wild sand dune beaches, free of construction sites. Three decades later the only area I can think of in Marbella which still remains untouched is the ‘protected’ las Dunas de Artola nudist beach (in Cabopino); the last stand of Nature. Not for long, as there are already talks underway to develop this unblemished green area as well.

Now all this is but a faint memory buried in sepia-coloured photographic archives. The last standing genuine sand dune beach in Marbella is Playa de Artola, in Cabopino. I have to drive for almost an hour’s time to Tarifa’s beaches (Cadiz) to offer my children a similar experience to the one I had when I was their own age – we take for granted far too many things in life and only fully appreciate them on losing them. And even now Tarifa’s pristine beaches, a natural treasure, are under threat of looming development with several hundred beachfront properties under planning. But enough digression.

As a result of a notorious lack of political will to enforce its own laws (as featured in detail in Auken’s report), landowners and property developers at large jumped at the chance and started building on the designated zone of protection which is prime building land highly sought-after by foreign property investors. After all, who hasn’t dreamt in their life of owning a front line beach pad?

After decades of leniency, by both PSOE and PP authorities, the former PSOE presidency took a bold stance taking the bull by its horns and started to enforce its own law – rather abruptly and harshly – some four years ago. This sent ripples of alarm through landlords owning coastal properties as the long-standing status quo had effectively been unilaterally broken. The existing law stipulates a grace period of 30 years (ending in 2018) after which all ‘illegal’ properties were to be demolished.

Official figures vary widely, but a conservative estimation puts it at over 10,000 properties nationwide (ranging from beachfront luxurious villas, to hotels and even including industrial sites) that would need to be demolished as a result of falling foul of the law’s stringent requirements. The most notorious example of this is the hotel El Algarrobico, an architectural monstrosity located in Almería, which has been built over earmarked green belt land (Cabo de Gata-Níjar national park no less!) and now has a ruling to demolish it with an estimated price tag of six million pounds – don’t hold your breath.

This has sparked an enormous sense of legal insecurity to foreign property investors looking to buy property in Spain’s privileged coastal areas. A fear widely echoed by the media abroad. If there is something investors dislike is when the rules of play are blurry at best. A transparent nationwide legal framework is mandatory to reassure them and foster investment – far too many administrations involved, regional and local, with overlapping competencies and more often than not contradictory rulings adding to the planning mayhem. There are countless cases of foreigners buying beachfront property only to learn with horror that their expensive properties are under threat of being bulldozed – despite having acquired them through a Notary in a perfect legal manner. The last thing our property industry needs right now are yet more scandals of good faith foreigners whose properties have been flattened out. I just cannot understate enough how damaging it was for Spain’s interests the media coverage of the Prior’s case – unrelated to the coastal law. Such cases need to be stamped out by the authorities well before they even take place if we are to rebuild trust in foreign investors. Trust is hard to attain and it only takes a couple of bad calls to lose it.

With the above in mind, the Government has approved a project of law to significantly amend Spain’s coastal law. Despite vehemently denying it is proposing an amnesty, to all intents and purposes it is an amnesty in all but name. The official line is that this amnesty will help to avoid a sense of planning insecurity in Spain encouraging foreigners to invest in Spain safely. Spain, with successive administrations organising continued road shows abroad in an attempt to restore confidence and bring back much-needed foreign investments, can ill afford to have its image tarred – once more – with thousands of foreign-owned properties demolished in five years’ time. Kudos to the Government for getting its act together, at least for once.

The cynic in me however raises the question on who would foot the enormous bill (billions of euros) to demolish said properties, tallying in the thousands, in 2018. Normally judicial rulings sentence the offender to demolish them – at their own cost. Problem is many of these landowners cannot currently afford this so it would ultimately fall to the state/local authorities to pick up the incommensurable tab. With a severe ‘recession’ this seems unlikely. I blush calling this a ‘recession’, honestly, and beg forgiveness and understanding from the gentle reader for not using the appropriate word for a social tragedy with over 25% unemployment rate. But this only underscores the fact it is a buyer’s market.

The Government has opted to duck its head in the sand pushing the problem ahead for the next 75 years. For this is the new proposed timeline for the new grace period. For the next three generations troubled landowners will be able to sell on and rent their properties – legally – without qualms deferring to future generations irksome planning issues.

Ah, life is so much easier when you are a politician – pushing problems under the rug for future generations to contend with; classic.

The Key Legal Misunderstanding

From my professional experience most misunderstandings related to our Coastal Law stem from people ignoring the particularities that are being dealt with in the zone of protection. As its name implies, developing land within its boundaries is forbidden.

Properties (in an ample sense) located within the zone of protection in Spain's Coastal Law are not freehold property, they are in fact leasehold property granted by the State (known in Spanish as a ‘concesión administrativa’ or Administrative concession). This is a fairly important point that surprisingly few people take notice of. This means that the land within this earmarked area actually belongs to the State. You are actually leasing the land (and anything built on it) for a pre-agreed timeline. After said timeframe has elapsed, the property will revert back to the State.

This zone of protection is devised to exclude developing within its boundaries (i.e. restaurants, hotels, villas, industries etc.) leaving it pristine. However, as the Coastal Law of 1969 was by and large ignored the new law from 1988 stipulated a grace period of 30 years (ending in 2018) to landlords owning property within the designated legal protection zone after which they would mostly be demolished. This was likewise ignored by subsequent administrations up until recently when the PSOE government started to enforce its own law proactively. I refuse to delve on the intricacies of the tiers of protection (‘servidumbres’) which merit their own article and would likely bore my readers to death.

This implies, for example, that on buying a beachfront property built within the zone of protection you know that it is in fact subject to a grace period ending in 2018. This administrative concession is now proposed to be extended to the year 2093, providing the reform is passed. This is a fairly important point – at least theoretically. Normal freehold property experiences capital appreciation over time (disclaimer: unless it was overvalued in the first place and you are in the middle of a severe global meltdown – such as now!). However these properties are more akin to leases than freehold properties. The value of a property is actually ‘reduced’ over time as the deadline draws nearer because the time remaining to enjoy it is likewise reduced.

I’ll put an example to explain the concept. Take two identical beachfront villas (built on the zone of protection) with different administrative concessions. You would expect the price tag of both to be identical – you would be wrong. Say the first one has a 75-year period and the second one only has a ten-year period. The former will reach a much higher price tag than the second because it still has 75 years to run its course, whereas as the ‘ownership’ of the second one will revert back to the State after a decade is over. That’s right, this land and anything built on it, is ultimately owned by the State – not by the owner.

You are de facto leasing it from the Authorities. When the time is up, ownership reverts to the State. Actually let me rephrase that; the ownership was always the State’s; it’s really the use that reverts back.

Just to clarify, unlike my above example, all property built within the zone of protection will all have an identical administrative concession lasting 75 years; I have taken the liberty in my above example to imagine different deadlines for the sake of explaining the concept on how the time elapsed impacts on the underlying value of the leasehold. That’s the theory anyhow.

In practice, the Government of 2093 will probably offer a new administrative concession – for a price. It’s like when you buy an expensive property in London that actually belongs to the Duke of Westminster, you are really only leasing it for a period, albeit a very long one. In any case, I wouldn’t lose sleep over it; I won’t be alive to see it and neither will you.

Highlights of the Proposed Amendment

I stress that the following bullet points may be subject to change as at the moment of writing this article the reform has not yet been enacted – it is only a proposal. This is only a summary of the main points currently being put forward for discussion that will probably make their way – or not – to the approved law:

• The main highlight is that the grace period to bulldoze thousands of coastal properties in 2018 is postponed by 75 years. The term ‘properties’ includes dwellings, restaurants, hotels, industries etc. In the interim owners may take advantage of this new grace period to sell on or let their existing properties legally. The looming demolition threat pending on thousands of properties in 2018 is now removed. This will be a most welcome respite for many.
• The Government can now override local planning authority decisions. This is introduced to avoid ‘El Algarrobico’ scenarios whereby local planning authorities, in full disregard of national and regional laws, approve planning breaching law.
• The proposal distinguishes between urban and natural beaches, increasing the protection of the latter.
• Beach restaurants, popularly known as ‘chiringuitos’, will have their administrative concession increased from one year to four years.
• Existing industrial sites (over 1,800) will now need to pass an Environmental report to have their administrative concession extended.
• Mandatory obligation to earmark all property located within the zone of protection and to have it lodged at the Land registry. Buyers will no longer be able to allege ‘good faith’ on buying them claiming they were unaware of their particular legal status: leasehold as opposed to a freehold property.

In Conclusion

It is a very tricky subject with no easy solution. Personally I feel torn between both sides. Balancing opposing needs is always a hard task; you have to determine what the greater good is, and that may be subjective. On the one hand you have a law which upholds social interests and protects coastal areas, on the other hand you have the legitimate interests of those owners who bought and developed land – mostly – in good faith. How can you lay the blame – and ultimately the consequences – on thousands of innocent bystanders for the government’s own reckless bipolar attitude who fails to uphold its own laws? You simply cannot. There are far too many interests at play in the big picture that amply justify overriding what was devised as a well-meaning law.

The immediate winners of this legal proposal are developers, lenders (many of which have repossessed these properties) and in general private individuals owning properties on the designated zone of protection (many of which are foreigners) which were facing the grim prospect of looming demolition in 2018. This amendment will greatly contribute to bolster the legal security over the next century hopefully attracting in its wake foreign investment. This reform aims to iron out legal uncertainties which were holding back much-needed investments.

On a wider angle, the image of Spain as a whole will benefit from this proposed amendment as it will successfully avert what would have been a most ugly PR affair in 2018 which would have tarnished the image of Spain to no end. It would have single-handedly pushed back recovery several years – such is its impact. The Government should be heartily congratulated on adopting a pragmatic approach; regardless of its unpopularity with opposing political parties – they would have done exactly the same thing if they were ruling, truth be said. Worth mentioning is the considerable money that will be saved from not having to demolish thousands of properties at a time where Spain sorely needs to keep a tight rein on public spending.

The loser, in a manner of speaking, is society as a whole. For this reform will only assert furthermore the sense of widespread impunity on building on land earmarked for special protection – it will consolidate a de facto situation, the triumph of illegality. I can only hope that the last few unblemished green remnants still standing on our coastline are in fact protected by this law. Without a resolute political willpower to back it, my faith remains low.

A lawyer can assist you ensuring your property is fully compliant of the coastal law requirements. Such properties will need to be registered under a special status following the approval of the project to amend Spain’s Coastal Law.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.012 © Raymundo Larraín Nesbitt. All rights reserved.