The Art of Planning Permission Revocation in Spain
How possible is it that someone who buys a plot of land for €800,000, earmarked to develop 30 apartments, financed with a substantial mortgage loan (€600,000 only after due diligence carried out by bank), with planning permission granted and already with a few off-plan sales on the pipeline, ends up with, after some years of legal action, half-acre of land wholly unsuitable to plant even tomatoes? In Spain, this is actually possible.
The case study in question saw the valuation of the plot go down from €1,198,280.30 to just over €20,000 after the regional Government in Andalucía challenged the planning permission granted by the Town Council in Tolox, a small picturesque village embedded in the very protected “Sierra de las Nieves” natural park. The mortgage loan, as was expected, remained unaltered. The developer’s brain activity, on the contrary, visibly altered, following sleep –and planning permission— deprivation.
This textbook horror story is actually very possible in Spain, where one Government office can challenge a decision made by a hierarchically inferior office, and, although is not commonplace, it did occur to several developers that had their Tolox Town Council planning permissions revoked by the courts, on instigation of the Junta de Andalucía. Horror story as it may seem though, the mayor is currently indicted for corruption as he was –allegedly— taking bribes from some developers.
But as that great Englishman, Ken Dodd, once remarked, every cloud has a silver lining, plus VAT: it could have been far worse if hundreds of off-plan property owners had paid their deposits only to see the works stop-half way to completion (and who could have then successfully pulled out had they secured a bank guarantee or be stuck with a broke developer for the foreseeable future otherwise).
Apart from the above upside, which is a true blessing in disguise for both parties of the contract since those very off-plan buyers seeking a retirement home in this beautiful area would have hardly be willing to complete on an overvalued property, the law protects anyone who is provably damaged by an official decision, undeservedly that is, and can sue in courts.
In this instance, the Tolox Town Hall is poised to be painfully sued by all of the developers that, in different degrees, have had their expectations trashed. Current legislation allows for the following to be indemnified by the infringing Town Hall:
- Demonstrable loss of value of plot of land as a result of the planning permission revocation (where land was purchased with planning permission).
- Demonstrable loss of revenue as a result of not being able to conclude transactions on secured off-plan unit transactions (not on those not sold).
- Taxes, costs and fees incurred in when purchasing the property and/or developing the project.
If the Town Hall can prove willful misconduct or fault on the side of the applicant, the above items become non-indemnifiable. For example, where someone got planning permission from a Town Hall to build close to the sea and they did not ensure compliance with national coastal restrictions; or where clearly planning permission if granted subject to certain, and unmet, conditions. And not least, when some palm was adequately greased…
But barring those reservations, as solid judicial authority on the matter puts it: “it is clear that revoking planning permission causes a developer financially certain and provable damage for, in any event, he is impeded from legally carrying out the previously authorized activity and even, may put him on the path to demolition of whatever was built.”
