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On May 25, Decree-Law 9/20 on urgent territorial protection measures for the Balearic Islands (BOIB no. 92 of May 25, 2020) was published and took effect.
As far as the regulations are concerned, they are divided into two chapters:
- The first chapter deals with provisions concerning urban development land. Measures are planned in this regard for consolidated urban land, unconsolidated urban land, land for development, and non-programmed land for development.
- The second chapter takes into account an important yet diverse list of restrictive measures for rural land and its urban use.
Once the aforementioned aspects have been established, we turn to analyze the impact on urban development land, especially on programmed and non-programmed land for development.
1. Urban development land: land for development and non-programmed land for development.
Regarding the land for development and the non-programmed land for development, this regulation provides for a genuine declassification of land and this land is automatically declassified as rural land, under the category of common rural land, when the requirements of Decree-Law 9/20 of May 25 are met.
We will not analyze the necessary requirements for declassifying land since this topic was already discussed in a previous blog article. Suffice it to say now that the regulations provide for a common status for land affected by declassification: expiration of the deadline stipulated in the municipal zoning or urban development plan, if applicable, in order to carry out urban land transformation work without this work having been fully completed.
Once the land has been declassified, it is Decree-Law 9/20, which states in Article 6.4 that rezoning of land for development in accordance with the provisions of the article shall not result in compensation in accordance with state legislation.
We find this idea in state legislation in Article 11.1 of Royal Legislative Decree 7/2015 of October 30, approving the revised text of the Land and Urban Renewal Law; as well as in the Balearic regional legislation, according to Article 6 of Law 12/2017 of December 29, on Urban Planning in the Balearic Islands.
As a result of the above, would there be any type of compensation should land be declassified as mentioned above under these new regulations?
The answer to this question would depend on the time frame applicable. In other words, if the urban land transformation work had been carried out by the deadline set by the municipal planning authority for building the development, or, on the contrary, if this work was done after the deadline had expired.
2. By the deadline set by the municipal planning authority.
2.1. Compensation for the loss of the right to participate in new urban development work.
According to Article 38.1 and 2 of Royal Legislative Decree 7/2015 of October 30, approving the revised text of the Land and Urban Renewal Law, it is possible to compensate the owner for declassifying his/her property when declassification of his/her land occurs within the deadline established by the municipal planning authority for building the development.
In this case, and the event that construction work on the land has not started to provide basic utilities, the article above states that the owner may demand, as compensation, the loss of profit due to the loss of the right to participate in the new development of his/her land, or due to a change in its status.
The compensation for preventing the exercise of the power to participate in this work or changing its status would, in any case, be the result of applying the same percentage determined by the law on territorial and urban planning for the community’s involvement in the capital gains in accordance with the provisions of Article 18.1(b) of the law mentioned above.
2.2. Compensation for work and promoting urban development or construction.
For the case of having begun urban transformation work before the deadline, Article 39 states that when the urban development expenses incurred become pointless for those who have incurred them due to the effects of the provision, the act or the fact that motivates the appraisal, these expenses and costs will be assessed for their amount plus the risk-free rate and the risk premium.
Here we are talking about:
- Expenses incurred for preparing the project or technical projects of the planning and execution instruments that, according to regional and urban planning laws, are necessary to justify urban development, construction, conservation, or building renovation work.
- Expenses for construction work and the financing, management, and development required for carrying out the project.
- Any compensation paid.
In this case, the second paragraph of the law states that the urban development work will be appraised in the manner established above, or in proportion to the extent to which it has been completed – the % completed and applied to the value of the completed urban development – whichever is greater, provided that the development is carried out in accordance with the instruments that justify it and that the deadlines established therein have not been exceeded.
To do this, the extent of completion will be assigned a value between 0 and 1, which will be multiplied:
- By the difference between the value of the land in its original status and the value it would have if the work had been completed, when the provision, act, or fact that motivates the appraisal prevents its completion.
- By the loss caused in the value, the land would have if the work had been finished, when only the conditions of its performance are modified, without preventing its completion.
In short, any changes in the planning before the deadline set in the Phase Plan would determine the compensation of the expenses incurred by the interested parties entrusted with the continuation of the Plan. (Supreme Court, Contentious-Administrative Chamber, Judicial Division 6, Ruling dated June 27, 2006. RJ 2006\4754). Here, we will include all the costs incurred in connection with the construction done.
3. After the deadline set by the municipal planning authority.
3.1. Management costs incurred by not having begun any urban development transformation work.
The owner would only have the right to claim compensation for the urban development expenses incurred and no other compensation.
This is because, as our Supreme Court pointed out, land ownership is statutory (Supreme Court, Chamber Three, Contentious-Administrative Chamber, Judicial Division 5, Ruling dated September 29, 1998, Rec. 938/1992); and by virtue of this, the simple fact that the land classification is changed does not create a right to compensation per se for the affected owner, but rather it is necessary for the owner to have carried out urban development transformation work, and as a result, having paid the urban development costs needed for the allocation of the land (Supreme Court, Chamber Three, Contentious-Administrative Chamber, Judicial Division 6, Ruling dated October 11, 2004, Rec. 7846/1999).
3.2. Carrying out all urban transformation work.
Another case involving compensation after the municipal deadline has elapsed would be where the owner has done all the urban development transformation work for the land.
In this case, the Supreme Court considers that compensation would be due for the loss of the owner’s urban use, even though it has already reached the stage of property ownership of the land, that is, the consolidation of the owner’s rights, so that the compensation of the individual affected by the loss of this use of his/her land would also be applicable (Supreme Court, Chamber Three, Contentious-Administrative Chamber, Judicial Division 4, Ruling dated July 9, 2012, Rec. 6433/2010).
What happens when a change in planning occurs due to the approval of a legislative act?
4. A change in the planning due to the approval of Decree 9/20 of May 25 on urgent territorial protection measures for the Balearic Islands.
In this case, you should ask yourself which public agency you should claim the compensation from.
The compensation must be paid by the government responsible for the decision causing the declassification.
It would be worth considering whether the declassification is purely legislative, having ratified the Decree-Law, or whether it is due to the Balearic Government issuing the aforementioned Decree-Law, which was subsequently ratified.
In this sense, we believe that the measure’s decision-making body should be the Balearic government, without prejudice to subsequent ratification by parliament.