The following report on the difference between the English and Spanish town planning systems was provided by Abusos Urbanisticos No – a citizens group that defends property rights in Spain
Overview Comparison Between English and Spanish Town and Country Planning and Development Law and Practice January, 2009
The English System of town planning
(1) National law imposes detailed policy requirements, to be followed by regional authorities, and local authorities (which are, for simplicity, referred to here as town halls) within those regions, when approving regional and local development plans. National law is conscientiously formulated to conform to EU law. The regional planning body adopts a macro development plan for a period spanning approximately 20 years,but is subject to on-going review.
(2) Each local town hall development plan is then formulated by locally elected politicians, advised by full-time qualified planning officers employed by the town hall. The local development plan is also subject to on-going review.
(3) The regional development plan must be approved by the national government before it can become effective, to ensure that it conforms to national law. Similarly, the town hall development plan cannot take effect until it too has been approved by the national government.
(4) Before being submitted to the national government for final approval, both regional and town hall development plans will have been prepared as first consultation drafts, with an opportunity for developers, preservation societies and individual citizens to make both written representations either in support of, or in opposition to, the draft development plan. After considering those representations, the development plan may be amended and there is then a public inquiry process, at which interested parties can apply for an opportunity to speak in support of, or in opposition to, the draft development plan.
Each draft of the relevant development plan is automatically submitted to certain authorities for their comment, including those companies who provide fresh water and foul and surface water drainage services to the region or town hall district, highways authorities and the Environment Agency (which has jurisdiction over contaminated land, floodplains, areas of scientific interest, rivers and national water resources).
(5) Individual developers (promoters) can present development proposals to the relevant town hall which may be either compliant or non-compliant with the local development plan. The town hall has the ability to reject a promoter’s development proposals if they are inconsistent with the approved development plan unless they offer genuine public benefit. This test is strictly enforced by town halls because they know that their decisions to approve or reject development proposals are subject to rights of appeal or legal challenge to government planning inspectors and/or the courts. Anyone may object to a promoter’s development proposals either to the town hall before the proposals are approved by the town hall or to the courts within 3 months after the approval of those development proposals. The objections must be on the grounds that the development proposals are not in accordance with national, regional and local approved rules (including, if appropriate, that they do not pass the public benefit test). In the event of any local corruption (which has occasionally, but rarely, happened in the past) the system of judicial challenge has successfully resulted in the appropriate legal outcome, as the courts rigorously review whether town halls and other public authorities are complying with or exceeding their powers and responsibilities.
(6) Promoters themselves (with the exception of the major utility companies, such as water, electricity etc., whose use of their powers is closely monitored by government regulators) have no power of compulsory purchase or expropriation. Any compulsory purchase powers have to be exercised by either national government or by the town hall or by these major utility companies, this process again being subject to the same degree of scrutiny and appeal as applies in relation to any approval of development proposals. Therefore, promoters almost always have to agree commercial terms with landowners to acquire land which the promoter would like to develop, before the promoter submits the development proposal to the town hall for approval. Only if there is genuine public benefit are compulsory purchase powers used and these are usually restricted to the provision of major road or rail public transportation schemes, hospitals, schools, flood prevention, improved facilities or other similar purposes.
(7) The promoter, in his negotiations with landowners,can identify almost all relevant landowners by means of a search at the national land registry, as title to almost all land in the UK is now registered there. Land registration includes a plan of the land to identify, with only very minor room for error in boundaries, the extent of each landowner’s land holding. The negotiations will recognise the potential market value of the land with the benefit of the relevant permits for the proposed development and agreement is often reached on a price for the sale of that land conditional upon the relevant permits being obtained, which will verify the price.
The developer therefore has to design his proposed development to take into account the willingness of landowners to sell their land to the promoter and the promoter may therefore have to pay a premium over market value to certain landowners to persuade them to sell important pieces of land without which the whole development proposal might not be realised. Values of EUR500,000 per hectare of development land have therefore been achieved by landowners selling land to be included in large development projects, even though the Promoters will also have to bear the costs themselves of all required infrastructure and other costs associated with the development to which reference is made at (8) below.
Where land is compulsorily purchased by a public authority, it is purchased at market value in any event. Expropriation is not permitted. Legislation sets out clear rules for the calculation of the appropriate compensation. Where only part of a land holding, such as a house and garden, is being acquired for a non-commercial public purpose, the market value will reflect the difference between the market value of the whole of the land holding compared with the market value of the land not being compulsorily purchased.
As a result, a landowner will receive at the very least the same price as he could reasonably expect to receive if he had chosen to sell his land on the open market, so enabling him to buy a replacement property or land of similar quality. There is even provision for a landowner, where he is faced with compulsory purchase of part of his land holding, to force the relevant public authority to purchase all his land holding, if the remainder is not capable of reasonable beneficial use.
Also, where a landowner’s use and enjoyment of his land is blighted by a public works project such as a new railway, road or airport, even where no land is to be compulsorily purchased, there may be circumstances in which he can insist upon compensation for his loss, that works are carried out to minimise the disturbance or can require the town hall to purchase the land at its market value that applied before the public works proposals were approved.
(8) Promoters are usually required by town halls to make substantial payments to the town hall in return for having their development proposals approved, whether or not they conform to the town hall’s local development plan. These payments will be identified for relevant public purposes in the documents approving the development proposals, to be used towards providing more school places for children living in new houses, contributions to improve local roads, bus services, train station and other local facilities that may need to be improved or expanded for the benefit of all local residents. For commercial development, the payments towards increased public car parking or other public benefits may also be included. The provision of infrastructure is guaranteed by way of bank guarantee at the developer’s expense, to ensure completion of all infrastructure even if the promoter becomes insolvent.
The promoter therefore must assess the profitability of its development proposals knowing that it must pay a market value for the land and that it must make contributions towards local infrastructure to the town hall. In no case can any local landowners be forced by a promoter or a public authority to make payments towards any infrastructure to be provided in connection with an individual development proposal, even if that infrastructure might increase the value of their land. The town hall can of course propose an increase in its local taxes payable by all residents within the town hall district each year but, once again, any proposals to increase local taxes would be subject to approval by the national government in accordance with national law.
(9) Astute promoters in England still make profits on development projects in a “normal” economic climate. Poor promoters soon become insolvent.
The Spanish System of town planning
(1) The national government, which is responsible to ensure conformity within Spain with European law, has effectively relinquished to regional governments all jurisdiction over regional and local development proposals, with little or no residual power for the national government to control policy at regional or local level.
(2) Local town halls are left free to formulate local development plans which usually conform with regional law, even if they do not conform with national or EU law. Similar to the English system, local development plans are formulated by locally elected politicians, in principle advised by full-time qualified planning officers employed by the town hall. The local development plan is then reviewed every 5 years. One problem is that small town halls often with unrealistic expansion ( and wealth generating) schemes lack the technical competence to design properly and carry out such plans. So they tend to rely on the developers themselves to povide the expertise, as though this were not to be seen as a conflict of interest.
(3) Local development plans can be challenged by an application to the courts for non-compliance with regional law, but while this is a legal opportunity there appears to be no willingness to challenge local development plans on the grounds that they do not conform with EU law.
(4) Whilst there appear to be unofficial means for interested parties such as promoters to influence the formulation of local development plans, there is limited, if any, real opportunity for preservation societies and individuals to object. Even those bodies with responsibility for provision of fresh water and foul and surface water drainage services to the town hall district appear to have difficulty in objecting either to the town hall development plan or proposals submitted by individual promoters (although some developments have been prevented in the courts on the grounds of lack of available sustainable water resources), as the consultation process appears flawed.
(5) Individual promoters can present development proposals to the relevant town hall, which may be either compliant or non-compliant with the local development plan. The town hall appears to have very limited power to reject a promoter’s development proposals whether they conform to the local development plan or are non-compliant with it, as regional law allows promoters to insist on their proposals being approved on very tenuous “public interest” or “general benefit” grounds. There is not only no agreed or justifiable definition of these terms but subsequently there appears to be limited or no real opportunity for affected landowners to object to, or challenge in the courts, the inclusion of their land within a development proposal. Allegations against development schemes are routinely ignored or overruled and legal processes are so complex, costly, lengthy and uncertain as to be unreasonable for almost all small property owners affected by a predatory system motivated principally by the prospect of fast and easy money.
(6) Promoters are given, under regional law, powers of compulsory purchase, which amount to expropriation, without even the limited guarantees national expropriation law provides. Promoters have the ability set out in regional land laws, certainly in acquiring rural land, to demand the compulsory ceding of property without compensation and the further purchase of land not at market value, but at a nominal agricultural value which does not reflect its value as development land. There appears to be no effective control by national, regional or town hall authorities over the amount of land taken by promoters from landowners or the effect on those landowners of losing that land, or the infrastructure costs that they apply and then demand from the original owners. When the property so acquired is included in development schemes the asking price suggests that the developer, not the original owner, has paid the acquisition and development costs. Thus the profit margins are enormous and exaggerated. And, until the current credit crunch, banks have been willing to loan developers a very significant amount of money on overvalued land.
(7) As a result, promoters do not need to negotiate forthe acquisition of land with landowners, nor do they appear to be required to pay a value for the land that would equate to its market value on any of the bases described at paragraph 7 in the summary of the English system. In no circumstances do landowners appear to receive adequate value or compensation for the loss of their land. There is also no ability for a landowner to compel a promoter to purchaser the remainder of his land at market value in any circumstances. It is small wonder therefore that because of the renowned “land grabs”- compulsory purchase on steroids- Spain is unique (or almost so) amongst countries attempting to attract foreign home buyers where it is impossible to obtain clear title insurance at any price.
(8) Promoters are required to provide the local infrastructure needed for the purposes of their own development proposals, such as internal roads, water, drainage and electricity supplies. However, as the promoters do not appear to have to provide adequate bank guarantees to the town hall to secure completion of all local infrastructure, residents on new developments can find themselves without proper infrastructure if the promoter becomes insolvent.
Also, as the promoter appears to have no liability to make major contributions towards wider infrastructure improvements, such as area highway improvements, upgraded schools or other public facilities, these are instead funded by a combination of increased local taxes on residents within the town hall district generally (or through regional or national taxes by regional or national authorities) or by those very landowners whose land has been expropriated. To add insult to injury, often the original small property owners are compelled to pay taxes on land they have cede to developers until the development is completed and the property sold on to new owners.
(9) Astute promoters in the Valencia Region can make enormous profits at the expense not only of the individually affected landowners, who bear a disproportionate burden as a result of the legal system and who, in most cases, are left with no ability to recover costs, never mind profit from the development, but also local, regional and national tax payers who bear the wider costs of infrastructure improvements required to serve new developments. Even incompetent promoters can make enormous profits in a “normal” economic climate. In the current situation however many builders and promoters,including some of the largest ones in Spain, have been forced into bankruptcy because they have over extended their credit with banks which are themselves in trouble. Even the vast amounts of money they have hitherto parked in offshore fiscal paradises may not be sufficient to rescue many of them from total disaster. Where this will leave matters by the time there is a recovery is for the future to determine. The hope is that the authorities will use this period to introduce laws and controls that will respect European norms including the rights to private property, the protection of the environment, public contracts, etc. and to streamline and improve the cumbersome laws and court sytem. That may be too much to hope for but, until progress is made in these directions, the future of the property market will continue to have an overhanging black cloud and a difficult future.