This FAQ is about the Licence of First Occupation (LFO), a legal requirement of all homes in Spain. The Spanish name for this licence is Licencia de Primera Ocupación, which is sometimes translated into English as the Licence of First Occupancy, First Occupation Licence, or First Occupancy Licence.
Read the guide below, then check out Raymundo Larraín Nesbitt comprehensive, updated guide to Spanish licences of first occupancy for the latest expert opinion.
What is the Licence of First Occupation?
The Licence of First Occupation is a certificate issued by the town hall (ayuntamiento) that confirms that a newly-built property fully complies with all planning and building regulations, and is fit to be used as a dwelling.
It confirms compliance with all health, safety, planning and construction laws, and that the property has been fully completed, with no outstanding works.
If the certificate is granted, it shows that a property has been legally built, with all licences in place, and finished to the standards laid out in the original building licence (Licencia de Construcción), also issued by the town hall.
The LFO can be granted for a single property, a new development of multiple properties, or a phase / sector of a large new development or urbanisation. Whatever the case, the LFO requires that the surroundings have been urbanised to the standards laid out in the original construction licence, or partial urban plan.
Why do you need a First Occupation Licence?
In theory, a First Occupancy Licence is required before you can live in a newly-built property, as a property is not legally recognised as fit for human habitation without one. That said, thousands of newly-built properties up and down the land are being lived in despite never having received an LFO.
In practical terms, the LFO is vital because you normally need one to set up utility contracts such as water, electricity, gas and telephone. The utility companies are required by law to check for an LFO before connecting a newly-built property. In some regions it used to be enough just to show that the LFO had been applied for, but now that the ‘positive administrative silence‘ rule has been turned on its head (the principle is now ‘negative administrative silence’) that many no longer work. To be on the safe side, assume you must be able to produce an LFO to get the utilities connected.
In theory, you also need an LFO if you are going to rent out a property, both for holiday lettings to tourists, and for long-term rental contracts (more than 12 months). For landlords renting without an LFO could be an issue from an insurance perspective.
If an LFO is a legal requirement for all new properties, and a practical requirement for getting hooked up to the utilities, you would expect all properties to have one. Not so, for this is Spain. Many homes around Spain do not have LFOs, and many of them have connected to the utilities without any problems. But things are changing, and the law is being more rigorously applied, so make sure you see an LFO before buying a newly-built property in Spain.
Note that in some areas town halls have issued LFOs for illegally-built properties, so an LFO doesn’t always mean that a property is 100% legal.
What happens if you don’t have a Licence of First Occupation?
Many buyers have been pressurised by developers into buying newly-built properties without LFOs, especially foreign buyers who don’t know they need one. If you are unlucky enough to have completed on a newly-built property without an LFO then you are probably living off the builder’s supply for water and electricity, with all the problems and hidden costs that entails. The builder’s supply can get cut off at any time, for example if the builder goes under, and the supply can be unreliable, even if it hasn’t been cut off.
There are other risks and problems too. You may not be able to get a mortgage without an LFO, and you will find it a big problem when you come to sell, as many potential buyers won’t touch a property that has never been granted an LFO.
So what do you do if you have completed on a property without an LFO? In short, apply for one yourself, and pay all the associated costs. If there are safety or planning reasons why an LFO has not been granted you (and your fellow owners) will have to pay to sort them out to the town hall’s satisfaction. This could cost anything from a few hundred to thousands of Euros, depending upon the seriousness of the problem.
Some Spanish consumer law specialists argue that buyers who have been tricked into buying from a developer without an LFO can get their money back with damages from the developer. Though that may be true in theory, anyone with firsthand experience of the Spanish legal system would certainly think twice before going down that road.
Much better to avoid buying in the first place any newly-built property that does not have an LFO.
Who should apply, and how long does it take?
LFOs are only required for newly-built properties, which are normally sold by developers. It is the developer’s job to apply for the LFO from the town hall (presenting the certificate of end of works from the architect), after which the LFO can take months to come through, even if there are no major problems. If there are construction problems the developer will have to correct them before the LFO is issued, and that will take as long as it takes. If there are no problems then it typically takes a couple of months to get an LFO in many towns around Spain, though it depends on how busy the town hall’s planning department is. It used to be the case that, thanks to the administrative silence rule, the LFO was considered to be automatically granted after 3 months if the application complied fully with all laws and regulations. Thanks to incompetence, corruption, and a lack of resources in some areas, for example Marbella, LFOs deemed granted by ‘positive administrative silence’ proved to be highly contentious. From July 2011 onwards, ‘positive’ administrative silence has been changed to ‘negative’ administrative silence.
For the process of applying, the cost, and the documentation required, contact the urban planning department (departamento de urbanismo) of your town hall.
Can you buy a property without a Licence of First Occupancy?
Properties without LFOs can be bought, sold, and registered in the property register. So it is not illegal to sell a property without an LFO, but it is illegal to force a buyer to complete without one. The developer is contractually obliged to produce an LFO at the time of completion and not doing so would be breach of contract (unless the buyer waives this obligation).
If you own a newly-built property that was not issued with an LFO you may have trouble selling it. As already stated, it is legal to sell a property without this licence, so long as you do not mislead the buyer. The problem is that few buyers, if any, will be interested, at least not without a steep discount.
So, you can buy a property without an LFO, but you cannot legally inhabit it, and you might have serious problems with utilities and the such like if you tried.
Can you be forced to complete without a First Occupancy Licence?
No, you cannot. It is your right to see proof of an LFO before you complete. A developer that cannot produce an LFO at notary is in breach of contract.
Is it ever a good idea to complete without a Licence of First Occupation?
In some rare circumstances it can be. For example, if you have made significant stage payments to a developer who is at risk of bankruptcy. If the property is finished, and there do not appear to be any planning problems, you may be better off completing without an LFO than becoming just another one of a bankrupt developer’s creditors, especially if you don’t have a valid bank guarantee.
Do resale properties need LFOs?
No, LFOs only apply to newly-built properties as the LFO is the originally authorisation for use as a dwelling. Once issued, the LFO thereafter becomes known as the Habitation Licence (Cédula de Habitabilidad or Cédula de Ocupación). If you are buying a resale property you will want to see an Habitation Licence from the town hall, rather than an LFO (though it is basically the same thing).
Can a Licence of First Occupation be granted by the administrative silence rule?
As of July 2011, the answer is ‘no’.
Before that, the administrative silence rule meant that certain applications (such as licences) were deemed granted by way of ‘positive’ administrative silence if they went unanswered by the administration in a period of time, normally 3 months.
First Occupation Licences could be obtained by ‘positive’ administrative silence if the application complied fully with all laws and regulations.
Unfortunately, LFOs obtained by virtue of ‘positive’ administrative silence proved troublesome in places like Marbella (and many other parts of Spain), where there was a breakdown in urban planning standards and efficiency.
If you are confronted with a Licence of First Occupation that has been obtained by ‘positive’ administrative silence you will need the help of a good, trustworthy lawyer to decide what to do.
This FAQ has dealt with the subject of Licences of First Occupation in Spain.