Licence of First Occupation: Why it is important!

buying property in SpainA word of advice: Do not listen to anyone that says buying a property in Spain that does not have a Licence of First Occupation is not a problem.

You need to be aware of the implications of purchasing a property in Spain, without a Licence of First Occupation.

 

What is a Licence of First Occupation?

A Licence of First Occupation is also known as Habitation Licence or Certificate of Habitation, in Spanish Licencia de Primera Ocupación or Cédula de Habitabilidad.

The following information has been taken from an article by Raymundo Larrain Nesbitt posted on the “Spanish Property Insight” website:

The Licence of First Occupation (LFO) is an administrative licence which the town hall, where the property is located, grants and verifies the development is in full compliance with the Building Licence (BL) and all associated Planning laws…

A Licence of First Occupation is basically a document consisting of one or more pages issued by a town hall and addressed to the developer who applied for the licence which states that the Licence of First Occupation has been granted for the property or group of properties in the application…

A LFO only applies to new builds or off plan property, not to resale. A LFO is important as it draws the line between a new build being legally fit – or not – for human habitation. A lack of a LFO may imply serious underlying problems. You need a LFO to be connected to utility companies…

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 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.

Read more here: http://www.spanishpropertyinsight.com/legal/licence-of-first-occupation-explained/

The information contained in the above article is accurate and very informative. I suggest you take time to read through it and make notes.  However, I feel the comment, “A LFO only applies to new builds or off plan property, not to resale”, may be misinterpreted.

Licence of First Occupatio
The lovely area: Mijas La Nueva

In many parts of Spain, Mijas included, there are quite a number of properties, for a variety of reasons, that do not have a Licence of First Occupation. There are also many property owners who are not aware that they do not have this licence. Many properties have been sold and resold without the Licence of First Occupation.

How is this possible?

Basically, if a Spanish mortgage is not required, then the non existence of this licence will not necessarily be noted. Not all lawyers stipulate the requirement of a Licence of First Occupation for completing a property purchase.

So, why do we consider the Licence of First Occupation to be an important document, when deciding whether to but a particular Spanish property or not? One word. Resale.

The non existence of a Licence of First Occupation may make resale more complicated.

Let me explain …

Although it is legal to complete a Spanish property purchase without a Licence of First Occupation, it has numerous legal and practical drawbacks which your lawyer can explain in more detail. Here are a few examples:

  • You, or a any other potential future buyer, will not be able to take out a mortgage on the property or remortgage it.
  • You will not necessarily be able to benefit from the official utility supplies. Changing accounts into your name will be complicated. Some lawyers are able to organise this for you but there is never a guarantee you will not have problems in the future.
  • Any future prospective purchaser, or their lawyer, will haggle with you and only pay a lower purchase price if you lack a Licence of First Occupation. In a resale, the new purchasers will suffer the same problems to secure finance by means of a mortgage loan. Not having a Licence of First Occupation implies that you are actually reducing the base of potential purchasers for your resale.
  • If there are planning issues at any stage, the Town Hall can set a charge against the property and you, as the new owner, may be held liable to pay the fine for the planning illegality.
  • You cannot legally rent out a property without a Licence of First Occupation .*

*(The above 5 points were also covered in the aforementioned article by  Raymundo Larrain Nesbitt)

 

So there you have it. Some of the reasons why you really should ensure that any property you are purchasing in Spain has a Licence of First Occupation, whether you require a mortgage or not!

One last tip. If you are told that the Licence of First Occupation has been applied for, ask why it has not already been granted and ensure your lawyer looks into it for you. There is often a reason why it was not given in the first place. Do not leave anything to chance.

Read more about my Property Finder Malaga services HERE.

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