Appraisal: The Principle of Caution of Order ECO/805/2003 Is Clarified Regarding the Possibility of Expropriation

28 April 2008

Through Order EHA/564/2008, Official State Bulletin (BOE) February 28, 2008, the Treasury has modified the scope of the principle of caution with regards to the possibility of expropriation in the appraisal of real estate and of certain rights for specific financial aims, as in Article 3.1.f of Order ECO/805/2003.

The principle of caution consists of applying the lowest appraisal value of the various probable scenarios. Faced with a property subject to expropriation, up until the publication of the present regulation there may have been doubts with regards to the application of this principle with the regulation concerning the land valuation, this being provision of the Land Law 8/2007, with these doubts resulting in a reduction in the financing possibilities of the land promoters. For this reason it was sought to clarify the interpretation of the principle in question through a new additional seventh ruling which is incorporated into Order ECO/805/2003 and which limits its application to cases of expropriation for the four specific cases detailed below:

  • In the case where the expropriation process of the property has started.

  • In the case of approval of a case of land or town planning, it being any type of plan or project, bringing with it the declaration of public utility and the need of occupancy of the real estate and corresponding rights, when said projects or plans enable its execution and this has to be carried out by expropriation.

  • In the case where the permitting Authority has declared the following situations and where this can give rise to the expropriation of the corresponding real estate:
         a) The failure to comply with the timeframes or other requirements inherent to the process of construction or building on the land
         b) In the case where the valuation date follows a failure to comply with the timescales or other inherent requirements of the
         construction or building process

For further information, please contact César García Quevedo de Puerta: