The Basque Government approves the necessary regulatory development for the effective management

Since 2015, the Basque Country has had a regulation on vacant residential units that included compulsory leases and even expropriation. All these measures were enacted by means of the Basque Country Housing Act 3/2015, of 18 June.

However, it was not until last Friday that the necessary regulatory development of these measures was published through Decree 149/2021, of 8 June, on uninhabited housing and measures for the fulfilment of the social function of housing. This regulation came into force on Saturday, 19 June 2021.

What measures have been developed?

The Decree regulates in detail the administrative proceedings for declaring a residential unit vacant and its effects:

1. Imposition and annual settlement of a vacant property fee.

2. Registration in the Register of Vacant Properties.

3. Compulsory lease.

4. Coercive fines.

5. Expropriation of vacant properties and annexes.

These effects will be stated in the decision declaring the residential unit as vacant. In principle, the fee and the entry in the Register are measures that are imposed directly once a property has been declared vacant and there is no further appeal. The rest of the measures are conditional on the Administration initiating new proceedings for which this vacant declaration works as a prerequisite.

When is a residential unit vacant in the Basque Country?

This new Decree develops the definition of vacant residential unit (which is different for each Autonomous Community).

In the Basque Country, residential units may be declared vacant if they remain unoccupied continuously for more than two years from the day after the residential unit complies with the minimum habitability conditions for residential use. In principle, any building intended for residential use in accordance with urban planning is considered to comply with the minimum habitability conditions, but proof to the contrary is admitted.

In the case of newly built residential units or residential units in the process of major renovation, the period starts to run from the moment that the state of construction makes it possible to obtain licences. However, in the case of residential units with an occupancy licence, the period starts from the date of notification of the granting of the licence.

There are a some specified grounds in the Decree that justify that a residential unit remains vacant. These include, among others, residential units offered for sale or lease at market price for a minimum period of three months and residential units whose management is transferred to the Administration for lease or which are assigned to a public programme of intermediation in the free housing lease market. Other situations in which vacancy is considered justified are second homes (with a limit of one residential unit per holder), temporary relocations for personal reasons, residential units owned by non-profit organisations for vulnerable groups, major renovations or refurbishment works that prevent residential use and residential units that, in practice, do not meet the minimum habitability conditions.

What is the procedure for declaring a residential unit as vacant?

Proceedings are initiated at the request of the town halls or the housing department of the Basque Government and interested parties are given the opportunity to file their allegations. They can last up to six months from its formal opening, although the Decree foresees that the expiry of this time limit does not prevent the initiation of a new procedure.

The Decree indicates that the procedure for declaring a residential unit vacant is not a sanctioning procedure and does not prevent the initiation of any sanctioning procedure that may be applicable for non-compliance with the social function of housing.

Once the residential unit has been declared vacant, is it considered vacant forever?

In principle, the declaration of the residential unit as vacant will be maintained as long as the situation of unjustified vacancy continues.

Any entitled person may request the revocation of the vacancy declaration if the duty of occupation is considered fulfilled. Requests for revocation are submitted to the same body that issued the declaration of the residential unit as vacant, which has three months to issue a decision. If it does not resolve within the deadline, the revocation request may be deemed to have been accepted.

What does the vacant property fee consist of?

This is an annual fee. The amount is 10 euros for each useable square metre of the residential unit and each year it will be increased by 10% up to a maximum of three times the initial amount.

The fee shall be levied for as long as the declaration of the residential unit as vacant remains in force. Revocation shall determine the cessation of the fee. The last fee shall be charged pro rata on a monthly basis in accordance with the revocation date.

According to the Decree, the town hall will impose this fee on both natural and legal persons once it has verified that the declaration of the residential unit as vacant is final in administrative proceedings and there are no possible further appeals. The fee will also be required of inherited estates, communities of property or entities that constitute an economic unit or a separate estate liable to taxation.

In principle, payment will be requested from the owners of the property. However, if they are able to prove that they do not have the use or enjoyment of the property, the fee will be levied on whoever is in possession of these rights. If the right to use the property is held by several owners, they will be jointly and severally liable for the fee.

The vacant property fee is defined by the Decree as a non-tax charge (although, in our opinion, this qualification is arguable) and compatible with other taxes, such as the surcharge on the Real Estate Tax that some municipalities in the Basque Country apply to vacant residential units (e.g. San Sebastián and Bilbao).

How does the compulsory lease works?

Compulsory lease can only be imposed on residential units that: (i) have been declared vacant; (ii) are still unoccupied one year after this declaration and (iii) are located in an area expressly declared to be "of proven residential demand". The proven residential demand declaration may affect an entire municipality or specific areas.

The term of the compulsory lease may be up to five years and may be extended for a further five years.

The procedure for the imposition of a compulsory lease is also initiated by the town hall or the housing department of the Basque Government and interested parties are given the opportunity to file their allegations. In principle, the Administration will try to reach an agreement with the holder of the property on the lease conditions. However, if an agreement has not been reached within 15 days, the Decree foresees that the expropriation procedure will be initiated regarding the use of the residential unit. The compensation derived from the expropriation will be determined in accordance with the regulations governing public expropriation proceedings, although the owner of the residential unit will, in any, case be liable for all the expenses assumed by the Administration to guarantee the habitability conditions of the residential unit.

What are the coercive fines?

The Decree says nothing about coercive fines. However, Law 13/2015 already provided for the possibility of successive monthly coercive fines to promote the effective occupation of vacant residential units.

Each of these monthly fines may be up to 300 euros.

When can the vacant residential unit be expropriated?

The declaration of residential unit as vacant may also lead to expropriation, provided that it does not have the status of social housing and one year has passed since the vacant declaration became final and no further appeal was possible. In addition, the Administration must justify the need for expropriation in order to guarantee the appropriate use and the fulfilment of the social function of the residential unit.

In these cases, the town hall or the Basque Government housing department will issue an enforcement order for the effective occupation of the residential unit within six months and, where appropriate, for the adoption of security and habitability measures. In the event of non-compliance with these orders, the procedure will be formally initiated.

Does the Decree contain any rules on the transfer of residential units?

Finally, the Decree does not include the expected regulatory development of the Basque Administration's rights of first refusal and call-back, which in practice are not yet considered to be in force.

The only rule contained in the Decree relating to the transfer of residential units is the one that refers to the subrogation of the purchasers in the status of interested party in proceedings for the declaration of a residential unit as vacant.

What other measures are included in the Decree?

The Decree is extensive and includes a detailed regulation of all the procedures mentioned in this note. In addition, it develops the Register of Register of Vacant Properties and mentions the major renovations aids and lease promotion programmes of the Basque Government (among others, Bizigune and Alokairu Segurua, Arrazoizko Prezioa). Finally, it also provides for the possibility of town halls or the Basque Government's housing department expropriating residential units and annexes, even if they are inhabited, if the duty of conservation, maintenance and rehabilitation is not fulfilled.

Do not hesitate to contact us for further analysis of the implications of this new Decree on your portfolio or business.