What is new in the Spanish real estate market after the Organic Law on the Efficiency of the Public Administration of Justice?

Organic Law 1/2025 of 2 January on measures for the efficiency of the Public Justice Service, in addition to reforming the judicial administration model, includes very important changes for the real estate market.

These include:

(i) the new rules governing auctions of real estate assets in the context of enforcement proceedings;

(ii) the acceleration of the eviction of real estate properties in some criminal and civil proceedings; and

(iii) the stricter requirements for tourist rentals.

This note analyses all these developments and their main consequences for real estate market participants.

Organic Law 1/2025: an omnibus law

Organic Law 1/2025 of 2 January on measures for the efficiency of the Public Justice Service contains a number of relevant procedural innovations, including: (i) the promotion of alternative dispute resolution methods (New requirement for negotiation process before filing civil action); (ii) the reform of the judicial administration model (with the new Instance Courts and the Judicial Office); and (iii) other measures aimed at improving procedural dynamics, such as all those relating to oral proceedings. Some of these measures have a particular impact on the Spanish real estate market, in particular the new rules on the auction of real estate assets in the context of enforcement proceedings and the acceleration of the eviction of real estate properties in some criminal and civil proceedings.

However, Organic Law 1/2025 is not limited to the incorporation of procedural measures but, in its final provisions, also amends several substantive provisions.

The main measures included in Organic Law 1/2025 (procedural and substantive) that may have an impact on the Spanish real estate market are summarised below.

New auction rules force creditors to re-evaluate their strategies

Organic Law 1/2025 review several aspects of Spanish Law 1/2000, of 7 January, on Civil Proceedings. In particular, it amends the rules governing both the auctions of movable assets in the context of enforcement proceedings (sections 643 et seq) and the auction of real estate in the same context (sections 655 et seq).

These reforms will apply to proceedings commenced on or after 3 April 2025 once they reach the enforcement stage.

For the enforcing party, the main novelty is that they lose their right to submit a higher bid after the close of the auction in which bidders have participated, as well as their right to request the award of the property in the event the auction has not drawn any bidders. Therefore, if they are interested in acquiring the property, they must join the auction as another bidder and be subject to the same rules (although, naturally, without the need to pay a deposit).

Therefore, enforcing parties need to familiarise themselves with the dynamics of the auction itself, because if they are interested in the asset, they cannot wait until the end of the auction to place a bid. This general dynamic of the auctions also undergoes important changes, mainly because the bids will now be secret. During the auction, the auction portal will not reveal the existence or non-existence of bids, nor their amount, so that the winning bidder and the other bidders will have to act "blind". At the end of the auction, the auction portal will only publish the amount of the highest bid or inform that the auction has drawn no bidders.

It is also very important to note that the possibility of making deferred payment proposals is abolished. The highest bidder must pay within 20 days of the close of the auction or lose his deposit (which is increased from 10% to 20% of the auction value, with a minimum of 1,000 €). If the highest bid is that of the enforcing party, the deadline to pay the difference between its bid and the debt is 10 days from the date on which the enforcing party received notification of the settlement. If this payment is not made on time, the enforcing party will be subject to the following consequences: (i) the auction will be declared “unsuccessful” (quiebra de la subasta in Spanish), (ii) the deposits paid by the other bidders to participate in the auction will be deducted from its claim and (iii) it will have to bear the costs of holding a new auction.

Finally, creditors should also note that the minimum award values have been slightly reduced. The auction will be approved if the highest bid is at least 50% of the auction value (previously, it had to be higher than 50%) or the full amount owed to the enforcing party for all concepts, provided that it covers 40% of the auction value. These minimums are more stricter in the case of foreclosure of the debtor's main residence, although for main residences the new percentages are the same as those established before the reform if the enforcing party wanted to request the award of the residential unit in the event that the auction has not drawn any bidders (70% or the amount owed, with a floor of 60%). In any case, any award below 70% (whether or not it refers to a main residence) will only come into play if the enforced party does not present a third party offering an amount equal to or higher than 60% of the auction value or, even lower, if it is sufficient to achieve full satisfaction of the claim of the enforcing party.

In relation to purchases of mortgage loan portfolios there are also changes which, in this case, would speed up the process because the right of the enforcing party and subsequent creditors participating in the auction to assign the award of the lot to a third party is now recognised, without the need for an express reservation of this right at the time of the bidding. Furthermore, the assignment no longer requires a court appearance, and it is sufficient to present a written document signed by the assignor and the assignee, attaching the documents attesting to their identification, powers and representation. If the assignment is for a price, the payment of the price must also be accredited.

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Measures are introduced to speed up evictions in some contexts

Organic Law 1/2025 modifies the Spanish Law on Criminal Proceedings to include the offences of housebreaking (section 202 of the Spanish Criminal Code) and unlawful appropriation of real estate assets (section 245 of the Spanish Criminal Code) in list of offences that can be subject to the so-called urgent proceedings. The offence of housebreaking refers to residential units while the offence of unlawful appropriation of real estate assets can refer to real estate assets other than residential units (e.g., real estate under construction, empty or unused). With this amendment, the way is open for the adoption of the precautionary measure of eviction by the duty court during its turn.

In relation to civil proceedings in which eviction of urban property is requested in a verbal trial, Organic Law 1/2025 amends the Spanish Law on Civil Proceedings to establish a period of five days to issue a judgment (as opposed to the previous ten days). In addition, the parties will be notified of the judgment, if necessary, by means of a hearing, on the nearest possible day within the five days following the judgment.

The dedication of residential units for tourist rental now requires express the condominium consent

In accordance with the amendment of Spanish Law 49/1960 of 21 July on Horizontal Property, owners who wish to allocate a residential unit for tourist rental must first obtain the express consent of the general assembly of freehold owners. However, the owner who was carrying out this activity before the change came into force under the sector-specific regulations may continue to do so under the conditions and terms established therein.The amendment also clarifies that the prohibition of tourist rentals is subject to a 3/5 majority of owners (not only the limitation or conditioning), as already interpreted by the Spanish Directorate General for Registerers and Notaries.

Other modifications

In addition to the above changes, Organic Law 1/2025 modifies other provisions of the Spanish Law on Civil Proceedings that are relevant to the real estate market. Among others: (i) certain formalities may be delegated by the court clerk to the court representative of the enforcing party (such as the request for the registration of seizures or the announcement of auctions); (ii) the possibility of suspending enforcement in order to resort to mediation or other appropriate means of dispute resolution is introduced; (iii) performance agreements approved by the court clerk are facilitated (and the suspension of enforcement in these scenarios); (iv) mortgage foreclosures of main residence are excluded from the material actions of the enforcement process that can be carried out by the Judicial Offices in the municipalities; and (v) it is clarified that in eviction proceedings that accumulate the action for claiming sums, the effects of res judicata affect both actions.

Finally, Organic Law 1/2025 includes some minor amendments to Spanish Law 4/2012, of 6 July, on timeshare contracts, the acquisition of long-term holiday products, resale and exchange contracts and tax regulations.

Entry into force

Although Organic Law 1/2025 establishes different dates of entry into force for its different sections, all the amendments described in this note will enter into force as of 3 April 2025.

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In view of the significant reforms introduced by Organic Law 1/2025, it is essential that real estate market operators review and adjust their strategies and procedures. In particular, they should familiarise themselves with the new dynamics of real estate auctions, measures to accelerate evictions and stricter requirements for tourist rentals.

Ashurst Madrid's Real Estate department is a leading expert in the legal regulation of the real estate sector and could assess any particular situation or portfolio to determine the impact of these changes on it and recommend the most appropriate course of action in each case.

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