Property development projects: land, licences and planning

Key points:

• The viability of a project depends on a prior legal analysis of the land (planning due diligence).
• The process of obtaining building and first occupancy licences is complex and can suffer significant delays.
• Contracts with architects, builders, and buyers must clearly define responsibilities to avoid litigation.
• Failure to comply with planning regulations can lead to financial penalties and even demolition orders.

The importance of the land: beyond just location

The first phase of any property project is the acquisition of the land. However, the value of the land lies not only in its location or size, but in its planning classification. A superficial analysis can lead to acquiring a plot where the intended construction is unfeasible.

Before any investment, it is essential to conduct planning due diligence. This legal audit process verifies the actual status of the property in the Registro de la Propiedad (Land Registry), the Catastro (Cadastre) and, crucially, the municipal planning scheme. It checks the land classification (urban, developable, or non-developable), permitted uses, buildable area, and any potential encumbrances or easements.

A mistake at this stage can mean the total loss of the investment. For this reason, the lawyers at the ARROWS International network in Spain conduct these reports to ensure the land is suitable for the project before you commit your capital.

The labyrinth of licences and permits

Once the land is secured, the administrative journey to obtain the necessary permits begins. Jurisdiction in planning matters lies mainly with the Ayuntamientos (local councils), which leads to a wide variety of criteria and timeframes.

The key authorisation is the building licence, which allows construction to begin. To apply for it, a technical project (basic and execution) drawn up by an architect must be submitted, which must comply with both national regulations, such as the Código Técnico de la Edificación (Technical Building Code), and municipal ordinances.

Subsequently, once the work is completed, it is essential to obtain the licencia de primera ocupación (LPO) (first occupancy licence). This document certifies that the building has been constructed in accordance with the approved project and meets the requirements for its use. Without the LPO, it is not possible to connect basic utilities or register the sale of the properties in the Registry.

Frequently asked questions about the land phase

1. What is the difference between consolidated and unconsolidated urban land? Consolidated urban land already has all services (roads, sewerage, lighting) and does not require additional urban development actions to be built on. Unconsolidated land, although urban, requires prior urbanisation works, which implies additional costs and time for the developer.

2. Can you build on rustic (non-developable) land? As a general rule, no. The law reserves this type of land for agricultural, livestock, or forestry uses. There are very specific exceptions, such as buildings linked to agricultural operations or buildings of public interest, but the process is complex and restrictive.

Contractual planning: architects, builders, and buyers

A development project involves multiple parties. The relationship between them must be regulated by robust contracts that clearly define obligations, deadlines, and responsibilities. Contracts with the technical team (architects, building engineers) and with the construction company are fundamental.

The Ley de Ordenación de la Edificación (LOE) of 1999 (Building Management Act) establishes a liability regime for the various parties involved in the construction process. For example, it defines the well-known ten-year guarantee, a compulsory insurance policy that the developer must take out to cover material damage affecting the building's structure for ten years.

Poor contractual drafting can leave the developer unprotected against breaches by the builder, construction defects, or claims from future buyers. Legal advice at this stage is key to negotiating and closing agreements that protect your position.

Potential problems	How ARROWS can help (office@arws.eu)
Hidden defects in the land: Impossibility of building, unforeseen encumbrances, or easements that limit the project.	Planning due diligence: We investigate the registry, the cadastre, and the municipal planning scheme to confirm the project's viability.
Denial of licences: The submitted project does not comply with technical regulations or municipal ordinances.	Review and advice: We collaborate with your technical team to ensure the documentation complies with regulations before submission.
Penalties for non-compliance: Hefty fines, a halt to the works, or demolition orders for building without a licence or in breach of it.	Defence and representation: We defend your interests in sanctioning proceedings and negotiate with the Administration to regularise the situation.
Disputes with the builder: Delays, cost overruns, or execution defects not covered in the contract.	Contract drafting and negotiation: We prepare works contracts that protect your interests, define penalties, and establish resolution mechanisms.
Blocked sales: Inability to obtain the first occupancy licence, which prevents the handover and sale of the properties.	Administrative management: We actively monitor the file and manage communication with the local council to expedite the obtaining of the LPO.

Final summary

A property development project is a high-risk operation of great legal complexity. The viability of your investment depends on correct planning on three fronts: land analysis, licence management, and contract formalisation. A failure in any of these stages can cause delays of years, unaffordable cost overruns, or the complete paralysis of the project.

To secure your investment and successfully navigate the complex Spanish planning framework, it is essential to have specialist advice from the very beginning. The team of lawyers at the ARROWS International network in Spain can guide you through each phase of the project and protect your interests. Contact us at office@arws.eu to discuss your case.

Frequently asked questions about property development projects

1. How long does it take to obtain a building licence in Spain? There is no fixed timeframe. It depends heavily on the local council and the complexity of the project. Although the law sets theoretical deadlines, in practice they can range from a few months in efficient municipalities to over two years in large cities.

2. What is the ten-year guarantee and who pays for it? It is a compulsory insurance policy that covers structural damage to the building for ten years. The Ley de Ordenación de la Edificación (LOE) obliges the developer to take it out as a requirement to register the new build and sell the properties.

3. Who is liable if defects appear after buying a new home? The LOE establishes a system of cascading liability. Within the scope and time limits of the LOE, the developer is jointly and severally liable with the other building agents to purchasers for covered material damage. In turn, depending on the type of defect, claims can be made against the builder (for execution defects), the architect (for design defects), or other parties for periods of one, three, or ten years.

4. Can I start the works while the licence is being processed? No. Starting construction without the required building licence is a very serious planning infringement. It entails heavy fines, an immediate stop-work order and, in the worst-case scenario, the obligation to demolish what has been built.

5. What happens if the local council does not respond to my licence application within the legal timeframe? This results in what is known as "administrative silence". Traditionally, in planning, silence is usually negative (the licence is deemed to be denied), which forces an appeal against the deemed decision. However, the regulations are complex and their application varies, so it is essential to analyse each specific case.

6. What is the Impuesto sobre Construcciones, Instalaciones y Obras (ICIO) (Tax on Constructions, Installations and Works)? This is a municipal tax that must be paid to the local council for undertaking any construction. Its amount is a percentage (set by each municipality) of the material execution cost of the work. It is usually settled at the start of construction.

Disclaimer

Official sources reviewed

BOE consolidated legislation cited, the Spanish Tax Agency and, depending on the subject, the College of Registrars and applicable regional and municipal rules. Editorial review completed on 5 October 2026.

Disclaimer: The information contained in this article is for general informational purposes only and serves as basic guidance on the subject according to the legal situation in 2026. Although we strive for the utmost accuracy of the content, regulations and their interpretation evolve over time. ARROWS advokátní kancelář, head of the ARROWS International network, is registered with the Czech Bar Association (its supervisory body) and holds professional indemnity insurance with a limit of CZK 400,000,000. To verify the current regulations and their application to your specific situation, please contact the ARROWS International network in Spain directly (office@arws.eu). We do not assume liability for damages arising from the use of the information in this article without a prior individual legal consultation.