A real life example regarding building licences.
When you are undertaking a refurbishment of a property in Spain, even small changes such as replacing a bathroom, or changing your flooring requires a licence from the Town Hall and taxes to be paid. Building work undertaken without the correct licences in place can result in fines, so it is important to secure the licences and make sure you have the right one, for the level of work you will be doing.
A Luxurious Villa with a lack of Technical Direction.
We recently had an assignment where we were called in to provide a chartered surveyor report on a delayed villa construction. This is a great example of the consequences that can be felt if you declare your project as a minor rather than a major works.
The buyer of a large villa, which was in the process of being refurbished, was finalising the purchase and called us in to clarify the financial status of the project and get a realistic idea of how long it would be until was finished.
During our investigations we discovered that the substantial refurbishment works had been licensed as an “obra menor” (Minor Works) instead of Major Works, despite the costs being upwards of a million Euros.
Being as it was licensed as a minor works, his project did not benefit from anyone to offer technical direction of works or independent supervision. Without this, the monthly billing was not processed in the Monthly Certifications, thereby making an accurate balance of accounts very challenging to obtain, without the provision of an accurate Statement of Account.
Even more alarmingly, the lack of any technical direction meant that the works were done without independent quality controls. Therefore, we were unable to establish whether any tests had been done on the cement, stability and damp coursing. This could be significant in the future, as there were no retentions held back for quality control purposes as it was deemed minor. For major works, it’s mandatory for the constructor to not charge 5% of the works to serve as a quality retention. This is normally held for a full year before being released, to cover any potential damages or faults which are experienced within the first year of the project.
An additional point, and relative to the fact that the works are considered by the developer as “minor”, is that there appears to be no OCT Company involved. This OCT Company emits quality certifications for the stability of the structure, roofing and façade and damp coursing – thus enabling a Decennial Insurance policy to be raised. If the property is to be registered in its new state this may well be a requirement and needs to be clarified from a legal standpoint.
The developer appeared to have a “friendly arrangement” with the builder and we were told this was the reason that much of the formal processes and paperwork were not available. Whilst this could be acceptable, on occasion, if the professionals involved are thorough, this way of “informal” working can put the developer or owner at risk. As if there is a problem in the future, there will be a limited paper trail on which to base a valid claim, particularly if the product is to be sold on to an end-user.
Key certifications will be missed, insurances not activated, guarantees of a nebulous nature and potential problems and fines from the Town Hall or Land Registry could just be some of the issues faced in the future, not to mention the lack of comeback for poorly executed works resulting in problems such as cracking, subsidence or damp issues.
In our opinion, trying to save money in this way, opens you up to a lot of potential problems and headaches and the Major Licence is advised to offer protection and certifications throughout the building process and beyond.
What is the difference between “Obras Menores” and “Obras Mayores”?
There are two classifications of building works in Spain, depending on the size and value of the project, and each one needs a difference licence.
Obras menores (minor works) are small projects such as refurbishments that do not affect the volume of the property, elevations or existing parameters. Largely, this will be for internal building works, such as putting in new kitchens or bathrooms, changing the internal layout by moving walls or dividing up larger spaces. The maximum budget for these works is 100,000€ and a permit is required from the Town Hall.
If you are spending more, or changing the size or height of the property, you will move into the obra mayor category and require a “Major works licence”. This requires technical plans and an application to the Town Hall for a licence. Costs for these licences is about 3-5% of the declared works.
The major differences between the major and minor licenses are:
- A building project that costs over 100,000€
- Works that affect the structure of the property, including facades or roofs, as opposed to merely changing tiles in the interior or redistributing internal dividing walls.
If your project falls into the major works category you must apply for a Licence and supply sufficient technical documentation, prepared by an architect or technical architect. While this does add expense and time, you will benefit from someone who, as part of his assignment will “direct the works” and vouch for the quality of the works.
Whereas, if you have applied for a Minor works licence, it is more of a formality and a way of notifying the Town Hall and paying the necessary fees and taxes. This means that responsibility for the quality of the works will rest on your contractor and you will be required to check the quality, without benefitting from a professional “sign off”.
Depending on the complexity of the works within a Major works licence, it may be necessary to have a quality control agency and even an outside Certification Agency, so that the necessary certifications are produced to register the revised property at a later stage.
To apply for a Building Licence under a Major Works scenario cost about 4.5% of the declared cost- which can be considerably more than that for a mere minor works construction licence.
It may seem tempting to try to save costs at this stage by just applying for a minor licence, but we wouldn’t recommend it. The consequences are that if you apply for a Minor to save costs instead of a Major these works do not benefit from having had a technical specification and direction of the works involved and therefore of any independent and professional supervision of the works. This can leave you in a vulnerable position if anything goes wrong, as you’ve seen from our example.