Licence of First Occupation explained

You may have heard the term ‘Licence of First Occupation’ (LFO, for short) before and wonder what the fuss is all about. In Spain, an LFO is a big deal when you buy property, especially if it is off-plan.

An LFO is a crucial document on buying off-plan property that draws a line between what is legal and what is not, in general terms. Although an LFO does not (usually) apply to resale properties, the fact is buyers are requesting it too more and more, especially if a lender is involved.

In this short blog post we are going to give a brief definition on what an LFO is and why it is so important in a conveyance procedure.

Definition

A Licence of First Occupation is a certificate issued by a town hall which confirms that a newly-built property (off-plan) fully complies with all planning and building regulations and is fit to be used as a dwelling. It assures compliance with Health, Access, Safety, Planning and Construction laws, and that the property has been fully completed, with no outstanding works.

An LFO allows off-plan purchasers to dwell in a property legally.

A LFO is important mainly for four reasons:

It provides a check on the planning legality. An LFO means a developer has built the dwelling in accordance with the original town hall’s Building Licence as well as with all Planning laws, national and regional.

It is required by utility companies to have access to official supplies: water, electricity and gas. Spanish law requires the granting of an LFO to hook up the dwelling to the supply grid.

Lenders will ask for it if you require finance. Banks will also be asking you for an LFO. Even on reselling the property, your buyer may request a copy for his own lender. Not having an LFO means a property deal may fall through. Also, if an owner requires to raise finance against it for whatever reason (i.e. health issues) his lender will require he supplies a copy of the LFO.

Holiday lettings. If you are looking to buy as an investment (buy-to-let), an LFO is required by Regional Tourist Authorities to rent out your place short-term as a holiday accomodation. If your property hasn’t attained a first occupancy licence, you will not be able to legally rent out your house and may be landed with humongous fines if caught red-handed. The fines for non-compliance are six-figures in some regions of Spain.

Our advice:

Buying off-plan property: in general, we advise you not to complete on off-plan property if the developer has not attained a Licence of First Occupation.

Buying resale property: make sure you ask a seller for his copy of an LFO. Older properties, built before 1980, will normally not have an LFO available. LFO are demanded  by lenders to finance mortgage-backed loans.

Homes-abroad.com and our trusted lawyers will always make sure that all paperwork is in order and everything is done by the book.