Scope of the Valuation Methods in Spain (I)

Scope of the Different Methods for the Valuation of Properties in Spain (I)

R. D. 1020/1993 and R. D. 1492/2011

The primary purpose of the Spanish Royal Decree 1020/1993, about Valuation Rules and Value Frame for Land and Construction, is the determination of the Cadastral Value of urban properties, whose data constitute the Spanish Urban Real Estate Cadastre. Moreover, the Spanish Law 58/2003, about General Taxes, states that the value of the real estate affected by tax obligations can be checked by the Administration using the values ​​established by the Real Estate Cadastre, by applying the multiplier coefficients determined by competent tax authorities, as established by regulation. For all the above, the technical standards of valuation expressed in Royal Decree 1020/1993 apply for the following purposes:

• determination of the Cadastral Value of any urban real estate
• determination of the tax base in the tax about Property Transfer and Documented Legal Acts
• liquidation of the taxable events of the tax about Successions and Donations.

Spanish Royal Decree 1492/2011

The Spanish Royal Decree 1492/2011, about the Valuation Rules of the Spanish Land Act, applies to the valuation of land, facilities, buildings and constructions, and of rights made in connection therewith, whenever the final purpose is one of the following:

• checking the sharing of benefits and burdens, or other operations required by the implementation of the territorial and urban planning in which the valuation delimits the financial content of powers or duties associated with the right to property, in the absence of agreement among all affected subjects
• determination of fair compensations in expropriations, regardless of the purpose and the laws governing the process
• determination of the amount payable to the owner in cases of forced sale or substitution
• determination of the financial guarantee of a Public Administration.

Illegal Building Works in Andalusia

Rules for the Valuation of Properties According ECO/805/2003 (V)

Valuation Rules According ECO/805/2003 (V)

Statement of the Values. Checks. Land Area. Mortgage Value. Intermediate Valuation.

When valuing a Real Estate in Spain, the values should be stated in a report and, where appropriate, a Certificate of Valuation.

Minimum Checks

The valuation of a property requires to perform all necessary checks to know the characteristics and the actual condition. Among the checks that should be performed, the following ones should always be included:

• physical identification of the property, through its location and visual inspection, checking if its floor area and other characteristics match the description
• identifying all visible servitudes
• conservation status or condition
• occupancy status
• use or exploitation intended for the property
• public protection regime, if it’s about housing
• architectural heritage protection regime
• agreement of the property with all applicable urban planning regulations
• where applicable, availability of right to the valued urban use.

Land Area

In order to calculate the value of a land or a country estate, the area to consider should be checked by the appraiser. If this testing is not feasible, the appraiser should use the lowest value between the Registry Area and the Cadastral Area.

Definition of Mortgage Value (VH)

The Mortgage Value or VH (‘Valor Hipotecario’, in Spanish) is defined as the value of the property as determined by a prudent valuation, taking into account all market conditions, the use at the time of the valuation and any possible alternative uses.

Definition of Intermediate Valuation

The Intermediate Valuation of a construction work is any of the valuations that are issued after the initial valuation and during the construction or rehabilitation process of a building or an element of a building. The Intermediate Valuation reflects the progress of the works and the percentage of work performed, but its issue does not involve the updating of the values ​​contained in the initial valuation.

Value Module M, Coefficient RM and Amendment of the Statement of Values

Module M, Coefficient RM and Statement of Values

Cadastral Value, Market Value and Individualized Value

Spanish Law 39/1998, regulating local treasuries, states that the Cadastral Value of the real property must be determined by reference to its Market Value. In order to give effect to that reference, the Cadastral Valuation procedure uses two main tools:

• value Module M, which aims to capture the variations in the Market Value of the urban real estate, according to market analysis made by the General Directorate of Spanish Cadastre, by fixing the value of the real estate product and by serving as a basis for the values of the land and the construction
• coefficient of Market Relationship (RM), which acts on the individualized valuation of the goods resulting from the Statement of Values, in order to ensure uniform reference to Market Values.

A change in the value of the module M does not alter the relationship between Cadastral Values and Market Values.

Individualized Value Resulting from the Statement of Values

The individualized value resulting from the Statement of Values is obtained by adding the value of the land in the plot and the replacement value of the building. Both values and their sum must be corrected in accordance with the provisions of the Valuation Technical Regulations. If the building is completed, the result must also receive the application of a coefficient relating the costs and benefits of the development.

Application of the Coefficient RM

The application of the coefficient of Market Relationship (RM) requires that the Statement of Values affects all the urban properties of the municipality. The coefficient is applicable to the individualized values resulting from the amendment procedures of the Statement.

Amendment of the Statement of Values

The amendment of a Statement of Values requires to adopt:

• the criteria and guidelines for the National Coordination of Values under which the Statement of Values was approved
• the homogeneous economic areas, modules, bands of coefficients and weightings contained in the Statement of Values
• the conversion factors that may be applicable to the Cadastral Values resulting from the Statement of Values.

The amendment process requires all the documents needed to define the scope of the amendment. It must state the new values for the streets or street sections. Where appropriate, it must establish the new delimitation of urban land. Every amendment to a State of Values should be justified by analysis and conclusions contained in market studies on the affected territory.

Architect Daniel Trujillano
http://www.arquitectotrujillano.com/valuation/home.html
Valuation Reports for Properties in Spain