Building permits and municipal approval risk

Most building works require municipal authorisation. The type of authorisation, the time it takes and its robustness against challenge are central to the risk profile of any development or renovation.

Forms of authorisation

Depending on the works and the applicable regional and municipal rules, authorisation may take the form of a licence granted by the municipality or a prior communication (comunicación previa) that allows minor works to start subject to later control. On completion, buildings typically need authorisation for first occupation or use before they can be lawfully occupied or connected to services.

Sources of risk

• Delay: processing times vary significantly between municipalities.
• Conditions: licences may impose requirements that affect design and cost.
• Challenge: licences can be challenged by third parties or reviewed by the administration itself.
• Underlying plan: a licence granted under a planning instrument later annulled may be affected.
• Unlicensed works: past works without licence can complicate sales, financing and registration.

Assessing approval status

Investors should review the licence file itself, not just the decision, including technical reports, conditions and any objections lodged. Confirming the expiry periods for starting and completing works is also important, as licences can lapse.

Hypothetical scenario: the example below is invented for illustration. It does not describe any real property, project, company or person. A buyer is offered a renovated apartment at a premium. The renovation added a terrace enclosure without licence. The buyer requests legalisation or a price reduction and a seller warranty covering any future enforcement.