Concept

What is military authorisation for the purchase of property?

Military authorisation is governed by Law 8/1975 of 12 March on Areas and Installations of Interest to National Defence, and by its implementing Regulations, approved by Royal Decree 689/1978.

This legislation imposes certain restrictions on the acquisition of property by foreign nationals in areas designated as zones in which access to property ownership by foreigners is restricted, for reasons connected with safeguarding the interests of National Defence and the security and effectiveness of military organisations and installations within Spanish territory.

Within these areas, the acquisition of ownership and certain rights in rem over immovable property by foreign persons subject to the Law requires military authorisation. The requirement therefore has a direct impact on the transaction and is a condition affecting the validity of the acquisition itself.

However, not all foreign purchasers are subject to this requirement, nor do all properties located within these areas currently require authorisation.

Buyers

Which foreign purchasers require military authorisation?

Nationals of Member States of the European Union are exempt from the restrictions laid down in Law 8/1975. Accordingly, a German, French, Italian or other EU national is not required to apply for this authorisation by reason of his or her nationality.

The position is different for non-EU nationals. Where an acquisition falls within the regime established by Law 8/1975, the relevant military authorisation must be obtained.

This requirement now also applies to British nationals. Following the United Kingdom’s withdrawal from the European Union, British nationals ceased to benefit from the exemption applicable to EU nationals. The Directorate-General for Legal Certainty and Public Faith (Dirección General de Seguridad Jurídica y Fe Pública) confirmed this interpretation, inter alia, in its Resolution of 25 May 2023. This issue is also becoming increasingly relevant for purchasers from Saudi Arabia and other Gulf countries, whose presence in the Mallorca and Ibiza property markets has increased in recent years.

The Law also applies to Spanish companies where more than 50% of their share capital is held by non-EU natural or legal persons. It may likewise apply where their shareholding is below that threshold but those shareholders are nevertheless in a position of control or predominance enabling them to exercise decisive influence over the management of the company.

Balearic Islands

What is the position in Mallorca, Ibiza and the rest of the Balearic Islands?

This issue is particularly relevant in the Balearic Islands. The Regulations implementing Law 8/1975 expressly include all Spanish islands and islets within the zones in which access to property ownership by foreigners is restricted.

This does not, however, mean that a non-EU purchaser requires military authorisation to acquire any residential property situated in Mallorca or Ibiza.

At present, it is essential to establish the planning status of the land. The Directorate-General for Legal Certainty and Public Faith has confirmed that the authorisation requirement does not apply to certain acquisitions of land which is duly evidenced as having the status of urbanised land, in accordance with the criteria laid down by the applicable legislation.

This exclusion does not extend to rural or non-developable land. Accordingly, the acquisition of rural property in the Balearic Islands by a non-EU national may be subject to military authorisation.

Furthermore, the mere existence of a dwelling built on rural land does not, in itself, alter the planning classification of the land or automatically bring the acquisition within the exclusion applicable to urbanised land.

Procedure

How is military authorisation obtained?

The authorisation must be applied for before the acquisition of the property is completed, and the application process requires both the purchaser and the property concerned to be identified.

The application must be accompanied by the documentation required to establish the identity and circumstances of the purchaser, together with documentation enabling the property to be correctly identified and located.

Where the purchaser is a company, the relevant corporate documentation must also be provided in order to establish its shareholding structure and the persons exercising control over it.

For this reason, where a transaction is subject to military authorisation, the application process should be commenced sufficiently in advance of the proposed date for execution of the public deed of sale.

The Purchase

How does military authorisation affect the property purchase?

This is one of the most important practical considerations.

Where military authorisation is mandatory, Spanish notaries and Land Registrars must require evidence that it has been obtained before the public deed is executed or the acquisition is registered, respectively.

Accordingly, whether military authorisation is required should be established before entering into a deposit agreement (contrato de arras). If the purchaser becomes contractually bound to acquire the property on a specified date without having made provision for the need to obtain prior administrative authorisation, difficulties may arise in meeting the agreed contractual deadlines.

In such cases, it is advisable for the contract expressly to address this requirement and, where appropriate, for completion of the purchase to be made subject to a condition precedent requiring military authorisation to be obtained.

This protects the purchaser if the authorisation is not obtained within the stipulated period and prevents an administrative requirement that should have been identified at the outset from subsequently jeopardising the transaction.

Checklist

What should be checked before purchasing property in the Balearic Islands?

Where a non-EU national intends to purchase property in Mallorca, Ibiza or elsewhere in the Balearic Islands, it is particularly important to verify the purchaser’s nationality, the precise location of the property and the planning status of the land.

This review should be carried out at the outset of the transaction and is particularly important in the acquisition of rural property.

Establishing in advance whether military authorisation is required allows the application to be processed before completion and enables the deposit agreement (contrato de arras) and the timetable for the transaction to be structured appropriately.

Conclusion

Conclusion

Military authorisation continues to have practical implications for certain property transactions undertaken by non-EU purchasers in Spain, particularly in the Balearic Islands.

In transactions involving rural property in Mallorca or Ibiza, establishing whether this requirement applies before entering into a deposit agreement (contrato de arras) can be crucial in avoiding the loss of the deposit paid, delays or subsequent difficulties in completing the purchase.