A client asked us to carry out a building survey of a property. It’s a lovely place, solidly built more than 20 years ago, with appropriate permissions letter from the Ayuntamiento (Town Hall) and a recent confirmation of no infracciones (No active file against it). It has a pool and fruit orchard, views of mountains and sea, but only 10 mins drive from the nearby town. The purchase price appeared good and there didn’t appear to be anything physically wrong with the building. “Go for it”, was our advice.

Until he instructed the mortgage tasador. The valuation came back at 70% of the agreed price.

“Why?”, the tasador was asked.

“Because it was not within an urban zone. Our valuing regulations state we must only value properties there on the basis of the value of the non-urban land, i.e. agricultural use, plus the build costs, with no comparison to the market value of similar houses.”

“But it has all the permissions, and the town hall has no problems with it”.

Finca in Mallorca

“Ah, but if it’s burnt down or destroyed in any way, you won’t get permission to rebuild as it is now illegal to build that type of house in that area, though it wasn’t when it was originally built.”

The principle is that an illegal building that should not be there, cannot be reconstructed. The laws of building in Rustic areas have become stricter over time and so, whilst this one was legal, its legality is now conditional.

The same appears to apply to buildings that have achieved a DAFO, Declaración de Asimilados a Fuera de Ordenación, which are being obtained by many of the tens of thousands of illegal campo buildings around Andalucía, currently being Regularised to prevent demolition and/or fines. Whilst under a DAFO, the owner is permitted to, ‘carry out repair and preservation work required for the maintenance of the safety, habitability and sanitation of the building’, they are not allowed to expand or rebuild. In the event of a partial problem, there should certainly be scope for discussion on the extent of reinstatement work permitted.

An insurance broker consulted was confident he could arrange cover, but then, the client would be left with an unbuildable site and only a cash payment for his loss, based upon rebuild costs and not market value.

And that presumably is the logic behind why the tasador gives a site plus building cost valuation.

Many buyers are prepared to take that risk, and that’s why the market value is above the building cost value. Banks, being the cautious people they are, do not take the risk and so demand a cautious valuation.