European rulings point to restrictions in the Balearics being most unlikely. | Marcelo Sastre


The Madrid law firm Uría Menéndez was commissioned by the Proinba association of property developers to draft the report on a proposed ban on non-resident home-buying in the Balearics and which was registered with the Balearic parliament ahead of Tuesday's debate on the subject.

The report drew attention to cases where the European courts rejected legislation along these lines in three EU countries - Austria, Denmark and Hungary - and which confirmed that the restrictions on the purchase and sale of property in member states were "restrictions on the freedom of establishment and the free movement of capital", two rights in the EU Treaty.

The first case was in 1993. Regional law in the Austrian Tyrol prohibited the purchase of land to build a second home. This and other aspects of the law were considered to be contrary to the free movement of capital on the grounds of discriminatory application.

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There were two more cases in Austria, one in 2002 and the other in 2003.

A law in Salzburg restricted the acquisition of land to establish a secondary residence. The purchaser had to prove that this would be a first residence. The law was annulled and was followed up in 2003 when Austrian regulations again sought to control and restrict second homes. The European Court of Justice reiterated its decision and rejected these regulations.

In Denmark in 2007, national law required purchasers of certain rural properties to establish permanent residence in these properties. The European Court considered that the imposition of a residence obligation as a condition for acquiring property was a restriction on the free movement of capital. Like any restriction, it could only be justified if it was necessary and proportional; and it was deemed not to have been.

The final case was in Hungary in 2018. A national regulation prohibited usufruct rights on agricultural land unless the rights were for the benefit of a close relative of the owner of the property. The European Court decided that this was not appropriate to European law as it was contrary to the free movement of capital by non-Hungarian nationals or non-Hungarian residents.