Hi,
the answer to your question is: if you have doubts as to the legality of the property, do not take any risk; even if the vendor is able to give you a copy of the LFO, check the legality through a formal query at the town hall. The query should include these points:a.- that there are no files for irregularities. b.- that there are no outstanding obligations. c.- that the properties are more than 4 years old and that the actions to punish/reinstate the legality have expired. The bank surveyor will be satisfied with this certification.
For a broader explanation of the reasoning behind, please read below; the explanation has got three parts, as follows:
1.- LFO is a tricky concept and needs some clarification, therefore the first question would be explaining what is a LFO
2.- second question: what it is for?
3.- third: what happens in second hand properties?
And now the explanation:
1.- The town hall controls building activities in a two-fold process:
- at the beginning, before starting the building, through the "licencia de obras", also called planning permission or building permit.
- in the end, once the building is finished, through the "licencia de primera ocupación",LFO.
Originally the LFO was JUST the permission granted by the town hall in order to confirm that the building had been finished according to the project which was considered when the planning permission was granted. In other words, it was the official confirmation from the town hall saying "ok, there are no irregularities". Example: if a developer has got planning permission for 45 houses and does 46, then the 1st Occupancy permission is not granted, as the result is not coincident as the original project. the same happens if there are relevant differences in sizes and floors.
At the same time, the town hall also issued a permission called "cédula de habitabilidad", which was considered as the document saying that the building meets the necessary safety and inhabitancy standards. Please note that it is a different concept from the LFO.
Once the regional governments became competent in planning issues, some started issuing regulations MERGING these two concepts into one single permission, also called LFO. Consequently, in places as Andalucia the LFO comprises both the cedula de habitabilidad and the strictly speaking LFO. In Cataluña and other places, the LFO was just the LFO and the Cedula de Habitabilidad exists as an independent permissions. Therefore I said it was tricky.
2.- The LFO is then the official OK from the town hall to the building. The same person/company who had applied for the planning permission is also liable for getting the LFO.
However, the old laws before 2.000 did not currently consider necessary that these permissions had to be included in the deeds, as the deed in Spain was aimed at registration of the property rights in the land registry, AND THAT'S IT. Consequently, it was perfectly possible that the notary executed a sale deed for a property which had not obtained a LFO. The result was that you might have been purchasing a property with irregularities (a shit, but YOUR shit after all), and in principle the Notary had no liability. Of course, you had action against the Developer, but you might find yourself in trouble as the town hall would consider the new owner as liable for those obligations that the developer had "forgotten" to do. For instance, A purchases a property from Developer B. No mention is made of the LFO. Then town hall C claims that the Developer has not respected the obligations included in the original project and permission - "a street lamp should be installed every 6 ms" - and they go against the new owner, who has not done anything wrong. Not that the LFO is an absolute guarantee either, as the town halls usually incur in delays when recepting the public property works...
Anyway, the laws provided for the LFO as necessary document to contract the supplies. After all, it was logic to request proof of legality before granting water and electricity. However, the problem is that the old laws did not provide for an specific punishment if such rule was not respected. As a consequence, the general praxis was that the water and electricity were connected without first occupancy permission by the supply companies. In many cases, a mere copy of the application for the LFO was considered as sufficient in order to get water and electricity connected.
As you see, the essential value of the LFO was "disregarded" and devaluated as in the end you could perfectly purchase the property, sign the deeds, having them registered in the land registry and connecting the supplies. Now the regional and national laws have innovated and since 2001 the notaries have to attach a copy of the LFO to the deeds and the supply companies do not allow the connection unless this document is in place with brand new properties, there are specific fines to guarantee that this time the law is properly complied with.
3.- The town halls and the regional goverments are obliged to achieve compliance with laws on buildings and therefore they are supposed to control this activity. The reality is different, as in many cases many buildings are started, and/or finished without permission, or simply exceeding the scope of the original permission. Examples: A starts a building without planning permission, A starts with planning permission for two floors but in the end he adds a basement which is not in the original plans and it is probably impossible to legalize, and therefore he simply does not apply for LFO, A gets a minor works reform and then he demolishes the whole building and erects a new one, of course he does not bother in applying for LFO, A gets a permission for an storage room and builds a house instead, etc...there are so many things which can be done, that it is impossible to tell you all.
However, as some say, "time is a healer", and in legal terms the competent administrations have got 4 years since the works are COMPLETELY FINISHED in order to take action and punish the builder or whoever is involved there, including the new and innocent owner, through demolitions, fines, etc. You might have heard of this deadline...well, please note that THERE ARE HIGLY RELEVANT EXCEPTIONS TO CONSIDER: Green areas, protected land,...Each case is different and a proper investigation is highly advisable to avoid unpleasant surprises.
Consequently, there are many properties which were built or altered without permission but due to the lack of activity from the town hall and regional government, they cannot be attacked. Please note that it does not mean exactly that they are legal, they remain in a gray area called "fuera de ordenación", which means something like "out of order". There are particularities in this situations, such us some restrictions to add or improve building areas, lack of consideration of some values for expropiation purposes, but in general terms we can say that it is not going to be demolished and that it is "safe".
Consequently, in order to check the legality of a building whose LFO is either missing or unknown, it is highly advisable to forward a formal query at the town hall. The query should include these points:
a.- that there are no files for irregularities.
b.- that there are no outstanding obligations.
c.- that the properties are more than 4 years old and that the actions to punish/reinstate the legality have expired.