The Communidad Valencia Regional Government passed a law to speed urban development in 1994. Whilst the law was largely well intentioned it has become controversial for it's abuses by various Ayuntamientos and Developers over the years.
This law, the 'Ley Reguladora de la Actividad Urbanistica' (LRAU), set out to ensure developments were built with sufficient public services and facilities including sanitation, green spaces, roads, etc... However, subsequent abuses by unscrupulous property developers have resulted in some small landowners having their land expropriated and/or receiving huge bills for 'urbanising' their land, and as such this law was withdrawn and replaced with a similar law known as 'LUV Ley Urbanistica Valenciana' in 2006.
The law essentially enables property developers to request land be reclassified from rural to urban land without the need to seek the owners' permission. In itself this is not so unusual (Even in the UK anyone can apply for permission to build on someone elses land!). However, under this law, developers can then go on to compulsorily purchase land from existing owners after this reclassification takes place, at prices that seem to bear little resemblance to the market value.
As in the UK, a notice of intent must be published, but currently only 15 working days are given to present an alternative urbanisation plan or an objection. Since many landowners are often absent from Spain this can cause problems. Additionally, alternative plans put forward by residents are often refused because of what many see as collusion between big business and corrupt local Town Halls officials.
This law applies throughout the Region but are mostly applied along coastal strip where land is in short supply and values are at their highest. Other Regions Spain are thinking of copying this as a way of promoting development for cash strapped local governments.
Opposing the law
Campaigning by an organization called Abusos Urbanistico No and a group of British and Spanish Euro MPs has forced the Valencian government to reconsider. In January 2004, the Valencian minister for land and planning, promised to reform the law and strengthen the legal position of small landowners. The new law was presented before the Valencian parliament in 2004.
When considering buying a property you should discover the planning status, particularly the land classification. Under Spanish law, all land is classified as one of three categories: urban, developable, or non-urban.
In fact, if you want peace of mind the answer is to simply buy property on land that has already been classified as urban - then you are normally protected from any land grabs. However, land designated as urban is generally more expensive than land designated as non-urban.
Remember that property on urban or developable land that has not had infrastructure installed will attract costs at a later date; and property situated on non-urban land may well be affected by a future reclassification to development or urban land and this may constitute a land grab !
The Land Grab Law understandably attracts a lot of bad press from all quarters, but the actual number of times that it is put into practice is relatively small (however, of little consequence if it effects you and your property). The best course of action to take is to speak to your Lawyer about your concerns, find out the classification of the land, and speak to the Town hall about proposed planning in your area.