Chile’s Supreme Court: The new battleground for rural real estate development projects

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Photo: Ciper ChilePhoto: Ciper Chile
To reverse a previous defeat in the Court of Appeals, the real estate companies have appealed to the highest court with the argument that it should be the market that defines where new urban centers are generated, and the State that assumes the negative externalities of its business. Thus, today an extensive struggle is being waged involving private and public interests, the executive and judicial branches, municipalities and civil organizations. This column details the multiple instances that once again highlight the urgency of strengthening land use planning in Chile.
By Patricio Segura
Segura is a journalist living in the Aysen region, where he also active in several citizen socio-environmental organizations. 
The conflict between the State and Chilean real estate companies over the instructions issued in 2022 by the agriculture minister and the director of the Agriculture and Livestock Service (SAG) to ensure that land subdivisions on rural land are related to agriculture, and thus avoid new urban centers outside of planning, has escalated to the Supreme Court. The questioning of the companies points directly to Oficio Ordinario 637 of July 12, 2022 (Ministry of Agriculture) and Circular 475 of July 18, 2022 (SAG), which refer to the need to address the problem of the fragmentation of rural areas and the loss of biodiversity and agricultural land following a massive migration from the city to the countryside as a result of the climate crisis, the pandemic and new technologies (which allow many to work remotely).
Last April 28, the Court of Appeals of Santiago rejected multiple appeals for protection [1] (four writs in total) filed in August 2022 by a group of companies gathered under the figure of Inmobiliarias de Predios Rurales [2]. In their opinion, the acts of the public utilities in question violate both their right to property and the right to develop a lawful economic activity. Part of their justification indicates that "rural properties are lands that may or may not be used for agriculture, livestock or forestry activities that are located throughout Chile outside urban boundaries" and, therefore, they can be divided having to meet "only one requirement: the lots resulting from the division must have an area that is not less than half a hectare, that is, five thousand square meters".
But, in practice, this argument has produced multiple environmental, social and economic problems in a large part of the country, leaving to the free market the definition of where to generate new urban centers; while nature, the inhabitants of pre-existing communities and the State must assume the cost of the negative externalities of that private real estate business.
The reasoning of the judges, in turn, is based on the fact that the process of subdividing rural land requires the application of all the regulations in force, and not only DL 3,516, which regulates this type of procedure (i.e. environmental, indigenous, native forest, tourism, wetlands, urban development, etc.). For this purpose, the SAG is empowered, under the principle of coordination, to request information from the relevant agencies in such matters (it is, in fact, its obligation, according to the second part of Article 46 of Law 18,755, which covers the manner of carrying out changes in land use). The ruling states that if they proceed in the manner requested by the appellant, they would constitute a privileged group -the owners of rural properties that intend to subdivide them-, since only by having the status of such, they intend to obtain the certificate without any further procedure, and that the appellees ignore all the regulations in force.
Likewise, the judgment of last April establishes that both the SAG and the agriculture minister have the powers to issue the challenged instruments, and that the acts are duly motivated, so they are not arbitrary decisions but necessary for the justification of their resolutions (as stipulated in art. 41 of Law 19. 880 de Bases de los Procedimientos Administrativos): ... nor is there an undisputed right in favor of the appellant that this court should safeguard and adopt measures in its favor, since to date no final act has been issued in such administrative proceedings; and when these are issued, the appellant may exercise the remedies that the law recognizes.
Following the decision of the Court of Appeals, Parcelas Chile SpA, Mon Mapu SpA, Inmobiliaria Ranquilco Sur SpA and Inmobiliaria Terramar Sp appealed before the highest court [3]. Among their arguments is that the judges would have endorsed the thesis that a subdivision of rural land would entail a change in land use. In addition, the magistrates understood that the power of the services to issue the official notice and the respective circular were being questioned, in circumstances in which it would have been pointed out that the services could not regulate beyond their competences the process of new lots outside the urban limits. For Sofía Barrera, lawyer of the Chilean public interest environmental law firm FIMA, the ruling is relevant from a legal point of view, because it recognizes that all current regulations are applicable to subdivisions of rural properties or mega-lots, including environmental regulations, and not only the urban planning regulations, as has been suggested. In addition, this ruling sets an important precedent on the coordination that must exist between the various State agencies, always in the light of DL 3,516, environmental regulations and all applicable legislation in force.
This has not been the first time that the Supreme Court has ruled on the so-called mega-lots. On November 26, 2022, it sentenced the prohibition of land sales of the Punta Puertecillo project in the O'Higgins Region until it is submitted to the Environmental Impact Assessment System (SEIA) and the respective favorable qualification resolution is obtained [4]. It was the Rompientes Foundation, together with a group of neighbors of Puertecillo, which in February 2019 filed an appeal before the Second Environmental Court of Santiago [5], questioning that the Superintendence of the Environment (SMA) refused to sanction and force the entry of the project to the SEIA (owned by businessman José Gálmez). The unprecedented ruling was based on an inspection process in which the SMA, in addition to the subdivision of the land into 295 half-hectare lots, found that "concrete rainwater drainage works located under internal roads, habilitation of such roads, sewage treatment plants, sewage treatment plants, sewage treatment plants, and the construction of a water treatment plant" had been carried out, sewage treatment plants, channeling of electrical services, street lighting, taps, sidewalks and bicycle paths, in addition to houses under construction and others already completed, parking for a total of 100 vehicles and the projected construction of a restaurant and surf school.
However, the highest court is not the only place, beyond the press or the Congress, where the different views related to the lots on rural land for housing purposes and other than agriculture, which is strictly prohibited by law, with very specific exceptions.
In the Aysén Region, businessman Rodrigo Barrientos Rubio, representing Green Capital SpA, filed a complaint [6] at the end of March against the regional director of SAG, Valeria Carrasco Sáez, and the head of the Cochrane Office, Pedro Isamitt Ramírez, for the alleged crime of abuse against private individuals. This is based on the fact that the service had not yet issued the required subdivision certificate, and that it had even sent official letters to other public agencies to request information prior to its pronouncement, without having, in its opinion, the legal powers to do so. Subsequently (April 5) another action [7] was filed in Coyhaique against the same officials by the company Refugio Póllux SpA, represented by Gerardo Andrés Mayol Labbé. Both actions have the sponsorship of the law firm of former prosecutor Carlos Gajardo, while the officials have since the beginning of May the support of lawyer Paulo Gómez Canales, from the State Defense Council based in Aysén.
● Previously, on November 21 last year, the 7th Civil Court of Santiago determined the precautionary measure of "suspension of the effects of the challenged administrative acts" (both the office and the circular appealed for protection and mentioned at the beginning of this column), following a lawsuit filed in October 2022 [8] on behalf of the Asociación Gremial Chile Rural, an organization that was also created to protect the interests of real estate developers. In light of the fact that this court decision did not satisfy their interests, on March 30, a new request was filed to impose on both services "a clear and express prohibition to carry out acts that directly or indirectly imply the application of the challenged administrative acts". However, on April 19 of this year, Judge Lidia Hevia Larenas decided not to grant the request.
● But it is not only the state agencies that are at loggerheads with the real estate companies. In the Aysén region as well as in Los Lagos, Los Ríos and O'Higgins, at least, citizen organizations, municipalities and individuals have filed dozens of complaints with the Superintendency of the Environment and the environmental justice system in order to ensure that the General Environmental Bases Law and all applicable environmental and biodiversity protection regulations are respected. In spite of this, the thesis of the Environmental Evaluation Service (SEA, headed by Valentina Durán Medina) has recently become known. When asked by the SMA about the need to submit the lots to environmental evaluation on some grounds of Law 19,300, it has systematically issued reports stating that the act of subdividing property does not in itself constitute grounds for submitting to the SEIA, but that when it is a housing project it "would violate the urban planning regulations and article 2 of DL 3,516". According to Francisco Sanhueza, of the NGO Chile Ambiental:
"The SEA's ordinaries represent a step backwards in the matter, since there are resolutions of the SMA that have resolved sanctioning procedures against plots of land for circumvention of the SEIA, criteria that the environmental courts have ratified and that are currently firm. Therefore, we are concerned about the actions of the Executive Directorate of the SEA."
The professional has thus referred to what has already been sanctioned and confirmed by the SMA itself and the Third Environmental Court [9] regarding the Bahía Panguipulli Case (Inversiones Panguipulli SpA), in which the circumvention of the Environmental Impact Assessment System of a real estate project was accredited, applying the preventive and precautionary principles, considering that it should be environmentally assessed in view of its entire potential impact and not only the current one. In the process, the Environmental Superintendency applied a fine of 351 annual tax units ($260 million to date) and ordered the project's entry into the system. Previously, the same company had lost an appeal for protection against the Office of the Comptroller General of the Republic for a ruling it issued questioning thirteen housing construction permits issued by the Municipality of Panguipulli on rural land [10], which was rejected in May 2020. This ruling was endorsed by the Supreme Court in October 2020. And so, there are multiple other rulings and actions of the comptroller agency related to the matter.
Also in its latest pronouncements, the SEA has argued that, since these are projects outside the regulations, environmental legislation is not the appropriate management instrument to resolve the matter, but other legal bodies and public services are. Although the rationale sounds coherent, in practice it complicates the possibility of curbing the current environmental impacts of projects that, taking advantage of a certain regulatory confusion in this regard, will continue to affect biodiversity and the quality of life of the pre-existing populations that depend on it. In the end, the agencies in charge of applying the General Environmental Bases Law and its respective regulations do not have unified criteria, which only contributes to further complicate a way to face the real problem.
Not everyone is convinced by the project recently announced by the government to increase to 2 hectares the minimum for lots on non-urban land (today this is 0.5 hectares) and the figure of "rural residential areas". If approved, the new urban centers would continue to be a market decision (real estate) and not the result of a territorial planning in which all the actors participate, and with an integral view. If a stop is not put soon to what today constitutes an illegal advance of the real estate business, the problem may have surpassed all possible institutionalism and regulation by the time a consensus is reached on how to deal with it. 
Last May 15, 2023, the Chilean Congress approved the law that increases the penalties for economic crimes and attacks against the environment. Among them, they are considered as such any act "perpetrated in the exercise of a position, function or position in a company, or when it is for the economic or other benefit of a company", and expressly mentions the transgression "of articles 138 and 140 of decree No. 458, of 1975, of the Ministry of Housing and Urbanism, which approves the new General Law of Urbanism and Construction" (which specifically refer to lots in rural areas). Although the figure of imprisonment is already considered in the urban planning law, until now it only applied to private individuals (and not in their capacity as representatives of companies).  With the decision of the Congress, the range of criminal prosecution of such actions will be broadened. This is one more step forward in addressing the problem.
This column was originally published in Ciper Chile. 
[1] Causas 101.241-2022 (ver) / 100.856-2022 / 100.869-2022 / 101.080-2022, Corte de Apelaciones de Santiago.
[2] Firmaron estos escritos las sociedades Parcelas de Chile Spa, Mon Mapu Inmobiliaria Spa, Inmobiliaria Ranquilco Sur Spa, Inmobiliaria Terramar Spa, Hacienda Inmobiliaria SpA, Kutral Inversiones SpA, Inmobiliaria Ecoterra Spa e Inmobiliaria e Inversiones Penty. 
[3] Causa 100.856-2022, Corte de Apelaciones de Santiago.
[4] Causa 14.568-2021, Corte Suprema.
[5] Causa R 202-2019, Primer Tribunal Ambiental de Santiago.
[6] Causa RIT Ordinaria 53-2023, Juzgado de Letras y Garantía de Cochrane (ver).
[7] Causa RIT Ordinaria 860-2023, Juzgado de Garantía de Coyhaique (ver).
[8] Causa Rol C-11409-2022, 7º Juzgado Civil de Santiago (ver). Demanda presentada por los abogados Esteban Carmona Quintana y Felipe Riesco Eyzaguirre.
[9] Causa R-28-2020, Tercer Tribunal Ambiental de Valdivia.
[10] Éste fue rechazado en mayo de 2020 (Causa 789-2020, Corte de Apelaciones de Valdivia), sentencia refrendada por la Corte Suprema en octubre de 2020 (Causa 62948-2020, Corte Suprema).  

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