Expropriation in Chile: procedure, deadlines and how to challenge the amount

Short answer: in an expropriation you do not negotiate whether they take the land. What is open to argument is how much they pay, and there are two deadlines you cannot miss. A panel of three valuers appointed by the expropriating body itself sets a provisional amount. Thirty days run from publication of the order in the Diario Oficial to challenge the expropriation itself, and from notification of the order until the thirtieth day after physical possession is taken to challenge the amount. If neither you nor the expropriating body challenges within that second deadline, the law treats the provisional compensation set by the panel of valuers as final and agreed.

What an expropriation is, and what the Constitution requires

An expropriation is the forced deprivation of ownership of an asset, decided by the State, with no option for the owner to refuse. It is not a sale. You do not decide whether to transfer: there is an act of authority that is issued, published and enforced. The only thing you can agree with the expropriating body, by public deed, is the amount of compensation and how it is paid.

The Constitution does not prohibit expropriation, but it imposes three conditions. The first is that there must be a law, general or special, authorising the expropriation on grounds of public utility or national interest, and those grounds are determined by the legislature. No one may expropriate on administrative say so alone.

The second is that the expropriated owner may always challenge the legality of the expropriation order before the ordinary courts. Not before the body that expropriated, and not through an internal administrative review: before a judge.

The third is the one that decides the money, and it is worth reading slowly. The owner is entitled to compensation for the patrimonial damage actually caused, set by agreement or by court judgment. Failing agreement, that compensation is paid in cash in a single payment, and physical possession may only be taken once the full amount has been paid.

The rule that fleshes all of this out is Decree Law 2.186 of 1978, the Expropriation Procedure Act. It is a short statute, with short and peremptory deadlines, and many rights are lost by miscounting one of them.

Who can expropriate, and under which law

Expropriation is carried out by what the statute calls the expropriating body, and it is not always the same one. The Ministry of Public Works is one of the most frequent, because of roads, interchanges and irrigation works. Housing and urban development services also expropriate, as do municipalities when they carry out works contemplated in the local plan, and other public services authorised by their own statute.

What matters is not the name of the body but the law it invokes. The expropriation order must state the law that authorises the expropriation and the legal grounds relied on. If that law does not exist, if it does not cover the asset affected, or if the grounds invoked do not apply, the statute provides an express ground of challenge, and it is one of the few that can set the whole expropriation aside.

The procedure, step by step

This is the real order of the stages. It is worth keeping in view, because the deadlines that matter do not run from the day you find out: they run from specific points in the procedure.

1. A panel of valuers sets the provisional amount

Every expropriation procedure begins with the appointment of a three member panel charged with determining the provisional amount of the compensation. That panel is appointed by the expropriating body, choosing from a list of valuers approved by decree of the Ministry of Finance for the region.

The statute builds in two safeguards worth knowing about. Professionals belonging to the expropriating body may not sit on the panel, and no more than one member may belong to the State administration. The valuers accept the appointment within three days, the panel convenes by the tenth day and has thirty days to issue its report, extendable by a further thirty.

This is the starting point for everything that follows, and also the source of many disputes: the amount is set by a panel appointed by the party doing the expropriating, not by you, although its members must come from the official list of valuers and cannot be professionals from the expropriating body.

2. The expropriation order is issued

With the report in hand, the body issues the expropriation order, which is a supreme decree or a resolution depending on the organisation. That order identifies the asset, states the law authorising the expropriation, the grounds relied on, and the provisional amount of compensation together with the terms of payment.

If more than thirty days pass between the date of the panel's report and the date the expropriation order is notified, the provisional amount is adjusted for the change in the consumer price index between the month before the report and the month before the order. This is not a concession, it is an express rule of the statute, and it is worth checking that it has been applied.

3. An extract is published in the Diario Oficial

An extract of the expropriation order is published once in the Diario Oficial, in the editions of the 1st or the 15th of the month, within ninety days of the order. It is also published in a newspaper of the province or region where the asset is located.

That publication date is the one to write down, because the thirty days to challenge the expropriation itself run from it. It is a short deadline and easy to lose, because it runs even if you have not yet learnt of the expropriation.

4. The money is deposited with the court

Absent a direct agreement, the provisional compensation is deposited in full to the order of the competent court into its bank account, because without an agreement it must be paid in cash in a single payment. The money is not handed to the owner directly: it sits at the judge's disposal.

Once that amount is deposited something fundamental happens that often goes unnoticed. Title to the asset vests by operation of law in the expropriating body, as original title, and the rights in rem affecting it are extinguished by operation of law, with the exception of statutory easements, along with leases, loans for use and other titles of mere tenancy, and also the restrictions, attachments and injunctions burdening the asset. The Registrar cancels those entries of its own motion.

The compensation takes the place of the asset for all legal purposes. Anyone who held a right over the land now asserts it over the money, with the same priority they had.

5. Physical possession is taken

Once the amount is deposited and the publications made, the body may ask the court for authorisation to take physical possession of the asset. If the owner resists, the statute requires the court to grant the assistance of the police without further formality.

There is one deadline that works in the owner's favour: the expropriating body must apply to the court for physical possession within sixty days of publication in the Diario Oficial. If it fails to do so, the owner may ask the court to declare the expropriation order of no effect, but must do so within one year of the end of those sixty days.

Until the day possession is taken, the risk in the asset remains with the owner, and so do the fruits or produce of working it. If there is a harvest pending, the statute allows a request for delivery to be deferred for a reasonable period to gather it in, provided the expropriating body does not object.

The deadlines you cannot miss

This is the table worth printing and keeping in the file. The deadlines in the statute are peremptory, and the rule that governs them provides that periods of days established in that law are suspended on public holidays, so they are not simply calendar days.

The thirty day deadline from publication and the deadline to challenge the amount run in parallel and should not be confused. The first is for attacking the expropriation or asking for it to be made total. The second is for arguing over how much they pay, and it is longer.

What is compensated, and what is not

The constitutional standard is the patrimonial damage actually caused. Each of those words rules something out.

Patrimonial excludes non pecuniary loss. Attachment to the house you were born in, the upheaval, the trouble of moving, none of that falls within this compensation however real it may be.

Actually caused excludes the hypothetical. There is no compensation for the increase in value the land would have had in a scenario that did not happen, nor for the project you meant to build and never started.

What does fall within it is the value of the asset taken and the real, provable loss the expropriation inflicts on the owner's estate, provided it is a direct and immediate consequence of the expropriation. And that is where the argument lies, because the panel's report may simply value the land by the square metre, without measuring what the works do to the rest of the property.

There are typical situations in which the provisional amount may fall short. A property cut in two by the alignment, losing its internal connection. A strip that takes precisely the access to the public road and leaves the rest landlocked, a problem that then has to be solved through a right of way easement. A shed, a well or a plantation that falls inside the strip and that the valuation recorded as bare land. A real area on the ground that does not match the registered one, so the wrong surface is being valued.

How the amount is challenged

The challenge to the amount is filed before the civil court of first instance with jurisdiction over the place where the asset is located. Where the expropriating party is the Fisco (the State treasury), as in expropriations by the Ministry of Public Works, the competent court is the civil court of first instance in the city that is the seat of the relevant Court of Appeal. The challenge can be brought by the owner or by the expropriating body itself, which may equally argue that the provisional amount is too high.

In the application the claimant states the amount at which it assesses the compensation and appoints a valuer to assess it. The other side has a peremptory period of fifteen days from service to put its case and appoint its own valuer. There is an eight day evidentiary period, the valuers report within the period the judge sets, and judgment is given within ten days of the last period expiring. Any appeal is governed by the rules on interlocutory matters.

The outcome is settled simply. If the judgment sets the final compensation higher than the provisional amount, the provisional amount is credited against it with the appropriate adjustment. If it sets it lower, the owner must return the excess received, likewise adjusted.

That last point calls for judgment before filing. Challenging is not risk free: the court may set an amount below the provisional one and order repayment. Which is why the decision is taken after a valuation, not before.

If nobody challenges, the price is fixed. The statute is explicit: the provisional compensation is treated as final and agreed if neither the expropriating body nor the owner brings a challenge in time. Silence does not leave the door open for later. It closes it.

What you need in order to get paid

Here is a problem that often delays payment. For the compensation to be paid in full, the owner must prove title and be up to date with property tax.

These are two requirements proved before the court. A properly registered property with no debts meets them relatively quickly, while a property with a tangled history can take months or years to satisfy them. These are the most common situations.

• Title has never been regularised. The land has been occupied for decades but was never registered in the name of the person holding it, or the entry is still in a predecessor's name. Until that is resolved, there is nobody to pay. That is the route of regularisation of title.
• There is an unadministered estate. The registered owner died and nobody obtained the posesión efectiva. The heirs cannot prove title until the special registration has been completed.
• The property is held in common or was bought as shares and rights. Nobody owns a defined piece of the ground, only a share in the whole, with the consequences we set out in the guide to shares and rights.
• The registered area does not match the real one. The strip taken is measured on the ground, but title is proved on paper. Where the two diverge, what is needed is a rectification of area and boundaries.
• There is unpaid property tax. The requirement is to be up to date, and an old debt may be wholly or partly time barred. We deal with that in the guide to the limitation period on property tax.

The practical conclusion is uncomfortable but useful: if you know your area lies on the route of a public works project, the time to put the title in order is before the decree arrives, not after. Afterwards, the deadline to challenge the amount runs on while you sort out the estate.

What if I am still paying off the mortgage?

It is one of the first questions people ask when they hear the news: the house or the land is being expropriated, but the loan with the bank is still running. Expropriation does not wipe out the debt. What changes is the security. Once the compensation is paid or deposited, the mortgage is extinguished and the Registrar cancels it, but the bank does not lose its right: the compensation stands in place of the property for all legal purposes, and the bank asserts its claim over that money with the same priority it had over the property.

The procedure for distributing the compensation is set out in Articles 23 to 31 of Decree Law 2,186, and it works like this:

1. Notices. Once the compensation is deposited with the court, the judge orders two notices to be published at the expropriating body's expense.
2. Twenty days for creditors. From the last notice, holders of rights in rem, such as the mortgage lender, and creditors holding court orders affecting the property have twenty days to assert their rights over the compensation.
3. Acceleration. Within the same period, a creditor can ask for its loan to be treated as due and therefore payable, if the mortgaged property is expropriated in full with no other security left, or if a partial expropriation reduces the security so much that repayment is put at risk.
4. Distribution. If anyone comes forward, the judge opens a separate file, calls a hearing and then rules on how the compensation is shared between the owner and the creditors.
5. Direct payment. If nobody comes forward within the twenty days, the judge orders payment to the owner, provided the owner proves title and is up to date with property tax.

In practice, if the expropriation is total and the bank asks for it, the outstanding balance of the loan is paid from the compensation and you receive whatever is left. If the compensation is not enough to cover the debt, the difference is still payable and can be collected from your other assets. That is why a low provisional amount does not just hurt you on price: it can leave you without the house and still in debt, which is one more reason to challenge it in time with your own valuation.

There is also a little known rule for owners in financial difficulty. Once the twenty days have passed, an owner who can invoke the benefit of competence under Article 1,625 of the Civil Code can ask, within three days, to be left what is indispensable for a modest living, on condition of repaying it if their fortunes improve. The application must be accompanied by a sworn statement detailing their assets, rights, obligations and encumbrances.

One concrete recommendation: tell your bank as soon as the expropriation order is published and ask in writing for the outstanding balance at that date. That way you know from the outset how much of the compensation will be left for you, and you can decide with that figure whether it is worth challenging the amount.

The mistakes that cost money

• Waiting for somebody to serve you personally. The thirty days to attack the expropriation run from publication in the Diario Oficial, not from the day you found out.
• Arguing with the official on site. The inspector taking the inventory does not set the amount and cannot change it. The argument over price is a court matter with its own procedure.
• Accepting the amount in writing without valuing first. A direct agreement closes the argument. It is a legitimate route and sometimes the right one, but it should be decided with your own valuation on the table.
• Challenging without your own valuation. A dispute over the amount is won with expert evidence, not with the conviction that the land is worth more. And the judgment may set an amount below the provisional one, with an obligation to repay.
• Not looking at what is left. If the part not taken loses economic significance or becomes difficult to work, you can ask for the expropriation to be made total, but that deadline is thirty days from publication and there is no getting it back.

How we handle this at Terreno en Regla

We work expropriations on three fronts that overlap, which is why the same firm looks at all three at once.

First we review the expropriation order and the file: the law invoked, the grounds, the identification of the asset, the adjustment of the provisional amount and the publication dates, which are what set the deadlines. That tells us whether there is something to attack in the order itself or whether the argument is purely about price.

Second, we value the property ourselves. We survey it, measure what the strip takes and, above all, what happens to what is left: access, severance, buildings, wells, plantations, and the real area against the registered one. That is the basis of the challenge to the amount, and it is what is worth checking in the panel's report.

Third, we put the title in order so that payment is not held up: regularisation, posesión efectiva, exit from the co-ownership or rectification of area, depending on what the title search shows.

If the route is to challenge, we run the proceedings to determine the final compensation before the competent court, which is the civil court for the place where the property lies or, where the Fisco is expropriating, the court in the city that is the seat of the relevant Court of Appeal, with the expert evidence to support it.

Frequently asked questions