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Taking the pain out of Spain
A villa in Spain has been an enduring dream for many British people. Many of those dreams have come true and the purchasers have lived happily ever after. For British estate agents, selling homes in Spain from their UK base has been their own route to riches at various levels, creating a successful market for 40 years.
But something went gradually, but horribly wrong and it wasn’t just over- development or even the recession. Land grab, illegal building, confiscated properties and an apparent inability by the Spanish legal system to address the issues have had a disastrous affect on the Spanish property market and consequently seriously damaged some UK agents’ businesses.
The most seriously affected area was Valencia. About 15,000 British, Belgian, German and French property owners lodged a formal petition with MEPs four years ago in desperation over a 1994 Valencia land and town planning law that triggered 20,000 compulsory purchases of land or property for “urban” development.
The law aimed to ensure that local development plans were not blocked by landowners, but a loophole meant that unscrupulous developers could reclassify rural land as urban without the owners’ permission - giving themselves compulsory purchase rights on foreign-owned homes at a fraction of market value. Euro-MPs have demanded the immediate repeal of these land laws. Spanish Prime Minister Jose Luis Zapatero, visiting the European Parliament in Strasbourg, was warned by MEPs that he could face a campaign to stop EU subsidies to Spain unless he intervenes to stop the confiscation of expat homes.
However, the problem is not as widespread as its impact on the market would suggest. Agents report that many cases have been resolved, the number of owners losing their home is not, in relation to the total number of expats living in Spain, huge. But the dramas and the hype have led to a very real reluctance to purchase property anywhere in Spain.
One British estate agent decided to do something about it. Ian Hawkins’ company is Luxury Spanish Villas, is based in Javea, on the Costa Blanca. Ian launched Safe Purchase Spain at the end of 2009 and has received a great deal of support from estate agents, solicitors and private vendors keen to provide financial protection against difficulties in home ownership in Spain.
“Spain is still the number one destination for Britons looking to buy abroad,” says Ian, “but continuing negative press coverage surrounding revoked building licences and demolition orders served on innocent owners has struck a dreadful blow to the Spanish market. Now for the first time, the Safe Purchase Guarantee provides insurance protection against a wide range of problems that can occur after a buyer has completed his sale”.
These problems include such things as title defects, illegal building licences, access problems, border disputes, community problems, hidden lease agreements, fraud, identity theft, vendors’ debts amongst others. “As far as I am aware, this is the first time buyers of Spanish property have had any measure of protection after they’ve purchased,” says Ian.
Estate agents who sell Spanish homes from any country can become Safe Purchase Certified Partners, signing the Safe Purchase Code of Ethics as well as statements confirming their professional experience and the fact they’ve never been convicted of fraud or financial irregularities. Agents include the guarantee with every purchase but it is also available to people who already own a home in Spain. The guarantee provides cover for 20 years of up to €360,000 in compensation for monetary losses. Underwritten by one of Spain’s largest insurance companies, Caser Segura, it includes title insurance.
Ian believes that the guarantee will revolutionise the way properties are sold in Spain and agents who have already signed up to it agree. Des Rowson, a member of the NAEA International Committee, says; “Safe Purchase is advertised on our websites and in the office in Spain, it has experienced good media coverage in the North Costa Blanca with the South just getting used to being able to purchase protection against land grab and, worse still, no proper planning documents. Purchasers need to be aware that if advised not to go ahead with a purchase there will be specific reasons so they need to walk away from the sale or end up as a statistic. There are many illegal properties on the Costas, you need to use a registered agent.”
Jo Stimson, of Wise Buy Spain says that reputation is everything and the guarantee can definitely help sales. “We have spent a great deal of time building our business. Living in the area we service, we are more than aware how easy that is to destroy. Safe Purchase Spain represents everything our company stands for. We had no hesitation in signing the Code of Ethics and are proud to display the official badge. It’s crucial that buyers know who to trust and up until now, there’s never been an easy way to tell.”
And the buyers are impressed. Roger Cox from Walsall, pictured with Ian Hawkins, recently completed the purchase of his new villa in Moraira. He says, “After seeing many TV horror stories of what some buyers have gone through, I was pleased to learn there are steps people can take to safeguard their investment. We were introduced to this part of Spain by friends and we immediately fell in love with the area. We were aware of the difficulties some buyers have faced but at the time there seemed to be no way around the problem. However, when we finally found the perfect villa, Safe Purchase Spain had been launched. We completed the purchase with a 20 year Safe Purchase Guarantee in place and can now relax and enjoy our home in the sun, knowing we have the rights as owners, fully protected.”
As with all new ideas, it takes time to convince some people and there have been comments that the scheme is actually a turn-off to buyers, because it highlights the issues even if they do not exist in that particular area – but the same can be said of most insurances, the whole point is peace of mind.
Other agents feel it doesn’t apply to their market. Aylesford Spain’s average sale is around €2M and at that level buyers would be certainly be using a top lawyer who would check the items covered. Aylesford’s Michael Corry-Reid tells PROPERTYdrum, “The guarantee costs €20 a year for 25 years protection, so for €500 it doesn’t seem a bad deal but the Costa del Sol does not have the same problems as, say, Almeria which had the high profile demolition stories. We have had our own problems with Marbella Town Hall, corruption etc., but this hasn’t resulted in any demolitions, despite threats from The Junta Andalucia against Marbella Town Hall.”
And improvements have been made; “95 per cent of all properties here are now legal, many having been retrospectively legalised. There are exceptions; Banana Beach, 200 apartments east of Marbella, occupied for eight years, has not been passed as legal. But what can they do? You cannot demolish a luxury complex and throw 300 people on the street and they do have very strong resident action groups.”
On the other hand, as Sally Bloom of spanish-property-sales.net, says, “Many people will not be aware that the Spanish property market rarely has any exclusive sales agreement between vendor and agent. It’s common to see the same property on with any number of agents with varying prices. As property finding experts we always find the lowest price but that’s not all! We think it is essential to be ahead of the competition and anything one can do, add or include as a service that will directly benefit the client has to make perfect business sense. The negative press the Spanish property market has been subjected to has taken its toll and it is no wonder buyers are cautious. Since we joined Safe Purchase in August we have seen a significant increase in the loyalty amongst our many clients and we can only put this down to the fact that we provide legally backed and insured reassurance as a certified member of the Safe Purchase Scheme. It’s not just cheap talk!”
Clearly, peace of mind always helps a sale and agents wanting to start or boost sales in Spain may find that this is the added extra that they need. In the USA it is mandatory to have title insurance on every purchase. In Denmark, buyers have a 20 year right to go back to their home’s vendor and demand compensation for faults that are revealed after the purchase; so vendors take out insurance against this. In the UK, we have robust legal systems on sales and purchase and the problems suffered in Spain don’t arise, but in Spain and, it seems, in emerging international markets, this has to be a very good idea.