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L.R.A.U. Urban Development Activity Act Valencia 1994

A letter to the Minister for housing

For far too long there have been very real problems with the purchase of Spanish Property with both foreigner and Spaniard losing out for a variety of reasons. The following letter was written in June of 2008 to the Minister of Housing calling for a variety of changes.

In 2006, 22,600 of the 900,000 Spanish property transactions inscribed in the Spanish property register involved British buyers - making them the biggest single group of property buyers after the Spanish themselves. Too many of these people ended up in situations which should not have happened. Dishonest estate agents coupled with lazy and incompetent lawyers have left many with land upon which they cannot build, houses in which they cannot live and every situation imaginable in between. In the meantime, the L.R.A.U. Act Valencia 1994 (condemned by the EU) and the L.U.V. which replaced it (and just as enthusiastically condemned by the EU) lays in wait for those victims who may not yet have heard of Spain’s Land Grab acts. In total, the British represent over 60% of all European demand for holiday homes in Spain and each time British demand falls, it puts pressure on the Spanish market.

Earlier we mentioned that in the main we dealt with foreign retirees. These are a particularly unique group of people who in the main are unaffected by credit squeezes etc., having planned their retirement and organised their finances some years ago. Demand for Spanish property among this group of people has fallen seriously even though they are financially well off. Perhaps the fact that those with a budget for overseas property know they now have a far greater choice of destinations than ever before and they are starting to exercise these options - finding them preferable to the risks associated with buying Spanish property.

The constant threats of demolition by what potential buyers see as the “bullying state” don’t help matters at all and they need to be quickly removed. Demolition should only be carried out if it can be shown that there was clear intention on behalf of the owners to disregard or ignore the law for whatever reason and it should be carried out quickly. For others, whose only crime appears to have been appointing an incompetent lawyer or deceived by an estate agent or developer the situation is very different. Little point exists in punishing the victims for the incompetence or dishonest actions of those they retained to represent them. Punishing them can never be effective as a deterrent. Instead, the law should pursue all those responsible, dealing with them firmly and in high profile manner in order that not only justice be done but be seen to be done. The threat of demolition is an ongoing saga which needs to end. It’s an ill wind which blows no good and something most decent people find offensive.

Your predecessor, Maria Antonia Trujillo, correctly observed that more qualifications are required to sell a lettuce than to sell a house. However, the revelation of this remarkable fact seems to have brought about little by way of change despite revealing an obvious weakness in the system.

As long as the sun shines on Spain there are going to be foreigners who wish to live here. They will contribute considerably to Spain’s economy by purchasing property and cashing their retirement cheques each month. Relations and friends will visit them and their expenditure whilst here will also benefit Spain. However, many potential buyers of Spanish property who are well funded simply have no confidence in the property market for a variety of known reasons and currently will not buy.

We sincerely believe that immediate changes in the way the property market operates are necessary and if brought about will bring immediate and needed benefits. Among many potential buyers of Spanish property there exists a single common denominator which is:  allowing that the government must know of the things which are wrong why does it allow them to continue? Anything the government does now will go a long way to answering this question which is not only being asked by buyers of Spanish property but another group which is equally or more important and for years has had hundreds of British buyers arriving at Spanish airports each month.

These are the UK estate agents who have chosen to specialise in selling property abroad but who have shown an increasing reluctance in dealing with the Spanish property market because of the seemingly never ending problems. To understand their reluctance requires only that you know that under UK law, any person involved in any part of a commercial action for which they will receive payment can be held responsible for any losses or damages incurred by the buyer. Therefore any client referred by a UK estate agent suffering loss can simply look to the agent in the UK for compensation and not have to become involved in the Spanish legal system.  

We believe that confidence in the property market, particularly among foreigners wishing to live permanently in Spain would be improved considerably and possibly far beyond what it had ever been if there were a house buyers charter which guaranteed to protect them from fraud or incompetence. If you feel the cost of this would be too great then you are clearly aware of the problems. However, the costs of operating such a charter could be reduced almost to nothing by ensuring that Estate Agents were required to undergo formal training at the end of which they would be examined and if successful, licensed to practice. Further, once licensed they would be required to carry malpractice insurance and it would be obligatory to prove to all clients that such insurance existed and was currently in force.

When selling property in Spain there seems to be no standard on how it should be measured and sized. As a result, the size of a building can vary by us much as one third simply by including terraces, flat roofs, staircases and patios etc. There should be one basic measurement which only concerns useable living space. We use this method ourselves, even though in comparisons with other properties our own property appears to be smaller, even though the reverse is usually the case. Other salient measurements such as roof terraces, balconies etc can be included separately but will not create the misunderstanding which they usually do and which in many cases is intended.

Competence among many lawyers leaves a lot to be desired and in some cases so does integrity. Lawyers are the subject of many justifiable complaints by buyers. The habit enjoyed by many lawyers of demanding fees “upfront” is something which should be stopped. They should be allowed to ask for a deposit in order to qualify that their appointment is genuine and to invoice for work in progress but the significant part of the bill should be collected when the work is done and a final itemised invoice is provided in writing. All too often we have seen “raring to go enthusiasm” evaporate or stall once a lawyer has received his full fee in advance of carrying out any work.  

All lawyers practicing law should be required to carry malpractice insurance which in the event of them being held responsible for any act of incompetence or neglect is more than adequate for the purposes of providing full compensation. Lawyers should not be able to limit their liabilities by any means other than insuring them.

The quaint habit of Lawyers under-declaring the purchase value of a property to evade tax should be ended. Enough is known about the practice to know that the buyer has never benefited from the procedure, which when carried out makes him immediately guilty of tax evasion. How are housing figures issued by the Ministry to be taken seriously when a significant, unknown percentage of the purchase price of each property sold is being withheld from them and apparently with their full blessing!

Cap commissions for all property sales to a maximum  of  5% per sale with the seller being required to declare in writing to the buyer what his commission is.  Move the overcharging of commissions from civil law to criminal law.

With Spain not having a system for outline planning, the purchase of land upon which it is hoped to build can be risky. Where land is being purchased for the construction of a private house, purchase should not be able to take place until construction has been approved by planning and other relevant authorities. Deposits for land purchase should be held in escrow by a bank or lawyer acting for the purchaser and refunded in full if planning is refused. If planning is approved, the price agreed for the purchase of the land shall be that agreed initially in writing between seller and buyer. Should the land purchase fail to take place within 3 months from the approval of planning then the buyer should be entitled to review his selling price.  Should the buyer withdraw from the sale following planning approval his deposit should be forfeit to the vendor.

Many potential buyers of Spanish properties are deterred by the fact that there have been many cases in Spain of building being approved but at a later stage being refused by a greater authority to the detriment of the owner. As to how this situation can come about is irrelevant but any authority giving permission to any person or organisation for the construction of a building should be responsible in law for its decision. If a greater authority at a later stage shall deem the construction illegal, then the granting authority should be responsible for all losses incurred by the constructor and those instructing him. Further time limits for recompensing should be set so as to avoid long, unreasonable delays.

Previously mentioned is the L.R.A.U. Act Valencia 1994 and the act which replaced it (L.U.V.) Both of these acts are iniquitous pieces of legislation and have been abused by corrupt officials and developers alike. Known almost universally by the foreign media as the "Land Grab Act" this legislation serves to do nothing now other than to keep Spain held in contempt by far too many people. It is doing dreadful damage to the Spanish property market with many boycotting Valencia and other parts of Spain simply because they have no desire to provide the roads and infrastructure for urbanizations they are never going to live on. The European Union has ruled against both of these acts and it is now time for them to be trashed – something which should have happened long ago. They are associated with dishonesty and unfairness and the longer they are allowed to exist, the more damage will be done to Spain. It is clear now that if these acts last for another hundred years they will never be able to achieve what they were designed for so no logical reason exists for them not to be axed.

Foreigners are important to the Spanish Property Market and logic points towards encouraging them to invest in Spain but in real terms, their treatment, together with that of many Spaniards whose only interest was in buying property has been an outrage, with the government doing little or nothing about the frauds perpetrated against them. Despite the fact that these frauds were regularly being reported by the foreign media the government did little and the damage to the property market continued.

To add insult to injury, today as the effect of interest rate hikes start to bite, the banks or some of them are up to their old tricks with their treatment of repossessions. In common with many others, we are being offered property from a variety of sources at knock down prices but where the proviso is for large amounts of under declared black cash. The idea of the property being sold to raise as much money as possible so as to be able to discharge the banks debt and return as much as possible to the previous owner is laughable. The previous owner is going to be very lucky to see a single cent of the proceeds, unlike the many cronies who gather around on the day of the sale to share in the plunder. Strict, laws are needed to monitor and control the disposal of repossessed property and to afford maximum protection to the former owner.

We have already mentioned the negative effect of demolition orders on properties belonging to both Spaniard and foreigner alike. We would ask both the National government and that of the Autonomies to look sympathetically at as many of these properties as possible in the hope of being able to legalise some of them.

One final point which is worth considering is that for anyone to be able to buy and sell a property in Spain requires that his property increase in value by at least 20 per cent just to pay for the buying and selling costs.

As a courtesy, I must inform you that once you have received this letter, copies will be made available to the media in Spain, many of whom hold an interest in this subject and have campaigned actively on some of the points contained within.

Yours sincerely,

 

 

John DeVries                                              Graham Glick

Directors
Spanish Property Company (1980) S.L.

21st Juy 2008. We hear that 1300 houses which have been illegally built in Catral and under sentence of demolition are now not to be demolished. Britons are the vast majority of owners many of whom stood to lose everything had the demolition orders been carried out.

We will continue to report any further progress.

Information on the topics shown here is available from this web site :

Home Healthcare Cost of living Insurance Cars Nif & Nie Numbers UK TV & Radio Electricity Gas & Water Telephones Internet Computers Heating & Cooling Legal System Wills Swimming Pools Assessment Visit Property Brochure C.G.T.Rates & Property Taxes  Bank Accounts Buying land Buying Property Power of Attorney Pets Schools Help Mortgages Campaigns Pensions