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19/02/2009 - A messy end to our Spanish love affair



The document demands he lodge a complaint on behalf of thousands of
British citizens who describe themselves as victims of Spanish property 'scandals and abuses'. Not only that, it calls on Brown to support a second angle of attack - a request for EU involvement: sanctions, no less. Is the UK love affair with Spanish property ending in recrimination, hurt feelings and the divorce courts?

Much like our own, the Spanish residential property market is in the midst of a crisis. The symptoms and the causes are familiar. A decade of easy credit has fuelled an investment and development boom. Prices raced way ahead of earnings, increasing at a rate that convinced many that a little voluntary short-term blindness would be more than rectified by long-term capital growth. So, people over-borrowed, over-lent, over-valued,
over-built. More building took place in Spain - at the 2007 height of the boom - than in France, Germany and Italy combined. But it didn't matter, the thirst for real estate was unquenchable, and in a few years there'd be
entire cities made of gold. There aren't.

There are, however, increasing numbers of panicky investors, filling the investment fora with tales of greed, corruption, penury and - in some instances - astonishing naïveté.

It's hard to find a happy punter. Even investors in Polaris World, a development project that seemed to know its market and have its act together (Jack Nicklaus-designed golf courses for gin-n-Jag lifestyle émigrés) are suffering. Over-building has made off-plan prices paid three or four years ago look steep. online Spanish property chatter suggests resale rates are 30%, up to 50%, lower.

At the other end of the spectrum, definitely hundreds, very likely thousands, of British and Irish investors have been fleeced out of at least 65 million Euros by Fortuna Estates, a posh boiler room for shares in pre-planning permission Andalucian land. In December, the Spanish  equivalent of the fraud squad made arrests, but it's unlikely money will be returned.

But the petition - and accompanying website at http://www.spanishpropertyscandalpetition.co.uk/ - highlights a more worrying problem and suggests systemized corruption involving developers, agents, lawyers, even town hall officials, and a Spanish legal system seemingly disinterested in making things right.

In Spain, planning decisions relating to urban land are made by the local town hall. Regional government makes decisions pertaining to 'rustic' land. According to dissatisfied British investors, local mayors have been giving the nod to rustic developments; issuing building licenses without the legal authority. Huge areas have been developed illegally, and properties sold off-plan. Regional authorities are now intervening, in some cases demanding that properties - some sold, to British investors - aren't connected to utilities, or in some cases are bulldozed.

Spanish lawyers, meanwhile, are said to have been failing to gain necessary Bank Guarantees. an essential piece of paperwork, according to a 1968 law, designed to hold off-plan purchase deposits in separate bank accounts and force their return (plus interest) if the developments aren't finished in the agreed time.

 According to the organizers, three-quarters of the petitioners have paid deposits on properties now deemed illegal. Almost a quarter have completed on illegal developments. The website's a compendium of woe. including stories of buyers being whisked by agents in their own cars for meetings with carefully selected lawyers. None of it sounds good.

 But for now, the race is on, will investors get any kind of legal redress before the developers go into administration?