Spanish Property Developers in Crisis

On 19 August 2011 the Spanish Government reduced the rate for VAT on new properties from 8% to 4% in order to help the beleaguered housing market where there are nearly 700,000 unsold new properties. The new measure is effective immediately and expires on 31 December 2011. The measure is being introduced to help kick start the sale of new properties which are mostly in the hands of the banks who have land and property valued at more than 65,000 million euros!

Alex Radford a Solicitor & Abogado with Irwin Mitchell Abogados believes this is a welcome measure from the Spanish Government however Alex commented that “unfortunately this only applies to new properties and should also be extended to resale properties where transfer tax is up to 8% depending on the value of the property purchased. Further with a lack of liquidity and credit available in the market it is unlikely to make real inroads into the unsold housing stock in a little over four months”.

Irwin Mitchell Abogados have an experienced Property Department and offer a complete property service when buying or selling Spanish Property. For more information on the services offered contact Alex Radford at alex.radford@irwinmitchell.es or telephone (+34) 952 209 860.

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Irwin Mitchell Abogados will be exhibiting at A Place in the Sun Live, the UK’s biggest overseas property exhibition which takes place at NEC Birmingham on 30th September - 2nd October 2011.

Come and meet us on stand E44 to chat to our expert legal professionals from our Spanish offices who will be providing advice, guidance and top tips from purchasing a property in Spain to guidance on fractional and shared ownerships.

Click here for further information and to get your FREE tickets worth £10 each!

Nine Britons who claim their dreams of owning homes on a five-star development in south-eastern Spain are now in tatters because of a property firm’s broken promises have welcomed news that they will get their day in court.

Members of the group used their life savings to put down deposits of up to €200,000 on properties at the Corvera Golf and Country Club close to Murcia in 2005 and 2006, with developers promising that their homes would be part of a top-quality project which included a five-star hotel and a host of other state-of-the-art leisure facilities.

However, the Britons have endured a frustrating and difficult five years since the majority of the proposed facilities have never been built, with the firm behind the development, Corvera Golf and Country Club SL, ignoring their pleas for answers over the issue.

Now, the group and legal experts at Irwin Mitchell Abogados – the Spanish arm of UK law firm Irwin Mitchell which last year commenced legal action against the company on their behalf – have welcomed the outcome of a preliminary hearing in Murcia, where it was confirmed the developers will have to answer the allegations in a trial in July next year.

The disgruntled homebuyers have also been buoyed by the news that Corvera lost an appeal against a ruling in another case related to the development, in which it was proven that the company did not have planning permission for the third phase of the site.

Alex Radford, the solicitor at the Malaga office of Irwin Mitchell Abogados who is helping the group in their battle for justice, said the formal setting of a date for trial and the result of the recent appeal are both a major boost in their fight.

He explained: “The past couple of years have been fraught with frustration, worry and anger for all of those who put their hard-earned savings into this development with the promise that they would be part of something really special. Shockingly, that promise has never been fulfilled.

“These people deserve answers as to why the facilities they were told would be built have not been and the opportunity to claim their money back from the company.

“We maintain the belief that the developers are in breach of contract and are delighted that those who have been badly let down in this affair will get the chance to have their voices heard in a court of law next year. Corvera should rest assured that come July all of our clients will be present in court to have their say.

“The news of the recent successful appeal is also very important, as it suggests that if the firm does not have planning permission for a third phase – let alone the fourth and fifth phases proposed by the company – there are no plans for anymore construction work. In theory, this means the facilities that were promised to so many people should be complete now.”

John Thorpe, from Lincoln, is one of the property buyers whose dreams of owning a top-class holiday home in Spain have been shattered by the actions of Corvera Golf and Country Club SL.

Discussing the news of the court date and the reaction of the group, he said: “We are all incredibly relieved to know that we will have a chance to stand up and tell authorities in Spain of the terrible ordeal we’ve been through in trying to get answers over the development.

“Like the other families in the group, we simply wanted to invest our savings into a development which offered us a chance of a better future. Sadly, we all feel completely cheated by what’s happened and just want one of two things to happen – the promised facilities to be built or our money back so we can get out of this nightmare.

“It makes me sick to the stomach to think about what’s happened and we will continue to fight to get the answers we want over this.”

The homebuyers who are represented by Irwin Mitchell are thought to be among 100 who put deposits down on homes valued at between €190,000 and €550,000 after falling in love with the plans for Corvera Golf and Country Club.

However, they had serious concerns after being chased for final payment on the properties, despite the majority of the leisure facilities not being built and some suggestions that build licences were also not in place for some of them.

The case was reviewed by Spanish authorities in a preliminary hearing held in Murcia on June 13th. The purpose of it was to set a trial date, as well as to present evidence on the case and determine the witnesses who can and should be called at the trial.

In terms of evidence, Irwin Mitchell Abogados presented a precedent case from February this year, where Corvera lost its appeal over a rulling which allowed a person who purchased a home on phase three of the development to recover their deposit.

Alex Radford explains: “The case was successful as it was confirmed there was no permission for the construction of phase three.

“This is notable as Corvera had stated to us and our clients that as building work continues, more facilities would be added on-site. However, the lack of planning permission means it is unlikely that any other construction work will be completed, so the promised facilities will still not be built.”

All of the people that Irwin Mitchell are representing in relation to this case have been called to act as witnesses in the trial, which is set to begin at the First Instance Court Number 2 in Murcia on Tuesday 17th July 2012.
 

If you have been affected by a smiliar case, contact Alex Radford at alex.radford@irwinmitchell.es or call +34 952 209 872.

Ever since the Spanish Coastal Law was enacted back in 1988, Spain has been in a constant struggle to balance the rights of owners who have legally acquired a coastal property on the beachfront and the right of every other Spanish citizen to have the coastline free of concrete and large buildings blocking the sea view and its direct access. The question is – How to strike a balance?

The debate is not a new one. However, this topic has gained more momentum and strength in the last couple of months after the European Parliament opened an investigation to inquire whether European citizens – especially British and German – are being discriminated against in their application of what is already a rather arbitrary Law. This is because, together with the Germans, expats account for a large percentage of the purchasers that are affected by the Act.

The 1988 Coastal Act was initially drafted for the purpose of protecting specific coastal areas which have undergone a soaring urban and industrial development during the last six decades. Vague and outdated, the Act defines the coast as a public property in need of protection and restricts the private use of its neighbouring land.

The current legislation allows the Government to declare rights over private property in cases where pedestrian and vehicle access to the shore is required, or even remove architectural barriers that have a negative effect on the landscape.

Many property owners have been asked for legal documentation which if they fail to produce could result in an order to pull back their boundaries. A number of high profile buildings are involved in this dispute, including the home of Cayetane Fitz-James Stuart, the Duchess of Alba, whose garden wall appears to encroach 32 square meters of public land.

It is cases such as these that has brought huge amounts of media attention and political debate especially since 2004 onwards when socialist government, presided by Mr. Rodriguez Zapatero, began applying the Coastal Act more stringently than ever before. Figures released by the Spanish newspaper “El Pais”, showed that while during the years running from 1988 to 2003, administrative procedures affected 4.569 kilometres of shore, a similar figure was detected for just the first six years of Mr. Zapatero’s presidency.

Furthermore the Spanish law known as “Procedimiento de Deslinde”, allows the government to declare any plot and private property as belonging to the public provided these are found within a certain distance from the sea line. As a result, the affected owner looses any property rights he had over the affected area and, at most, he is granted a grace period to use the property ranging between 30 to 60 years, depending on each case.

It is of course not hard to sympathise with the large number of bona fide purchasers who have acquired a property without being warned by the notary, the banks or anyone else that their home could in fact be on public soil, only to find this out one decade later together with the bitter news that they neither can sell. It is therefore not surprising that these measures have been widely criticised, internally and externally, by different pressure groups, affected buyers, the United Kingdom, Germany and even the European Parliament.

Notwithstanding the above, not all is lost for these home owners as the pressure on the government has (ironically) eroded the strength of the Coastal Act pressing for an urgent reform of the legislation.

Environmentalist groups and NGOs such as Greenpeace and WWF have firmly opposed to any modifications of the Act or even a more lenient application of the same. In their opinion, 1.500 affected individuals in all of Spain is a small number when compared to the rights of the majority of the population. As stated by one of WWF’s activists, “the figures simply do not warrant the modification of the Coastal Act.

The Law aims to repair the damage caused by the privatisation of the coastline as well as to prevent future consequences. A plot that is available, free of construction and well located is highly valued and worth fighting for but this does not mean that the Government should succumb to the pressure. Individuals often complain when something that is theirs is taken away, however, hardly anyone ever objects to defend property that belongs to the general public”.

It is unknown where this debate will lead, but the last trends offer encouraging news to those affected by the coastal zone protection measures. On March 2010, the European Parliament has held different meetings with affected owners who might lose real estate properties purchased in good faith.

Different experts at Brussels are monitoring the alleged abusive application of the Spanish law in relation to property rights to see whether any discrimination on grounds of nationality has been perpetrated. The European Commission has contacted the Spanish authorities accordingly and many envisage a prompt modification of the Law.

In these situations professional advice is essential to try and safeguard the money and the rights of those who have acquired a property. Irwin Mitchell is currently assisting clients who are facing similar scenarios. If you are an affected owner, please do not hesitate to contact us for preliminary advice, free of charge. We will notify you of any potential claims that may become available.

To avoid potential pitfalls; always seek legal advice.

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For further information please contact Marcelo Masri on (+34) 902 150 105 or email marcelo.masri@irwinmitchell.es. Alternatively you can contact Alex Radford on (+34) 902 150 105 or email alex.radford@irwinmitchell.es.

For more information on coastal property law, please click here.

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Back in September, 2009, the company known as Aldea Advisors SL was declared in a creditors' voluntary insolvency. The procedure is being followed in the Commercial Court nº1 of Alicante.

Legal costs are generally calculated using the local college of lawyers' tariffs, however these are non binding. This booklet, published by the college of lawyers in the court and province where the matter is being handled, sets out the legal costs that a lawyer could charge you for the many types of legal services and actions carried out on your behalf.  

Not necessarily as legal costs in Spain are awarded at the discretion of the judge. Unfortunately legal costs here are treated differently compared to other European countries. Below we set out the various scenarios that you could be facing.