Beware of Spanish Property Lawyers

Give a lawyer unlimited power over your affairs and you could be heading for serious trouble...

Amid the thrill of buying property in Spain, many people make too little effort to understand the “boring but important” issues involved in the conveyancing process. But as the following experiences show, you ignore unexciting questions — like whether to grant a power of attorney or complete without a first occupancy licence — at your peril.

Power of attorney

Maureen Windale moved to southern Spain with dreams of living out her twilight years in a sunny rural idyll. Windale, 68, a pensioner from Sunderland, spent €150,000 (£100,000) — most of her life savings — on a newly built bungalow with one acre of olive groves in Andalusia’s Granada province.

At first, she was delighted with her new home just outside the village of Freila, 60 miles northeast of the city of Granada, and close to the provincial border with Almeria. “I was so happy with my big bungalow and its views of mountains and lakes,” says Windale, a widow who moved alone to Spain. But seven months later she is spending the rest of her savings on legal action against the vendor, the estate agent and the lawyer. What went wrong? It turns out that Windale was duped into buying an illegal property. Her title deeds make no mention of the bungalow, and the land is significantly less than she was promised. To cap it all, she does not even own the land outright; she shares it with her neighbour and the vendor.

Windale’s big mistake was to give sweeping powers of attorney (POA) to a lawyer recommended to her by the agent. The lawyer abused these powers to buy her an illegal property that was smaller than expected. The lawyer signed all the purchase documents on her behalf, and Windale had no idea what she was getting into. In hindsight, she realises that the lawyer was in cahoots with the agent and vendor in a scheme to defraud her.

“I let my heart rule my head, and now I’m so angry with myself,” says Windale. “The vendor was English and the estate agents were English, so I felt I could trust them. When this is done to you by your own people it hurts a lot more.”

Just like Windale, many Brits on inspection trips to Spain sign a power of attorney in a hurry before flying home. For many, it is an unintelligible document in Spanish giving a lawyer they have never met before extraordinary powers to make decisions on their behalf — with big financial implications.

Buying agent Andrew Lupton, head of Stacks Relocation Spain, believes that many Brits are too flippant about granting POAs when buying property. “It’s risky giving a POA to a relative stranger,” he explains. “They are powerful documents that can be easily abused, which is why we recommend people never sign POAs unless it’s among trusted family members. And if you must sign one, make sure the powers are limited very specifically to the job in hand.”

Licence of first occupancy

Imagine buying a new home in Spain but not being able to connect to the mains. This is what happens if you complete on a new property without a licence of first occupancy (LFO), or licencia de primera ocupación in Spanish. Utility companies need to see this licence – issued by the town hall – before they can supply domestic accounts with water and electricity. But some big new developments are not receiving LFOs, often because of planning irregularities.

Jayne Arthur, 48, and husband John, 52, from London, rue the day in early 2004 when they completed without one, paying £140,000 for a two-bed flat in Mijas, near the Costa del Sol. “We have been relying on the builder’s supply for two years, and the problems have put us under a lot of strain,” says Arthur.

Developers often promise to provide water and electricity from the builder’s supply until an LFO is granted. The problem here is that the supply can be unreliable, and there is always the risk that it might be cut off. “There was a power surge on the development a few weeks ago in which many neighbours lost their air conditioning, fridges and burglar alarms,” says Arthur. “We had to pay £200 to have our air conditioning fixed, and now we’ve decided to shut down the fuse box until the utilities are connected.”

Unfortunately for the Arthurs, their lawyer used a power of attorney to complete on their behalf without ensuring that an LFO was in place. “Other buyers didn’t complete until a few weeks ago, when an LFO was granted. But because we completed two years ago we’ve had to pay more than £2,700 in community fees, rates and wealth taxes for a holiday home we couldn’t use,” seethes Arthur.

Under Spanish law you can’t be forced to complete without an LFO, but that rarely stops unscrupulous developers from putting buyers under pressure to do so. The best advice to all buyers is don’t complete without one. Having said that, in some cases it may be the most sensible thing to do.

“The lack of an LFO sets the alarm bells ringing,” explains Michael Davies, a lawyer based in Almeria. “It means you have to do more checks than normal and find out exactly why there is no LFO. Once you know what the problem is you can decide how risky it is to complete without one.”

Spanish Property developer...read on

LIKE many things in life, it seemed like a good idea at the time. Buy a flat in a traditional block in Barcelona, do it up and make a killing. How could we lose? House prices across Spain went up 12 per cent in the past year, according to government figures. In Barcelona the figure was almost double, with the price of the average home rising by a staggering 21 per cent in 2005.

Of course, many Brits, including the Times columnist Matthew Parris, have fallen in love with tumbledown wrecks in the Spanish hills and turned them into dream homes. Yet many analysts predict a gradual slowdown in the Spanish market. So going for a place like Barcelona, which still has considerable cachet and is propped up by strong domestic demand, seemed a better long-term investment. Surely the city could withstand any dip in the market? Mark Stucklin, a Spanish property expert on www.spanishpropertyinsight.com, says: “Barcelona is such a great place that, even if the prices do fall nationally in Spain, buying here will always be a good investment.”

The only snag, then, was the actual asking price. The average flat, with marvellous high ceilings, classic Spanish tiles and a balcony, costs about €500,000 (£336,600). And it is impossible to snap up a places with a gorgeous terrace overlooking the Mediterranean for less than €1 million. So the only way to get into this market seemed to buy a flat that needed doing up and make money on it later.

Among British friends who had the same idea it seemed a favourite dinner party topic of conversation. “Are you looking? Have you seen something? We’ve been looking for ages, but they are all a million euros. It’s impossible!” Undaunted, we started our hunt.

Estate agents proved useless. They didn’t listen to what we could afford or what we wanted. So, although we said we were looking for a classic old-style flat, we were shown round a succession of ultra-modern horror-show homes. My girlfriend, Lucille Papais, told them we had a budget of €500,000, only to be taunted with a palace with a price tag of €1 million. After traipsing round the umpteenth place, our morale was at rock bottom, so we decided to make our own luck by knocking on old people’s doors and asking them if they wanted to sell.

Then, when we had all but given up, we found what we were looking for. In the heart of Eixample, one of the city’s best areas, we found a classic flat with high-ceilings, old tiles on the floor and two balconies. On closer inspection, there were a few drawbacks. The flat was dark and dingy and it had uneven floors, but it had plenty of space and a nice view of a park.

We agreed that with a bit of work it could be great, so we agreed to buy it. The estate agent tried to force us to pay a fee up-front, but we knew that the seller should pay the fee, not the buyer. She also spoke very quickly, like a machinegun, perhaps in an effort to pressure us into buying. We politely told her to slow down.

Then the search began to find someone to do it up, which is just as important but perhaps even more difficult than finding a flat. If you don’t want to try to organise a small army of plumbers and architects, then you need a good project manager. Asking around through people who have done the same thing is often the best method. We chose one who promised us a good foreman and appeared to have done a decent job on other flats. His price was reasonable, so we shook on it and told our man exactly what we had in mind. We later discovered that our ideas were different from his. Our plans outlined, we waited for the work to start — and waited, and waited. After two months and plenty of excuses, they got going. There was a lot to do. The whole thing had to be gutted, the basic structure checked, and then rebuilt.

Many Britons will have found to their cost that every builder in Spain thinks foreigners are made of money. They try to steer you to their suppliers who can give you a “special deal”. This simply means a cut for them. Keen to avoid falling into this trap, we did our own research. An entire floor needed replacing so we had to find some old tiles, but it proved difficult to locate the classic tiles for which Spain is so famous because Spaniards love the new, not the old.

Very soon, things started to go awry. The floor was not levelled properly and the ceilings were too low and had to be redone. We realised that, if you do not stand over the builders every day, you are asking for trouble. Alternatively you must insist that they call you every time they are not sure about anything.

As the work proceeded at a snail’s pace, our patience started to wear thin and many sleepless nights were spent fretting over the project manager’s incompetence. At one point I even dreamt fleetingly of hiring a hit man to bump off the builder, but even if I had been serious this would have delayed the work still further.

On top of this, more things were going wrong: radiators were in the wrong place, the precious tiles were damaged, the heating didn’t work. After a series of rows we fixed our own deadline to force the builders to finish, paid them €80,000 for their efforts, bade them a less than amicable goodbye and moved in.

So was it worth the hassle? When I look out from the balcony, I think . . . of course, it was.