Buying in Spain

An "ethical" network of estate agents and developers has been formed to improve the investment potential and image of Spain's property market, which has been tarnished by allegations of land grabs, mis-selling and overdevelopment.

The Lighthouse group has been set up by Shaun Powell, the former managing director of Thomson Holidays, who claims he was "horrified" at the lack of regulation and poor customer relations in the sale of Spanish property to Britons.

A series of scandals has hit the investment market in Spain. Some British owners of rural homes in Valencia have had land "confiscated" by developers whose links with local planning authorities let them to redesignate areas as "urban" and thus compulsorily purchase properties.

Operation White Whale, a police probe into an alleged £160m money-laundering scam, involved funds said to be stolen from a Russian company. It has thrown into doubt the legality of thousands of homes bought by British and Irish investors on the Costa del Sol.

Developers have been accused of seeking "black money" deals with investors - selling homes officially at a reduced cost to minimise tax burdens, with the buyers making up the rest "under the table" in cash.

Other developers have been known to build without consent - they then sell to individuals who later find it hard or impossible to re-sell, because buyers' searches reveal the absence of planning permission.

Lighthouse insists the 100 developers and agents currently in its network must abide by a 33-point code of conduct. It obliges them to tell buyers to get independent legal advice instead of using "tame" in-house lawyers, and insists developers must display original building licences, and demonstrate where they have sourced funds for construction work.

"By British standards this isn't revolutionary, but in Spain it's a breakthrough" claims Powell. "In the travel business there's public liability, so if there's a problem on holiday, there's a chain of responsibility and a redress system. There's nothing like this when it comes to buying property".

The hitch with Lighthouse is that it is a voluntary system, with only limited authority to police its code and punish offenders, and firms pay Lighthouse some £13,500 to be listed. The network has expelled two agents, but otherwise its powers are weak.

"What we really need is government regulation," insists David Honeyman, a British developer running Andalucian Dream Homes and a founder member of the Lighthouse scheme. "Ideally, we'd have proper training and inspection of businesses but in the meantime anything forcing people to put their company on the line for fair dealing must be good."

He is one of the few developers selling through a so-called multi-listing system, a US-style IT network, which means a buyer registering with one agent in the Lighthouse network automatically has access to properties on sale from all others in the scheme.

"It means it's possible a client might see another property they like more, but it's a benefit to the buyer and it means they see we're grouping together to provide a better service. That's highly unusual in Spain," says Honeyman.

He says that in the past councils and lawyers working for developers in tourist areas of Spain have apparently colluded with builders to allow gluts of new homes to be built, thus undermining the market for small-scale investors wanting to re-sell homes at a profit.

"A lawyer has to be independent and not recommended by the developer, vendor or anyone who has an interest in the deal," says Noemi Chaves, president of Marbella's Law Society. She suggests British buyers visit the local law society office to obtain a list of truly independent conveyancers.

The need for Spain to smarten its image is acute, even though it remains the most popular place for British second homes.

Developers in emerging markets such as Bulgaria and Dubai are wooing investors by citing the unreliability of some purchases in Spain. "Spain's still a good bet," insists Shaun Powell. "There's a sustainable infrastructure, unlike new markets, which have resorts but nothing much further inland. For investors, Spain makes long-term sense - we've just got to prove that it's reliable and legal."

For further information on Lighthouse ( www.lighthouse-spain.com), call 0845 456 7865