Spain's property agents aim to restore confidence

Is the Spanish property industry finally coming clean after years of headlines about land grabs and distinctly dubious estate agents?

While tens of thousands of people have had trouble-free purchases across Spain, many high-profile cases of Britons caught up in alleged scams have made buying in the country nerve-wracking for many. But now three groups of property professionals are fighting to restore their reputations and instil confidence amongst purchasers.

The first group consists of 100 estate agents and developers in Spain who have developed what they call an "ethical approach" to clients through Lighthouse (0845 456 7867; www.lighthouse-spain.com) which has a 33-point code of conduct and a compulsory training scheme for members who display Lighthouse logos and sell homes on its website.

It insists buyers seek independent legal advice instead of using solicitors linked to agents themselves, and obliges developers to show building licences and their funding sources in a bid to avoid past problems, like illegal construction and fraud.

"The ethos behind Lighthouse is trust," says managing director Shaun Powell. "Buying abroad can be stressful when you're dealing with a different language, legal system, currency and culture, so we want clients to deal only with accredited agents."

Lighthouse members recognise the weakness in their approach - enforcing the code of conduct is voluntary, and no substitute for tighter legal controls - but they insist it is working. The network has already expelled two members.

The second group is the plethora of buying agents who are now stepping up publicity for their role as "honest brokers" in the sales process in Spain.

"No estate agent in Spain does due diligence checks - they would be failing in their duty to their client, the seller. Their job is to sell a product, not to highlight potential problems," explains Barbara Wood of The Property Finders, a buying agency (01908 218753; www.thepropertyfinders.com). Instead, she says, rigorous due diligence checks are an inherent part of the process of buying agents.

To hire a buying agent you typically pay 1.5 per cent to 2.5 per cent of the purchase price of the home you eventually buy, but do at least get peace of mind about the deal.

"We'll also check with neighbours and go to the town hall and talk with anybody we feel pertinent, up to the clerk of works or councillor for urban development," explains Andrew Lupton of Stacks buying agency (0871 871 4687; www.stacksrelocationspain.com).

The third group consists of up-market estate agents with a tradition of operating at the top of the market but who are now considering selling low-cost properties and are emphasising their track record in protecting clients' interests.

The theory goes that agencies operating mainly in Britain are likely to be better trained and more accountable than those operating only in Spain, sometimes with only one office and relying largely on internet or telephone contact with clients.

"Put bluntly, we have our reputation to keep up. We're approaching these sales with the same rigour as with multi-million properties in England," says James Price of Knight Frank (020 7629 8171; www.knightfrank.co.uk), an agency more accustomed to selling homes with seven-figure price tags.

He says he is now looking at areas of southern Spain to market low cost homes - it already has homes from €290,000 (£207,000) on Mallorca. Other high-status agents are considering broadening their sales portfolios in Spain to take advantage of buyers' concerns over the quality of service from less well-known operators.

Of course there are other ways for Britons to keep out of trouble when they buy in Spain, chiefly by exercising the same caution they apply back home.

Legal experts advise that British buyers in Spain should not accept advisers put forward by estate agents and developers and should instead insist on independent surveys and valuations (lists of experts are available from town halls or local offices of the Spanish law society, listed in Yellow Pages), just as they would if they were buying in the UK. Likewise, buyers should shop around to get the best mortgage deals and not automatically accept a deal from a lender linked to the building firm.

Some buyers make still more fundamental errors like failing to read the paperwork.

"I find it hard to believe people sign a purchase contract without seeing an English translation first, but the overwhelming majority of people who subsequently find themselves in difficulties for any number of reasons have done just that," says Barbara Wood of The Property Finders.

"When I ask people if they would hand over money in the UK without reading a contract first they say they would not. So why do they do it in Spain?"

ADVICE FOR BUYERS

THE PROBLEMS

* In 1994 the Valencian regional government passed the Ley Reguladora de la Actividad Urbanística or LRAU; it gives property developers the right to request that sites be reclassified from rural to urban without seeking permission from home owners on the land in question, and sometimes with below-market compensation offered. It allows just 15 working days for owners to object - an unreasonably short time for second home owners who may not even be in Spain during the period. The process, known as "land grabbing" in the UK, affects areas along the Valencian coastline close to existing towns, and where land prices are at their highest. The Spanish and EU governments are looking at ways of modifying this law.

* Operation Ballena Blanca (White Whale) was the Europe-wide police probe into alleged money-laundering through a network of "front" property firms on the Costa del Sol. In spring this year police seized the construction sites of over 250 properties including two estates in San Pedro de Alcántara and Manilva.

* Sellers commonly state on second-hand properties' deeds apparent sale prices which are up to 40 per cent below the actual sale prices. This is to help sellers pay lower capital gains and value added taxes, less stamp duty and smaller legal fees. Buyers then pay the difference between the apparent and the actual prices to sellers "informally" (ie, in cash) and so get embroiled in the tax evasion. The government has set out 300 new guidelines to try to curb the problem.

THE SOLUTIONS

In rural areas you should check:

* Is there a title deed at all - if not, why not?

* If there is a deed, is it correct?

* Are there charges?

* What are the building regulations in that area? They change as you go further into the country

* Is there any likelihood of change of use of land, for example changing designation from greenfield to brownfield?

In urban areas you should check:

* If the property is new, is there a building licence?

* Does the builder have a 10-year guarantee like the NHBC's in the UK?

* What are the building regulations in that area?

* What could impact on the property? For example more building, roads and commercial development.

* What are the regulations governing the community you buy into?

Source: The Property Finders

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