While recently we have seen significant problems materialise in the Cypriot property market regarding ownership of land and property, there appear to be even worse problems emerging from Spain.
Just one year ago Len and Helen Prior were the subject of a draconian local property ruling which saw their £600,000 Spanish villa razed to the ground after the land was reclaimed by the local authorities and their earlier property license was deemed illegal. The situation is reaching crisis point across Spain and there are significant implications within the EU as EU ministers get tough while trying to bring the Spanish authorities back into line.
The issue of planning permission has been the subject of much debate and confusion over the last few years as Spain’s many regional authorities began to clamp down on local planning permission licenses, deeming many illegal and reclaiming the land. As in the case of the Priors they saw a perfectly acceptable £600,000 villa razed to the ground before their very eyes, forcing them to live in their garage for the last 12 months.
So what has changed in Spain?
Despite the fact they have been left heartbroken, Len and Helen Prior have fought an ongoing battle with the Spanish authorities which has cost them £25,000 so far, and seen their case taken to the highest court in Spain. The Spanish constitutional court ruled in favour of the expat couple suggesting that the regional Spanish authorities acted “illegally” in knocking down their villa and failed to follow the correct procedures.
Those who have not looked in detail at the Spanish property market may be unaware that there are significant and powerful regional authorities in play across the country. They have the power, in theory, to overrule any decision by local officials and have used this power to reclaim land which has often resulted in the demolition of homes and properties.
How many homes are at risk?
Many people believe that the Prior case is the tip of the iceberg with suggestions that tens of thousands of homes, often occupied by expats, across Spain may be at risk. When you consider that many homes are worth hundreds of thousands of pounds there are literally millions and millions of pounds worth of properties under threat of demolition for very vague and varied reasons. The regional authorities have been looking to reclaim land for sometime in the name of the environment, access routes and other vague excuses.
The ruling from the Constitutional Court of Spain is a major step forward and the Priors believe this strengthens their case for a compensation claim in the region of €600,000. While there is every chance the ruling may be appealed, it should if nothing else at least slow down the onslaught of various demolition notices being handed out across Spain.
What will this do to the Spanish property market?
Spain, along with many other countries around the world, is having a very difficult time at the moment and the property market is under severe pressure because of the worldwide economic downturn and significant reduction in tourist numbers. However, the ongoing threat from local regional authorities has cast further doubts on the sense of acquiring property in Spain at this moment in time. Until there is a definitive ruling, which cannot be amended or revoked, we’re likely to see a vast number of foreign investors taking a step back from the Spanish property market with potentially more properties set to be listed for sale.
The EU stance on Spanish property regulations
The European Union has decided to take a very firm line with the Spanish authorities with regards to property licenses, property development and the reclaiming of land using retrospective regulations. After initially allowing Spain the opportunity to “right the wrongs” using its own legal system, the EU has now stepped in suggesting that many benefits of EU membership could be suspended unless the situation is resolved.
With a veiled threat to withdraw Spain’s influence over the EU budget and access to hundreds of millions of Euros in additional funding it would appear the Spanish authorities and Spanish legal system has finally taken notice. However, yet again we see a significant difference in planning and property regulations throughout Europe even though the EU Parliament has sought to offer equality to EU citizens moving around Europe.
Compensation claims for demolished properties
While there has been no definitive ruling regarding potential compensation for Len and Helen Prior there is no doubt that the ruling by the Spanish constitutional court is a significant plus point. Even though this particular expat couple have taken the headlines of late there are many more in a similar position who will now be looking towards the Spanish authorities and the Spanish government for significant compensation. This could in theory cost their Spanish government hundreds of millions of pounds and severely dent the country’s reputation as an expat colony with UK investors particularly concerned.
The ongoing property troubles of Len and Helen Prior have hit the headlines on a number of occasions over the last 18 to 24 months. The fact that their local planning permission license was granted with no problems, yet superseded by the regional authorities, struck fear into the hearts of many Spanish property investors and has had a significant impact in certain areas of the country. It would be wrong to suggest that all regional authorities have acted in a manner as experienced by the Priors but it is more the fact that retrospective regulations have been introduced which are causing significant concern for many property owners and property investors.
While the ruling by the Spanish constitutional court is a significant step forward for property owners and property investors in Spain, the issue of receiving payment of compensation may not be as straightforward. However, the threat to withdraw significant EU membership benefits and access to hundreds of millions of Euros in funding should hopefully “refocus” the minds of the Spanish authorities and encourage them to speed up the process.
There are many issues to consider when looking to buy property overseas and the Spanish situation has highlighted how difficult and how complicated the process can be. Taking legal advice from local practitioners is something which all property investors should consider as a form of protection in the event of unforeseen circumstances.