European Property Rights and Wrongs - Diana Wallis MEP
European Property Rights and Wrongs - Diana Wallis MEP
European Property Rights and Wrongs - Diana Wallis MEP
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Purchasing off plan: buying a property not yet built with only the developers’<br />
designs to go on may seem like a major risk in these more careful times, but in<br />
the property booms of the early 2000s the opportunity to make big profits buying<br />
<strong>and</strong> selling on seemed like a risk worth taking. The off-plan price was significantly<br />
cheaper than the built price (to reflect the risk that it was not built) <strong>and</strong> investors<br />
would then aim to re-sell at a profit once built. The problem sites are created<br />
by developers going bust <strong>and</strong> failing to finish the development, leaving some<br />
residents living in a ghost town with no amenities, or not being built at all due to<br />
bankruptcy or to a change in administration in local government sweeping away<br />
previous abuses in issuing permits. The purchasers will often have paid in instalments<br />
<strong>and</strong> face a long <strong>and</strong> complex legal battle to recover their payments or face<br />
living in a concrete jungle with no mains electricity or sanitation.<br />
Bank guarantees: For purchasers buying off plain in Spain Ley 57/68 required<br />
developers to bank deposits or instalments in a bank guarantee account where<br />
the funds would be kept separate <strong>and</strong> returned to the purchasers should the<br />
developer file for bankruptcy or fail to finish the property for another reason.<br />
Unfortunately some banks have refused to honour the scheme; either for technical<br />
reasons, such as the correct paperwork not being completed by the developer,<br />
or because they insist that the beneficiary obtains a court order before they will<br />
pay out. This is causing hardship to those affected who need to find the up front<br />
cost of lengthy litigation proceedings <strong>and</strong> legal advice in order to obtain the Court<br />
order, the costs will be recoverable in the end but many will not have the funds<br />
upfront, or the appetite, to take on litigation.<br />
Planning legislation: The so called “l<strong>and</strong> grab” laws in Valencia illustrate the<br />
risks posed by the LRAU <strong>and</strong> LUV planning laws, a model that was copied in other<br />
regions. These laws were first proposed to allow the urbanisation or development<br />
of rural areas to progress, but were applied too loosely <strong>and</strong> drafted too widely, allowing<br />
abuses by developers <strong>and</strong> unfettered urbanisation in an unsustainable way.<br />
Lack of information or due diligence: This can arise from uncertainty as to<br />
which tier of administration to consult for permits or certificates; for example in<br />
Spain there are certain documents which must be obtained from the municipal<br />
government <strong>and</strong> others from the Regional government. Public information may<br />
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<strong>European</strong> <strong>Property</strong> <strong>Wrongs</strong>