Costa Questions

Reporter Kathy Sheridan of the Irish times was recently in Marbella to report on the current Urbanistic situation. Premier Property International met with Kathy, together with representatives of Vital Abogados a prominent Marbella Law Firm to discuss the unfolding problems & possible legal consequences on the Costa del Sol.

Below is the article as it appeared in the Irish Times dated 04/11/06

On the Costa, the Irish are keeping their heads down. In the province of Malaga and specifically around Marbella and Puerto Banus, where foreigners pay a hefty premium for the glitzy address, there is what one Irishman describes delicately as "a certain agitation" among property owners. Well, you too would be agitated if your sunny, golf-side, trophy villa - not to mention the couple of investments you picked up for a song in the same block and might have "forgotten" to declare to the Revenue - stood in the shadow of an official bulldozer, amid talk of world-class money laundering and wholesale planning corruption.

 

PATRICK HUGHES, AN Irish accountant and managing director of Premier Property International in Marbella, remarks the large, fully-completed four-star Senator Hotel never got to open its doors. It too lies locked and chained, with a notice declaring that it did not have the required licences for 99 suites and may not therefore be used as a hotel. There is talk that it may be turned into a community facility, such as a nursing home.

Drive on to another vast, white-and-blue trim apartment development called Banana Beach. Despite the jolly name, it too is under particular scrutiny, and has become a byword for negative press for Malaga property.

"No one would discuss it openly, but many people saw - or should have seen - a lot of this coming," says one local agent. "Anyone looking at the Banana Beach development, for example, must have seen that it didn't fit." In fact, it was built on public parkland.

 

Patrick Hughes, whose property company was one of the first in the area and had a "huge stake" in the Irish market, admits that his company's business has "dropped dramatically" in recent years and that the Irish market is saturated. The investors have moved on to new territories in Germany and eastern Europe, leaving behind the less lucrative "lifestyle" buyer, in search of sun, beach, bargain-priced apartments and cheap flights.

Other agents have admitted that business has fallen by up to 70 per cent, coupled with stagnating prices and a poor outcome for investors seeking to sell out.

Nonetheless, reputable estate agents and lawyers such as Hughes and Dublin solicitor Tom McGrath are confident that the figure of 100,000 "illegal" homes said to be in danger of demolition throughout Spain is "probably exaggerated". Locally, it is believed that the true figure of those under threat is around 10-20 per cent of that. Many believe the government will do nothing more than make an example of a couple of buildings that are blatantly in contravention of planning policy, such as those built in a green zone. But some buildings will certainly face the wrecking ball. McGrath believes that this will be a "watershed", once it happens, for a country "that already has the basis of an excellent conveyancing system that will be a model for other countries to follow".

Daniel Dorronsoro Rueda, of Marbella law firm Vital Abogados, points out that while backhanders were undoubtedly being exchanged, even the most motivated lawyer could not have known that there was something awry with a licence carrying the genuine stamp of the town hall. Furthermore the provincial government, the Junta de Andalucia, cannot deny that it knew what was happening in Marbella, since it had an obligation to control and inspect each new development and accepted the hefty VAT take from each unit sold. The clincher, in his view, is that while much of this has been argued out in various courts for up to nine years in some cases, no warning was placed on the property register to alert lawyers of potential buyers that a particular property was under legal scrutiny. Although the provincial government sought an injunction from the high court to stop all building while their investigations continued, the court refused. So buying and selling continued regardless.

So how can the blame be apportioned? Some believe that the government will go after the developers and that deals will be done involving money or donations of land, rather than demolition of legally-owned, occupied buildings.

"They can't go demolishing buildings," says Hughes. "Look what tourism is worth to Spain." It is said that one in 10 workers who contributes to the social security system is involved in a tourism-related activity. But while tourist numbers are up on last year, there is some alarm that income is down, suggesting that that the rise is in quantity rather than quality.

DORRONSORO RUEDA BELIEVES that people whose properties are demolished will have to be compensated by government. "But the government doesn't have the money. There is no money in Marbella's coffers due to all the corruption." In fact, the Junta has had to agree a loan of 100 million to Marbella as "an exceptional measure" to meet the town's everyday administration costs, after more than a decade of being milked dry by successive corrupt mayors".

"What they will do is demolish maybe one big building, one owned by someone who built it knowingly without permission, where everything was illegal. It will be done as an example and that will be all over the media. The elections are next May. What government is going to vote itself out of business?" asks Dorronsoro Rueda's conveyancing partner, Araceli Alvarez de Sotomayor Lopez. Like many, she is convinced that the demolition threat is politically motivated, with an eye on the elections. "It's the Spanish way of doing things", adds Dorronsoro Rueda. "Suddenly there is a lot of talk, blah, blah, blah, and a lot of threats . . . Then nothing happens."

But there has been tough talk from official quarters, not least from the Andalucian president, Manuel Chaves, who has said that illegal buildings should be demolished and has called for judges to take a tough line when faced with illegal buildings and corruption. Regarding Marbella, he said that since 1995 the Junta had challenged more than 400 licences awarded by the town hall, but sentences had only been reached in 39 cases.