Licence to rip you off

Give a lawyer unlimited power over your affairs and you could be heading for serious trouble.

Sunday Times Home Section, 29 October 2006

Amid the thrill of buying property in Spain, many people make too little effort to understand the “boring but important” issues involved in the conveyancing process. But as the following experiences show, you ignore unexciting questions — like whether to grant a power of attorney or complete without a first occupancy licence — at your peril.

Power of attorney

Maureen Windale moved to southern Spain with dreams of living out her twilight years in a sunny rural idyll. Windale, 68, a pensioner from Sunderland, spent €150,000 (£100,000) — most of her life savings — on a newly built bungalow with one acre of olive groves in Andalusia’s Granada province.

At first, she was delighted with her new home just outside the village of Freila, 60 miles northeast of the city of Granada, and close to the provincial border with Almeria. “I was so happy with my big bungalow and its views of mountains and lakes,” says Windale, a widow who moved alone to Spain. But seven months later she is spending the rest of her savings on legal action against the vendor, the estate agent and the lawyer. What went wrong? It turns out that Windale was duped into buying an illegal property. Her title deeds make no mention of the bungalow, and the land is significantly less than she was promised. To cap it all, she does not even own the land outright; she shares it with her neighbour and the vendor.

Windale’s big mistake was to give sweeping powers of attorney (POA) to a lawyer recommended to her by the agent. The lawyer abused these powers to buy her an illegal property that was smaller than expected. The lawyer signed all the purchase documents on her behalf, and Windale had no idea what she was getting into. In hindsight, she realises that the lawyer was in cahoots with the agent and vendor in a scheme to defraud her.

“I let my heart rule my head, and now I’m so angry with myself,” says Windale. “The vendor was English and the estate agents were English, so I felt I could trust them. When this is done to you by your own people it hurts a lot more.”

Just like Windale, many Brits on inspection trips to Spain sign a power of attorney in a hurry before flying home. For many, it is an unintelligible document in Spanish giving a lawyer they have never met before extraordinary powers to make decisions on their behalf — with big financial implications.

Buying agent Andrew Lupton, head of Stacks Relocation Spain, believes that many Brits are too flippant about granting POAs when buying property. “It’s risky giving a POA to a relative stranger,” he explains. “They are powerful documents that can be easily abused, which is why we recommend people never sign POAs unless it’s among trusted family members. And if you must sign one, make sure the powers are limited very specifically to the job in hand.”

Licence of first occupancy

Imagine buying a new home in Spain but not being able to connect to the mains. This is what happens if you complete on a new property without a licence of first occupancy (LFO), or licencia de primera ocupación in Spanish. Utility companies need to see this licence – issued by the town hall – before they can supply domestic accounts with water and electricity. But some big new developments are not receiving LFOs, often because of planning irregularities.

Jayne Arthur, 48, and husband John, 52, from London, rue the day in early 2004 when they completed without one, paying £140,000 for a two-bed flat in Mijas, near the Costa del Sol. “We have been relying on the builder’s supply for two years, and the problems have put us under a lot of strain,” says Arthur.

Developers often promise to provide water and electricity from the builder’s supply until an LFO is granted. The problem here is that the supply can be unreliable, and there is always the risk that it might be cut off. “There was a power surge on the development a few weeks ago in which many neighbours lost their air conditioning, fridges and burglar alarms,” says Arthur. “We had to pay £200 to have our air conditioning fixed, and now we’ve decided to shut down the fuse box until the utilities are connected.”

Unfortunately for the Arthurs, their lawyer used a power of attorney to complete on their behalf without ensuring that an LFO was in place. “Other buyers didn’t complete until a few weeks ago, when an LFO was granted. But because we completed two years ago we’ve had to pay more than £2,700 in community fees, rates and wealth taxes for a holiday home we couldn’t use,” seethes Arthur.

Under Spanish law you can’t be forced to complete without an LFO, but that rarely stops unscrupulous developers from putting buyers under pressure to do so. The best advice to all buyers is don’t complete without one. Having said that, in some cases it may be the most sensible thing to do.

“The lack of an LFO sets the alarm bells ringing,” explains Michael Davies, a lawyer based in Almeria. “It means you have to do more checks than normal and find out exactly why there is no LFO. Once you know what the problem is you can decide how risky it is to complete without one.”

© Mark Stucklin (Spanish Property Insight)

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