Buying abroad - The obstacles
Want to own a property abroad? It's not always as simple as you think. We take a look at six places, six problems and how to avoid them
Featured June 08Want to own a property abroad? It's not always as simple as you think. We take a look at six places, six problems and how to avoid them
WORDS BY ZOE DARE HALL
IT MAY BE CRUNCH TIME, ECONOMICALLY SPEAKING, BUT THAT DOESN'T STOP US HARBOURING THOSE DREAMS OF HOLIDAY HOMES IN SUNNY PLACES. When it's all doom and gloom at home, what is more appealing? By 2012, 4.5 million British people will own a holiday home abroad, according to Overseas Property Professional. And the old favourites remain top of our list; Spain and France the perennial winners, with Italy, Portugal and Greece rising up the ranks.
As anyone who has bought a home in the UK will know, the fun part is the window shopping. Once the buying process begins, the stress starts. Add to that the complexities of a foreign country -fluctuating exchange rates, unfamiliar legal systems, hidden taxes and cultural quirks-and you will want to cling on to good, trustworthy advisers every step of the way.
It's not just in emerging markets that buyers can get caught out. Some of the biggest obstacles to a smooth house purchase can be found in Spain, from the mere hiccups of mistranslations to the potential catastrophe of finding you are about to sign on a house that shouldn't even be there.
So before you go near an estate agent, do some serious research, advises David Cox from Property Frontiers, and author of Where To Buy Property Abroad. In this book, he risk rates different countries, with Spain and Cyprus as a high-risk five stars, and Italy and Greece as a low-risk one star.
Spain
The issue: Planning
Spain is the number one choice for 25% of Brits who buy abroad, but it's not without its obstacles, most of which boil down to planning, says Andrew Langton, Chairman of Aylesford International (www.aylesford.com). "Planning encompasses all of the key problems that have led Spain to over-build 700,000 houses a year. There aren't enough people in Europe to occupy them all. And now the Spaniards will suffer the recession more than anyone else in Europe," he says. "People have had their houses demolished because they didn't have the appropriate planning or because planning department officials granted something without consent. It's a very sensitive subject."
The solution: With most of the mayors implicated in planning permission scandals behind bars, a clean-up operation is in progress in Marbella. "You can't get permission to build a garden shed without paperwork," says David Honeyman, MD of Andalucian Dream Homes (www.adhspain. com). "Marbella has become one of the safest places on the coast to buy, because no lawyer or bank will touch a property they don't think is 100% safe."
But knowing your home is legal is essential, and for that you need a good, independent, English-speaking lawyer. "Make sure you see the nota simple, a Land Registry document that confirms ownership of the property, its boundaries and any outstanding charges or debts, and all properties should have a cedula de habitabilidad-a licence from the town hall saying all planning/construction has been approved," says Alex Vaughan from Lucas Fox (www.lucasfox.com).
With off-plan properties, scrutinise the building licenses, proof-of-land ownership and bank guarantee to protect your money should the developer go bust. And turn up in person at the notary's office to complete on the property. Most British buyers don't-and may never realise the mistakes they have signed away.
France
The issue: Inheritance laws
France's strict inheritance laws give children legally protected shares in the property, to which they are entitled on the death of their parent. "It's almost impossible to disinherit your children by leaving your property in a will to someone else," says Alan Lambert from French property specialist VEF (www.vefuk.com). The surviving spouse usually gets a quarter share of the property, "so they may find themselves in joint ownership with their children or step-children if their late spouse had children from a previous marriage," says Lambert. "It comes as a general surprise to most buyers as it's so unknown in the UK or Ireland, and it can be an obstacle to achieving what you want."
The solution: Depending on personal circumstances, you can draw up a "marriage contract" in application of the Hague Convention, so that the property is owned as a 100% joint asset and can be left to a partner.
You can also buy the house through a property-holding company or SCI (Société Civil Immobilière), so rather than own the property as individuals, you own a share of the company. "It's not necessarily the most cost-effective, straightforward or even tax efficient way of buying property in France however, so the vast majority of our clients choose to buy in their own names," says Lambert, "especially since Sarkozy has introduced more favourable inheritance tax laws between spouses and between parents and children. Spouses are now exempt from paying inheritance tax and on the death of a parent, each child benefits from a €151,950 tax-free nil rate band."
Turkey
The issue: Getting the go-ahead from the army before buying
In certain areas of Turkey, notably those nearest the Greek islands, including the Turgutreis area of the Bodrum Peninsula, military restrictions prevent non-Turkish nationals from buying property or land. In any property purchase in Turkey, you need to get military clearance, and foreigners cannot buy more than 2.5 hectares of land anywhere in the country. Turkey has also just frozen the issuing of title deeds to foreign buyers until July 16th while it amends its property laws. They are likely to make it impossible for foreign companies, as well as individuals, to buy up large tracts of land.
The solution: Be certain that you're not buying in an area that's restricted to Turkish citizens only. "There are a few pockets around the Bodrum Peninsula, which is popular with British buyers, and a lot of money can change hands before you sign contracts and realise you're stuck with something you don't legitimately own," says Julian Walker from Turkey specialist Spot Blue (www.spotblue.co.uk). "It all comes back to using a good lawyer," he adds.
As for military clearance, that's just part of the buying process, says Walker, "like the searches on a house in the UK. I've never known anyone to be knocked back as a result."
Robert Nixon from Nirvana International (www.nirvana.international.com) adds that while the conveyancing system in Turkey is one of the easiest in Europe, "you need to be patient for six months before you receive the title deeds of your property, as it takes this amount of time to get military permission." Regarding the suspension of title deeds for foreigners, it's a case of waiting till July to complete.
Switzerland
The issue: Restrictions on foreign ownership of property
Switzerland has tight rules on where and what property foreigners can buy, as set out in the country's property laws, called Lex Koller, which are due to be abolished by 2012. Currently foreigners can only buy in certain areas-you can forget Zermatt and St Moritz for starters. And each canton has a limited number of permits to allocate to foreign investors each year.
Last year's moratorium on issuing permits in the Valais canton -which includes the popular ski resort of Verbier-threw a further spanner in the works, though was designed to clear the backlog of permit requests that were taking years to process. Non-residents can buy only one property in Switzerland, and of no more than 200m2 in build size.
In some areas, you cannot sell within a certain number of years, to prevent investors from artificially pushing up prices by buying and selling multiple properties in quick succession.
The solution: Even if the Lex Koller is abolished, there will still be restrictions on where foreigners can invest. "But there are still many areas of Switzerland that provide a hugely appealing investment and second home destination, where there are more authorisations available, a far shorter waiting list and new developments being created," says Sean Collins, MD of Pure International (www.pureintl.com).
"Canton Vaud is hugely popular. You can buy in a less well-known, better-value resort, such as Château d'Oex and still ski the Gstaad Valley. The Ticino and Grison cantons are also stunning areas where, due to minimal levels of demand in the past, there are excellent opportunities to purchase as a non-Swiss national.
Bulgaria
The issue: Land ownership
Foreigners can't buy land in Bulgaria -though an amended law in 2007 allows ownership in some cases if the foreigner is a Bulgarian resident. So if you buy a house with land, you need to buy the property through a company, to own the freehold.
"The freehold issue can also come into play when you buy apartments," says Lance Nelson from Jet2Let Property (www.jet2letproperty.com). "If you don't buy through a company, you don't own the freehold, and that will deter most Bulgarian buyers when you come to sell. But most agents there will tell you not to bother setting up a company as it slows down the sales process," says Nelson. Also, make sure that the land you are buying is legitimate and belongs to the vendor. "There can be issues with land that has been carved up into smaller plots and given to various members of a family, so tracking them down can take time," he adds.
The solution: To buy land, you need to set up a Bulgarian registered company. This costs about €600 and requires depositing a further €2,600 in a company bank account while the company is registered. Once that process is complete, you can withdraw that sum and use it for any purpose. Use a good independent lawyer to verify the ownership and classification of the land, to ensure it is land you can build on.
Morocco
The issue: Arabic titles
Moroccan properties come either with Arabic title deeds (melkia) or French. Some-particularly old houses in the medina-come with no title at all, but you would be well advised to steer clear of these as without the deeds you are not the official owner.
The solution: "Absolutely make sure that the property you want to buy is titled. If it has a melkia, you should go through the process of changing it to a French title," says Philip Arnott from Moroccan Properties (www.moroccan-properties.com) in Marrakech. "It's a long-winded process that can take up to 18 months and requires two adouls (religious notaries) to read out the deeds line by line to one another. You can own the property legally with a Moroccan title, but it makes it cleaner and easier to sell the property if you change to a French one. Always get a good English-speaking lawyer and insist on a translator."
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