We had been considering buying a property in Spain for some time. The thought of our own villa with a pool located in a nice plush green valley with views of the sea and that lovely warm Mediterranean temperature. Who hasn't thought of buying such a property in Spain!
So when we saw the advert in the local paper that there was to be a Spanish Property Exhibition at a nearby hotel we thought that it would be an excellent opportunity to see what kind of property we could buy with our hard earned nest egg.
The Exhibition was well organised. We signed in at the entrance and gave our contact details. We visited various stands. They had properties all over Spain and on all the Costas. Gosh so much to choose from!
The information from most of the exhibitors was that Spain was still a good place to buy and house price growth was in double figures, better than the UK and definitely better than leaving our money in our savings bond or investing in the stock market. Had we not heard that the Costas would be the California of Europe!
In addition if we did not intend to live in the property all year round some of the developers ran their own rental companies and we could expect 80% occupancy and for a new 2 bed villa with a communal pool in a relatively good area we could expect rental income of between 1000 and 1500 pounds a week!
We discussed our prospective purchase over a coffee at one of the stands whilst considering where and what we could get for our money. A two bedroom villa in Estepona on the Costa del Sol, our preferred destination as most low cost airlines fly to Malaga all year around, would cost 170,000 euros approximately 120,000 pounds. If we wanted to venture in land and buy our dream villa with sea views we were looking at about 300,000 euros which is approximately 210,000 pounds.
The Estepona property was within our price range but the villa was slightly over and we would need to borrow some money. However with the rental potential we didn't think we could go wrong.
No wonder so many Brits are buying in Spain.
We could not make our minds up so the nice gentleman said that it would not be a problem for us to inspect both properties and to then make a decision. However he also had a property in the process of construction with completion expected to be within a year, also in our price range and stage payments could be made during the construction process. Stage payments over a year suited us. What do we do next we asked. A deposit of 3,000 pounds would secure any of the three now and if we paid 500 pounds we could fly to Spain for the weekend and inspect all three and then make a decision. We agreed to fly out two weeks later and paid 3,500 pounds.
Our flight to Malaga seemed to be over not much after take-off and we were greeted by the nice gentleman at the airport who said that he would be looking after us for the weekend. Once our bags were unpacked and we were refreshed we met him to inspect the properties. We could hardly contain our excitement!
The property in Estepona was good but smaller than we expected and being on a complex of properties with a communal pool we would not have the privacy that we were looking for. The villa was beautiful! Although it was inland and slightly over our budget. We would make our decision after seeing the show house of the property in the process of construction.
The show house was stunning. Great views, marble floors, three bathrooms and our own swimming pool! We loved it!
The nice gentleman said that the property should be completed within a year. He would introduce us to a lawyer who spoke some English who could agree the contract with the developer and then payments would be made. The lawyer would act for both parties to save on costs. Did he require anything else we enquired. As there was great demand for this particular property and he had various showings later on that day a payment to bring the deposit paid up to 10% would secure the property. We were reluctant to make any further payments without seeing the lawyer but the nice gentleman said that if we backed out of the purchase he could sell the property again tomorrow and maybe even make us some money . Convinced we had found our dream villa and frightened we would not find anywhere else at the same price without going through the stressful house hunting process again and incurring more costs, we paid the balance payment and returned to the Hotel to enjoy the rest of our holiday.
When we arrived home we contacted the lawyer who advised us that we should budget for 15% costs on top of the purchase price and his fees would be 3% of the purchase price.
We thought his fees were a bit steep and asked him to send us the dates when the next the payments would be made and the contract. The contract arrived in Spanish. We asked for an English version but were told that the contract was the developers contract and no changes could be made so it was pointless having it translated. He asked us for the next payment. We said that until the developer sent us a contract in English we would not pay any more money. He advised us that in accordance with the contract if we did not make the payments we would lose 30% of monies paid. We were never told about this.
We arranged a translation of the contract and were horrified to find that the contract was one-side in favour of the developer. We requested a meeting with our lawyer, the estate agent and the developer to find out exactly when the property would be built. The developer was too busy but the property would be built in about two years time. We told him we had been advised that it would be ready in a years' time. He laughed. We asked the estate agent if he could re-sell the property for us and he said that it was not a good time to buy and the contract that we signed did not allow this. He also advised us that rental incomes had plummeted!
We decided to instruct our own independent lawyer and incurred more costs. The contract could not be changed as our first lawyer had signed this on our behalf and we had paid money to the developer, which committed us to the purchase.
Two years later we completed the purchase with a sour taste in our mouths. Why? Because we should have done our homework on the area, asked how much the total cost of purchase would be, instructed an independent lawyer and consulted independent rental companies on the rental income.
Alex Radford is a Solicitor & Partner at De Cotta McKenna y Santafé, who can assist with purchases of property in Spain.