The pain in Spain

Thousands of Europeans are facing the prospect of losing their dream homes in Spain because of unscrupulous builders and a lack of government leadership, says Michael Cashman

As an MEP who is a member of the Socialist group, I welcomethe reelection of the Zapatero government in Spain. One of the biggestchallenges he now faces is how to revive the Spanish economy. Spain’seconomic growth was underpinned by a huge property development boom, but nowthe bubble has finally burst. Although caused partly by global economic forces,it was also due to irregularities in Spain’s property laws and massiveover-supply. Not only is the average native Spaniard affected by this, but soare nearly a million Europeans who have bought property and moved to Spain. Many arenot only facing the problem of their property losing value but also the actualthreat of their homes being demolished. This situation has been caused by a mixof unscrupulous property developers taking advantage of loopholes in currentland laws, corrupt local politicians allowing massive development to take placeunchecked, and the inconsistent application of complicated land laws causing muchconfusion and bafflement to home buyers.

To add to this toxic paella, the situation is made worse bythe unwillingness of local, regional and national Spanish authorities to showresponsibility or leadership in dealing with this issue. Even the judiciaryseems set against those who face the threat of demolition. For many peoplecaught up in this problem, the dream of living in Spain has now turned into anightmare.

I should know. As vice chair of the European parliament’spetitions committee, I have received hundreds of heartbreaking emails andletters over the last few years from people who are facing ruin. They haveploughed their life savings into their dream home in the sun and now face theserious prospect of seeing these dreams turned into dust and rubble. In the Marbella region alone,4500 families face court decisions on whether their house will be demolished orlegalised.

Spain’sproperty development has been staggering, with over 800,000 houses being builtannually over the past decade, more than in France,Germany and Italycombined.  But this was done mainly withlittle thought for planning or the environmental costs. British buyers alonespent nearly €15bn in 2004-2005 in the Spanish property market, while thousandsof Germans, French, Scandinavians and other EU nationals also bought homes in Spain,believing that they were purchasing legally built properties. Little did theyknow that the deeds to their property were not worth the paper they wereprinted on. This crisis is not merely a British problem but one that hasaffected thousands of people from numerous EU countries.

The highest concentration of development took place in Valencia, wherelocal planning and environmental laws were ignored and massive development tookplace. To curb unhindered property development and speculation, the Valencianland law (LRAU) was adopted in 1994. In reality, unprincipled propertydevelopers took advantage of loopholes in the law, and reaped huge profits. Thelaw was used to reclassify land for development or ‘urbanisation’. The new law(LUV) introduced in 2006 failed to rectify the problems, despite the Europeanparliament producing its recommendations in plenary. Owners of thisreclassified land are forced to give up 10 per cent of their land withoutcompensation as a contribution to the provision of utilities. They are alsoobliged to contribute either in land or in cash towards the cost of buildingthe entire infrastructure for the whole of the development area. To makematters worse for the property owners, they have no say in the infrastructurerequired or how much it will cost. If they do not pay in advance, they facetheir property being ‘embargoed’ and the development proceeds anyway.

The property problems in Valenciahave now spread to other parts of Spainsuch as Andalusia, Murciaand Madrid.  Though this crisis is about the interpretationand implementation of property laws by Spain, it is clear to see that theapplication of the law has led to serious abuse of the most elementary rightsas recognised on an EU basis - consumer rights and property rights – and thatEU directives on the environment, public procurement and consumer protectionhave also been disregarded. Fundamental individual and collective rightscontained within the EU treaties have been also ignored.

Even in the face of such legal uncertainties, and theprospect of not knowing if or when their house will be demolished, the spiritof the thousands of European expats living in Spain has not been broken. Over20,000 people have petitioned parliament, and on the three fact-findingmissions that we undertook to Spainwe met many of these people and their representatives. They are as determinedas ever to seek justice. There have been some positive results from theirefforts. The European commission has warned the Spanish government to adhere toEU laws concerning public procurement and the need to be transparent, puttingthe Spanish government on notice of legal action before the European court ofjustice. The petitions committee will draw up a further report with additionalrecommendations. I have called for a moratorium on any further urbanisationplans and a moratorium on demolitions of legally purchased property until theSpanish government, along with the regional and local authorities, agree towork towards a coherent and practical policy to resolve this crisis.  A solution to this self-made scandal will notonly help those who have been affected by Spain’s land law irregularities, itwill also instil confidence in the Spanish property market. I believe it isalso time for an EU directive on property title to ensure protection forpurchasers in the future. The Spanish economy will recover, but those peoplewho have been affected by this nightmare may find it harder to do so.