Buyers of holiday homes need security
Here we go again. Two recent stories have shown the long-standing need for increased protection for people in one country who buy holiday homes or investment properties in another.
One comes from Bulgaria where a group of foreign purchasers staged what could only be described as a mass "break-in" to get control of a block of holiday flats that they had bought – for a total of $100 million (Dh367m) – in the ski resort of Bansko. For two years they have been denied entry to their flats after an influential local businessman took over the entire complex and refused to hand over the keys.
The other comes from Spain where 1,500 foreign buyers have paid $60m in total for "dream homes" on a development called Trampolin Hills in Murcia. The company behind it now appears to have gone into administration and the purchasers – many of which paid up to $120,000 each, five years ago – may well get nothing back.
There is nothing especially surprising in these stories. Sadly they are all too common in both Spain and Bulgaria. But they highlight the continuing lack of any real international law governing cross-border property purchase, even with countries within the EU or within other internationally-respected regional groupings.
In Britain some estate agents selling homes overseas have formed a trade body which is long on words but short on practical usefulness – the Federation of Overseas Property Developers Agents and Consultants (Fopdac). It has just merged with another estate agency body but retains what it calls a "code of ethics" supposedly governing the sale, rental and maintenance of property overseas.
The code is laced with essentially well-meaning but utterly unenforceable platitudes including:
- "Members shall make honesty and integrity the standard in all their dealings with clients and customers. They shall avoid misleading property descriptions, concealment of pertinent information and exaggerations in advertising"; and
- "Members shall use their best endeavours to encourage developments with due consideration for open space and proper environmental controls".
You would be right to think these statements do not have "member" agents quaking but in case they contravene one of Fopdac's rules, there is the ultimate sanction:
- "Should the Federation receive a complaint that a member has not acted in accordance with the Code of Ethics then the Committee should decide that a member is in default and he subsequently fails to rectify the matter as directed, then the member would be liable to immediate expulsion."
Of course, the people behind Fopdac are at least trying to do something but even if agents, developers and consultants actually want to safeguard buyers – and most surely do – then there is very little they can actually do in terms of cross-border legal protection.
At best the introduction of this code gives a spurious authority to those agents and developers who support it, and at worst it gives buyers an entirely unjustified reason to believe they have additional "protection" against something going wrong – and additional protection if they have a problem they want sorting out.
Just try asking the poor buyers in Spain and Bulgaria what use the code of ethics would have been, even if the agents and developers they dealt with had put a "member" sticker in their office window.
On top of that, almost no publicity has been given to the "code of ethics" so what minimal comfort and incentive it might provide to buyers is lost. To informed people, it looks suspiciously as if the absence of that publicity benefits the "members" who then get the kudos of joining without any real disbenefit if they are thrown out without anyone ever noticing.
The agents and developers who could do something more are the top end, respected ones with excellent track records – but most of those dismiss the likes of Fopdac's code of ethics as unenforceable… and of course they are right.
It is time for bodies such as the EU to treat this matter seriously. If it is possible to enforce international regulations over activities as diverse as money laundering, airport security and passport controls, why not similarly effective cross-border controls over ensuring the bona fides of developers and estate agents?
Far more people feel aggrieved over dubious property practices across the world than ever feel aggrieved by the effects of money-laundering and, I am tempted to think, far more than would ever be affected by terrorist attacks.
Many will say 'buyer beware' and just assume rough justice will teach naïve buyers a lesson. But that's unfair. Governments should act – and act now.
- The writer is Property Correspondent of The Observer. The views expressed are his own
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