The dream of a new life on the Costa del Sol has turned sour for thousands of British expatriates as a series of legal and financial scandals threatens to take away their homes.
An investigation into a £200m building scam involving money allegedly stolen from a Russian oil company has coincided with a crackdown on illegal building and a mis-selling dispute involving one of Spain’s biggest developers of holiday homes. Thousands of owners along the coast between Malaga and Gibraltar, a prime location for Britons, face financial ruin.
“The Costa del Sol market is in crisis,” said Mark Stucklin, director of the market analysts Spanish Property Insight. “One scandal would have been bad enough, but for three to hit at once is devastating.”
The trouble began last month in Marbella when police raided the offices of Fernando del Valle, the head of a local law firm. He is alleged to have helped clients invest as much as £200m from dubious sources in holiday-home developments through anonymous trusts in Gibraltar. Francisco Javier Nuñez, the lawyer for del Valle, 57, says his client strenuously denies any wrongdoing.
As part of the money-laundering inquiry, called Operation White Whale, ownership of 251 properties has been declared “frozen” by the courts. Police believe the homes may have been built with “dirty” money, including some illegally siphoned from Yukos, the Russian oil giant that disintegrated amid financial scandal. Buyers fear their homes may be sold to repay Yukos creditors.
Those affected include Edward Hunt, 62, a carpenter from Dorset, and his wife Angela, 47, who bought a £110,000 one-bedroom flat in a big new development at Alcaidesa, near Gibraltar. The couple moved in last month but are now locked in a legal battle to establish whether they own the apartment.
“We assume we are the owners, but we have not received the title deeds and we have had no proper contact with the developers or our lawyers since the money-laundering scandal broke,” said Hunt.
“I’m a carpenter. I want to retire and work on my boat. I don’t know anything about Yukos and all I can think about is what will happen to my money. Angela is in tears about this every night.” The Hunts are not alone. Dozens of Britons bought in the Alcaidesa development, marketed by Ocean Estates, a large Anglo-Spanish property agency. Lawyers and property analysts estimate that several hundred Britons have been affected by the court order.
“Fernando del Valle’s firm was recommended by some big estate agents and acted for thousands of overseas buyers, many of them British,” said Stucklin. Operation White Whale has coincided with a crackdown on illegal building. Last month the Andalusian government, based in Seville, said it planned to demolish up to 1,600 homes that had been ruled by the Andalusian high court to have been built illegally. Officials had approved dozens of developments on greenbelt land.
One home earmarked for the wrecking ball is a two-bedroom flat in Banana Beach, Marbella, that Russell Ellis, 61, a builder from Devon, and his wife Lynn, 53, bought three years ago for £80,000. There are no plans to offer compensation.
“We bought in good faith,” said Ellis. “We used a good lawyer and checked planning permission had been granted.
“The development should not have been built because it is too close to the beach and is on land earmarked for the local community If the Andalusian government orders demolition, my two summers in the sun will have cost me £40,000 each and I may end up with nothing.”
Lawyers trying to prevent demolition say 500 Britons have been caught up in the planning clampdown.
In the third scandal, thousand of Britons have invested in developments that have been put on hold and may never be built.
Paul McCall is one of them. Three years ago he moved from Bournemouth in Dorset, where he ran nightclubs, to the Hipodromo district, north of Fuengirola. He put down a £30,000 deposit on a unbuilt flat in a proposed development by Aifos on e of Spanish’s biggest developers.
The company, which is promoted by the singer Julio Iglesias, has dozens of offices in Spain, London, Manchester and Dublin. Aifos said it would get planning permission and start building within a year.
Three years on, the development of Aifos Hipodromo has not been started. “Not a brick has been laid or a trench dug. Aifos says it cannot get planning permission after all,” said McCall. ”I should be sitting on my patio, enjoying a glass of wine with my girlfriend Dionne. As it is, we are being thrown out of the flat we rent in Mijas next week and we don’t know where we are going to go.”
David Greene, a British chartered accountant who runs de Bocues Properties, an agency in Fuengirola, estimates that as may as 2,500 British buyers have been mis-sold Aifos homes along the coast.
“Aifos takes deposits and assures buyers that planning permission is a formality,” he said. “It is not and never has been. Aifos is so big that I see new cases every week”:
Aifos has offered to return deposits to disgruntled buyers with interest but many have declined, saying it would leave them out of pocket because property prices have been rising sharply.” I want the home I bought three years ago”. Said McCall. The scandals have focused attention on some of the unattractive realities of the Costa del Sol property market."
”Mindless, unfettered construction and speculation have damaged the area and corrupted the market. It’s heading down,” said Stucklin. Estimates of house prices rises in Spain last year range from 11%-19%. New properties in the Malaga area went up 10.8% in the first half of the year alone. Most experts predict a sharp slowdown this year.
Jose María Sanchez Alfonso, who runs a law practice in Fuengirola, said: “Nobody would discuss it in public, but in private everyone who works in property on the Costa del Sol has been predicting a crisis like the one we have now.
”Prices have been rocketing because of a flood of legitimate buyers and a influx of black cash from unconventional sources. The over-the-top market has encouraged sharp prices among leading developers anxious to make a fast buck”
