Antonio Flores’ Blog

A Marbella judge ruling has been overturned by the Malaga High Court, once again proving that the interpretation of Spanish property law can vary from white to black in a matter of moments, depending on who is given to the opportunity to opine.

In this specific case the Marbella Judge stated that the lack of First Occupancy License for a property at Santa María Green Hills was not directly attributable to the developer (thereby signalling that it was not an essential part of the contract) and concluded that the buyers could not cancel the contract on those grounds, given that the property was finished and ready for occupation pending compliance with the Marbella General Plan. In this judgement the magistrate even warded costs to the developer.

The Malaga High Court´s conclusion is exactly…the opposite: that the First Occupancy License is an essential part of the contract and that irrespective of the legalization of the development under the new Marbella Plan the developer was at fault for not having delivered a fully legal property on time.

Interestingly my good friend Luis Gonzalez has just won a case against Aifos on behalf of a client who had bought in the development Calahonda Hills, though Ocean View Properties. This judgement is interesting because it forces the developer to return the deposit (40K Euros) plus interest but also the price increase of this same property should the client had wished to buy a similar property at the time of filing the case (what we would call loss suffered or gain prevented). Conversely the judge does not consider the claimant to have suffered any mental anguish over this plight and decides not to award compensatory moral damages.

The above shows that we are still far from knowing what will Spanish judges think and do when presented with similar cases and if there will ever be some form of consensus over this crucial matter. If only someone could get them together in a pub for a round of pints I´m sure we would not have these so-far-apart opinions!

Antonio Flores Litigation Aifos, Calahonda Hills, Ocean View Properties, Santa Maria Green Hills

The weakness of the pound is already affecting thousands of property owners with an Euro mortgage, and according to many it would not seem that the English currency will revive in the short run. As we worry about the adverse effect of the exchange rate, some banks are already making predictions in respect of where the pound will be in June 2009, and you would be surprised that they are mostly well away from the terrifying “parity” word.

The chart below has been taken directly from the Sunday Times (Money supplement):

Even if the worst forecaster got it right, the Euribor applied by the banks (higher than the Euro current interest rate) is now at 3.025%, and there is almost unanimity in that they should be in the region of 2% by mid next year, which would mean that mortgages would cost up to 34% less than at the highest Euribor mark (5.5%), at the beginning of October 2008, comfortably making up for the depreciation of the British currency.

Expats and pensioners living on a fixed income paid out in sterling may have lost in real terms approximately 30% of their purchasing power in the eurozone. This is certainly a problem for many thousands of people but is already being tackled successfully by many by either buying in Gibraltar, a good option for Costa del Sol residents, or buying by internet in the UK, for certain products.

And for many who have decided to sell, the benefits are clear: if they managed to buy at a time when the sterling was trading at 1.5 times to the euro and can sell when a euro buys you 1.08 pounds, they are getting a good deal. In this respect many private purchase contract holders who have pulled out of their contracts due to contractual default by the developer are getting, in some instances, 40% more pounds than those they invested.

Finally, anyone deciding to buy one of many bargains which can now be found will necessarily need to take out a Euro mortgage to cover as much as possible of the purchase price so that the immediate exposure to currency risk is limited to the deposit (for example, a typical 70% mortgage). Of course, the euro mortgage repayments will still have to be funded from sterling sources, but at least the exposure to the unfavourable exchange rate is minimal and staggered over a considerable time. And when the pound/euro exchange rate returns to normal values, your mortgage capital in euros will still be the same, but in pounds it will have shrunk to 70-80% of the original amount.

If you live in the UK and have a property in Spain, and you are struggling to pay the mortgage, I would advise that you rent the property out, even if it’s below market rental value. You will be receiving the rent in euros which will cover a large amount of the monthly mortgage repayment. If you are worried about non-paying tenants, you must note that the goverment is enacting new laws which will allow evictions to be performed in a very short period of time.

Antonio Flores Uncategorized