The threat to demolish up to 100,000 holiday homes follows a decade of planning scandals, writes Kathy Sheridan in Marbella
On the Costa, the Irish are keeping their heads down. In the province of Málaga, and specifically around Marbella and Puerto Banus, where foreigners pay a hefty premium for the glitzy address, there is what one Irishman describes delicately as "a certain agitation" among property owners. Well, you too would be agitated if your sunny, golf-side, trophy villa - not to mention the couple of investments you picked up for a song in the same block and might have "forgotten" to declare to the Revenue - stood in the shadow of an official bulldozer, amid talk of world-class money laundering and wholesale planning corruption.
It's not only the Irish, of course. No one is immune. The former prime minister, José María Aznar, owns an apartment in Marbella in a building that wasn't properly licensed. Actor and local hero Antonio Banderas has also found himself in a tricky situation. Like most of the property owners caught up in the fiasco, they probably had no idea that there were problems around the planning licences.
In a series of investigations that have made a hero out of judge Miguel Angel Torres, which began with arrests last year in connection with a €250 million money-laundering ring, the Marbella town council has been dissolved, some local councillors and officials have been hauled off to jail, and thousands of high-end apartment blocks, villas and a few four- and five-star hotels are threatened with demolition.
The debris in the wake of corrupt officialdom includes an outraged populace (which has organised two large protest marches, one attracting 10,000 people), a politically estranged provincial government, a dangerously embarrassed national government and, crucially, up to 30,000 "illegal" homes in Málaga alone, of which around 5,000 are under particularly severe scrutiny.
To get a sense of the local impact, imagine if Frank Dunlop's information to the planning tribunal was all accepted by the planning authorities and the population rose up in fury, organising marches to demand that planning laws be enforced in the case of corrupt rezonings. Imagine the repercussions if demolition teams then moved in on various vast developments that had been voted or signed into existence by dubious means.
Back on the Costa del Sol, on the motorway from Málaga to Marbella, beneath the rocky scrublands amid massive billboard advertisements for golf and property - "Wake Up to the Dream!" - is one for a development called Señorío de Guadalmina is particularly prominent and recurs every few kilometres.
Follow the dream into the town of San Pedro and there it is, such as it is: a vast plot of land, complete with street lighting, roads, a massive apartment block and a sales office for the developer giant, Inmobiliaria Osuna. Only a fraction of the land is built upon, however. The sales office is closed. A hint as to why this is lies in the black and white police tape across the site entrance. Zoned partly for recreation facililities and small communities, the builders never got beyond Block A, where they over-stepped the planning permission. They simply added two more floors than were allowed for in the plans, a ploy that appears to have become fairly commonplace around Málaga in the past 15 years of a corrupt town hall.
In other cases, permission for 20 villas with ample green space became a block of twice that many townhouses with little green space, or a permit for townhouses simply morphed into a vastly more profitable apartment block.Down at a large development called Casablanca Beach, its €500,000 apartments were built so close to the beach that anyone with a grain of sense might have sniffed trouble. That too is closed off with police tape. At the equally upmarket Guadalmina Villas, five villas priced at around €750,000 each, and backing onto Guadalmina golf course, are locked up, with chains on the gates.
PATRICK HUGHES, AN Irish accountant and managing director of Premier Property International in Marbella, remarks that his daughter was on the verge of buying one a couple of years ago when their lawyer noticed "something tricky" in the licences. Although developed by one of Spain's largest construction companies, they were built in a "green zone".
Further on, the large, fully-completed four-star Senator Hotel never got to open its doors. It too lies locked and chained, with a notice declaring that it did not have the required licences for 99 suites and may not therefore be used as a hotel. There is talk that it may be turned into a community facility, such as a nursing home.
Drive on to another vast, white-and-blue trim apartment development called Banana Beach. Despite the jolly name, it too is under particular scrutiny, and has become a byword for negative press for Málaga property.
"No one would discuss it openly, but many people saw - or should have seen - a lot of this coming," says one local agent. "Anyone looking at the Banana Beach development, for example, must have seen that it didn't fit." In fact, it was built on public parkland.
One Irish couple who bought a two-bed apartment there three years ago for about €125,000 admit they are "extremely worried but have our fingers crossed that all the reassurances from agents and lawyers actually mean something".
Jack and Yvonne Burditt, an English couple looking to invest their life savings in a home for their retirement, paid more than €250,000 for a beach-front apartment on Banana Beach. Despite a welter of assurances that no local authority would swing a wrecking ball on such a vast, fully-occupied development, the elderly couple sit nervously among their packing cases, convinced that the bulldozers are on the way, says Gwilym Rhys-Jones, an adviser and investigator with the Costa del Sol Action Group.
"Marbella could end up looking like Pompeii," says Rhys-Jones with a wry laugh.
Local agents and lawyers insist vigorously that it won't. "They would say that, wouldn't they?" counters Rhys-Jones.
Patrick Hughes, whose property company was one of the first in the area and had a "huge stake" in the Irish market, admits that his company's business has "dropped dramatically" in recent years and that the Irish market is saturated. The investors have moved on to new territories in Germany and eastern Europe, leaving behind the less lucrative "lifestyle" buyer, in search of sun, beach, bargain-priced apartments and cheap flights.
Other agents have admitted that business has fallen by up to 70 per cent, coupled with stagnating prices and a poor outcome for investors seeking to sell out.
Nonetheless, reputable estate agents and lawyers such as Hughes and Dublin solicitor Tom McGrath are confident that the figure of 100,000 "illegal" homes said to be in danger of demolition throughout Spain is "probably exaggerated". Locally, it is believed that the true figure of those under threat is around 10-20 per cent of that. Many believe the government will do nothing more than make an example of a couple of buildings that are blatantly in contravention of planning policy, such as those built in a green zone. But some buildings will certainly face the wrecking ball. McGrath believes that this will be a "watershed", once it happens, for a country "that already has the basis of an excellent conveyancing system that will be a model for other countries to follow".
Daniel Dorronsoro Rueda, of Marbella law firm Vital Abogados, points out that while backhanders were undoubtedly being exchanged, even the most motivated lawyer could not have known that there was something awry with a licence carrying the genuine stamp of the town hall. Furthermore the provincial government, the Junta de Andalucia, cannot deny that it knew what was happening in Marbella, since it had an obligation to control and inspect each new development and accepted the hefty VAT take from each unit sold. The clincher, in his view, is that while much of this has been argued out in various courts for up to nine years in some cases, no warning was placed on the property register to alert lawyers of potential buyers that a particular property was under legal scrutiny. Although the provincial government sought an injunction from the high court to stop all building while their investigations continued, the court refused. So buying and selling continued regardless.
So how can the blame be apportioned? Some believe that the government will go after the developers and that deals will be done involving money or donations of land, rather than demolition of legally-owned, occupied buildings.
"They can't go demolishing buildings," says Hughes. "Look what tourism is worth to Spain." It is said that one in 10 workers who contributes to the social security system is involved in a tourism-related activity. But while tourist numbers are up on last year, there is some alarm that income is down, suggesting that that the rise is in quantity rather than quality.
DORRONSORO RUEDA BELIEVES that people whose properties are demolished will have to be compensated by government. "But the government doesn't have the money. There is no money in Marbella's coffers due to all the corruption." In fact, the Junta has had to agree a loan of €100 million to Marbella as "an exceptional measure" to meet the town's everyday administration costs, after more than a decade of being milked dry by successive corrupt mayors".
"What they will do is demolish maybe one big building, one owned by someone who built it knowingly without permission, where everything was illegal. It will be done as an example and that will be all over the media. The elections are next May. What government is going to vote itself out of business?" asks Dorronsoro Rueda's conveyancing partner, Araceli Alvarez de Sotomayor Lopez. Like many, she is convinced that the demolition threat is politically motivated, with an eye on the elections. "It's the Spanish way of doing things", adds Dorronsoro Rueda. "Suddenly there is a lot of talk, blah, blah, blah, and a lot of threats . . . Then nothing happens."
But there has been tough talk from official quarters, not least from the Andalucian president, Manuel Chaves, who has said that illegal buildings should be demolished and has called for judges to take a tough line when faced with illegal buildings and corruption. Regarding Marbella, he said that since 1995 the Junta had challenged more than 400 licences awarded by the town hall, but sentences had only been reached in 39 cases.
Meanwhile, the revelations about the former town hall denizens - which are covered in depth by Spanish and English-language newspapers such as Sur in English - continue to entertain and enrage the nation.
Last April, the then mayor of Marbella, Marisol Yague, councillors, developers, notaries, lawyers and businessmen were among 23 people arrested for their roles in the alleged racket headed, allegedly, by the 53-year-old chief of urban planning for Marbella, Juan Antonio Roca.
Roca - originally plucked from the dole queue in 1991 by then mayor Jesus Gil - faces charges of corruption and moneylaundering and is accused of heading a gang that obtained at least €2.4 billion in cash, valuables and property as bribes and backhanders for permitting illegal developments and granting municipal contracts. It is claimed that during his 15 years in the job, he approved some 600 developments, getting a kickback of at least 10 per cent of the villas, flats or land involved.
Allegedly, Roca regularly turned down developers' planning applications, then bought the land himself, changed the rules and built his own developments.
Multimillion euro scams - including kickbacks, ranging from the contractor for the municipal tow truck service, to the local bus service, to a verbal deal involving the owner of the
giant La Canada shopping centre, allowing him to extend the premises to house tennis courts and a café - were all mentioned at length in telephone taps, recently published in Spanish newspapers. In one police sting, €2 million was found by police in a car belonging to one of Roca's henchmen.
Taped conversations between Yague and Roca revealed the true hierarchy within the local authority. In one revealing exchange, when Roca brings up the subject of next year's local elections, Yague responds: "I have decided, but in any case I'll always do what you think best . . . Of course I'll tell you what I think but once again I'll do what you say . . . Good or bad, whatever you say, if it's best to say yes or to say no, or to find someone else, I'll always do what you say."
One of the two lawyers and close Roca collaborators who have turned into key state witnesses was scathing about Yague in a statement, saying that she "was incapable of making decisions, even if they were of little importance".
As for Yague's fellow councillors (14 of whom were charged along with 16 business people in a second wave of arrests), Roca bares his contempt: "In normal circumstances they wouldn't get a job as caretaker in their block of flats . . . Unfortunately we've got the lowest and the weakest in the world."
Another scam, whereby luxury cars found abandoned in Marbella were appropriated by the local police, saw one such car being used by Yague herself and her police officer boyfriend. In the court order sending her to prison this year, there was reference to her accepting cars from business people with whom the town hall was negotiating the tow-away concession and car-hire service for Marbella. Among the selection of transport was a Lexus, valued at nearly €50,000.
Meanwhile, Roca - in custody for more than seven months - has tried to explain away his many companies, telling the investigating judge he has a habit "of confusing what is mine with what I am dealing with". He claimed that many of his 120 different companies (needed to siphon off the money and gifts) belonged to his lawyers, adding that he was often referred to as "the boss" due to his strong personality.
WHAT HAPPENS NEXT will be scrupulously watched by locals and anyone with an interest of any kind in Spanish property or culture. Both Yague and her right-hand woman, Isabel Garcia Marcos - dubbed the Chaneles, or the Chanel Girls, by inmates in Alhaurin de la Torre prison - are out of jail for now. Only eight of the 72 arrested in the corruption case are still in prison, including Roca and another former mayor of Marbella, Julian Muñoz. No one is sure why some are still in and others have been released. The fact that Roca's confiscated jail diaries contained plans of the prison buildings, along with sketched portraits of prison officers, complete with their names, timetables, shifts worked and days off, may hold a clue.
Back in Ireland, those with a vested interest in Spain, and/or just a love of it, draw attention to the very differing regimes between the two countries in cases of planning corruption. John Mulligan, who runs Abodes.ie, which sells property in Spain, Hungary and Romania, contends that Spain has dealt well with the problem.
"It's distinctly different to here in that people there are going to jail. There's no way the whole administration would wind up in prison here, even though nothing has happened in Marbella that hasn't happened here. There they put them in jail; here we have a tribunal that goes round and round, and round and round."
Bulgaria
Buyers must beware in Bulgaria on a number of grounds: one is agents' exaggerated claims of rental yields and capital appreciation, another is clear title. Having to form a Bulgarian-registered firm to buy property, as foreigners must, isn't a problem - but buyers should get a trusted independent local lawyer to check title deeds and ownership disputes - the land registry in Bulgaria is sketchy.
Bulgaria is still being sold as a place with unbeatable value - but overdevelopment is reducing resale values and rental opportunities, depending on location. Also, beware of developers' tax dodges - for example, make sure the full purchase price is stated in the title deeds. If it is understated, the buyer will lose out by paying capital gains tax (CGT) on more profit than was actually made.
Croatia
As in Bulgaria and other countries of the former Yugoslavia, it's essential to check out title deeds and ownership disputes in countries such as this where the wars of the 1990s displaced many people. And if buying on a Croatian island or on the coast, always check that the property has been authorised: the Croatian government has taken to demolishing houses that were built without permission too close to the coastline, which is now a protected area.
Cyprus
Estate agents may call it "northern Cyprus", but to the Republic of Cyprus, it's "Turkish-occupied Cyprus" and Cyprus's ambassador to Ireland, Andreas Kakouris, warns Irish people not to buy property there. He says that 75 to 80 per cent of the property in the northern part of the island is either owned by Greek Cypriots or built on land owned by them. Their claim to this property still stands, 32 years after Turkey invaded Cyprus in 1974. Kakouris's message is simple: don't buy property in northern Cyprus if you want to avoid conflict over title in the future.
Dubai
Questions still remain about foreigners getting freehold title, especially for apartments and other communal properties, despite the Dubai government's promises of new laws to legalise freehold ownership by the end of the year. And, of course, the government can change any law at will.
Apart from this, some investors are concerned that it would be difficult to sell property there easily in the future, fearing that massive overdevelopment in the emirate will lead to a fall in values. Cautious investors also worry about its location in the volatile Middle East.
Turkey
Again, as in other rapidly growing markets, buyers in Turkey (Istanbul pictured below) must be very alert to sharp practice by selling agents: unscrupulous agents will suggest ways of evading tax and financial regulations - and buyers may pay dearly for buying something illegally when Turkish authorities eventually crack down. As in Bulgaria, beware of extravagant claims for rental returns and capital appreciation.
It's important to to get an independent local lawyer to check out title, although problems with foreigners being allowed to buy property have been cleared up since the beginning of the year. However, make sure to get "military permission" which all foreigners must obtain before buying. Normally this is just a formality unless you're buying a property close to an airport or military barracks - but it can take up to three months to come through. Frances O'Rourke