Bloomberg News, 18 4 2007 

http://www.bloomberg.com/apps/news?pid=20601085&sid=a4eHzt8IyYi8&refer=europe 

Spanish Land Grab Threatens to Undermine Second-Home Gold Rush

By Sharon Smyth

April 18 (Bloomberg) -- Linda Brennan and Terry Venables are making their last stand. Bulldozers await the green light to demolish part of their century-old house in Spain's Valencia region, so they never leave the property unoccupied.

Venables, a former British soldier, shouts in rage as he points to stakes that mark out the foundations of vacation villas a developer plans to build on land where their pear trees and grape vines once flourished. Rather than being compensated, they received a bill for 69,900 euros ($91,670) to bring services such as power and water to their new, unwanted neighborhood.

``This is bloody daylight robbery,'' says Venables, 59, tossing a stone into the abandoned swimming pool they don't bother to fill anymore because it sits near the new property line. ``They are screwing us not once, but twice.''

Venables and Brennan are victims of a Spanish law that lets local governments claim land for projects such as schools and low- cost housing that benefit the community. As real-estate prices have soared in recent years, the rules have been used to free land for golf courses and resorts. Abuses are hurting Spain's reputation as Europe's most popular second-home market.

``What was designed for good has been used for bad,'' says Hugh Robertson, a London-based partner at Irwin Mitchell, a law firm representing British property owners in Spain.

The land claims are part of a web of questionable real-estate transactions, including projects completed with illegal building permits or no permission at all. Altogether, 102 cases of urban corruption have been opened in Spain, according to Greenpeace International, which is campaigning against damage to the Mediterranean and Atlantic coastlines.

European Investigation

On April 11, the European Parliament's Committee on Petitions issued a report detailing a laundry list of concerns uncovered during a trip to Valencia, Andalusia and Madrid. They range from the limited public interest of some developments and arbitrary costs for infrastructure to a lack of recourse for property owners and destruction of national parks, according to the report.

``Town councils have concocted urban development plans less because of their real requirements related to population growth and tourism, and more because of what often appears as their greed and avarice,'' the committee said. Victims of the land grab law, including Spaniards and foreigners, number in the ``tens of thousands,'' it said.

The property developer in Aspe, near Alicante, says it did everything legally when submitting plans for 18 vacation villas to the town hall in 2000, two years before Brennan and Venables bought their house.

Boost in Prices?

``Everything we have done is completely legal,'' says Manuel Sanchez, manager of Residencial Virgen de las Nieves, who placed the blame on the British homeowners. ``They should have checked with the town hall first and asked if there were any developments going on in the area before purchasing.''

The couple should be ``grateful for all the extra amenities our development will bring,'' as well as for the resulting boost in real-estate prices, Sanchez says.

The mayor of Aspe, Roberto Iglesias, and the head of town planning, Juan Manuel Padilla, didn't respond to requests for comment left with the secretary they share.

Last week, a court in Alicante decided to investigate a separate complaint against the mayor by six Aspe residents who said he coerced them into selling their land to a developer for 18 euros a square meter, according to legal documents obtained by Bloomberg News. The land had been valued at 41.88 euros a square meter in rural areas and 230 euros in industrial areas.

Marbella Scandal

Iglesias is scheduled to appear in court Sept. 21, the papers say. His assistant at the town hall, who declined to be named, said the mayor denied all the accusations in the claim.

Spain's real-estate industry made headlines last year when the urban planning adviser in the resort town of Marbella was arrested on charges he accepted bribes to award building permits. Juan Antonio Roca, who's still awaiting trial, had a network of officials who re-zoned rural land for development, multiplying its value, according to court rulings released last year.

Police seized 2.4 billion euros of assets, including two hotels, a Porsche, a Mercedes-Benz sports car and 103 horses, during raids on Roca's property, the rulings showed. On March 14, Roca's wife and daughter were detained on suspicion of money laundering.

His lawyer, Jose Anibal Alvarez, told El Mundo newspaper at the time that there wasn't enough evidence to jail his client. He didn't respond to messages left on his mobile phone. Information on who is representing his family wasn't available at the court.

`Tip of Iceberg'

``The Roca case was just the tip of the iceberg,'' says Charles Svoboda, a retired Canadian diplomat and Benissa resident who founded Abusos Urbanisticos No (No to Urban Abuses) in 2002 when his own home was threatened by a new development. ``The story publicized how shady the Spanish real-estate sector is and it's tarnishing the country's image among homebuyers.''

His group now has about 30,000 members.

Complaints center on an urban planning law approved in 1994 in Valencia that was originally meant to prevent the owners of rural land from standing in the way of projects for public benefit. Land owners are obliged to give up 10 percent of their land and then help the developer pay for infrastructure in cash or property, which can amount to more than half the land, according to the European Parliament report.

Developers aren't required to pay for the land. The law establishes that landowners are compensated by the increase in property values that come from rural land being reclassified as urban, says Francisco Pazo, a partner at Irwin Mitchell.

Law Modified

Bernardo del Rosal, a former ombudsman for the region of Valencia, says that while the essence of the law is right and has led to some very beneficial projects, it's written in a way that has left it open to interpretation.

``With the speculation in land prices, it's too tempting for people not to abuse it,'' says del Rosal, who is now a law professor at the University of Alicante. ``Part of the problem is that local governments are exercising no control whatsoever over what private developers are doing.''

In 2005, the law was modified to give homeowners two months to protest, rather than the original 15 days. A new law takes effect in July that obliges city officials to open all planning and development decisions to public comment.

The changes show that the government is committed to ending the abuses, said a spokesman for Prime Minister Jose Luis Rodriguez Zapatero. He asked not to be identified, citing government policy.

`Uncompromising'

Zapatero has pledged to punish anyone who misuses the law. ``This government will be uncompromising in the face of urban corruption in all towns, no matter which party has control there,'' he said Feb. 2 at a Socialist Party meeting in Madrid.

It may be too little too late. A doubling of property prices since 2000 and the battle over Spain's version of eminent domain are already contributing to a decline in the market.

New housing developments are being completed with 35 percent of units unsold in some coastal areas, according to a report by Madrid-based Aguirre Newman, a real-estate consulting firm. Selling times for new properties have risen to 35 months, up three months from a year ago.

Foreign investment in Spanish real estate dropped 11 percent to 4.9 billion euros last year, according to figures released by the Bank of Spain. That's the third consecutive annual decline. The bank doesn't break out commercial and residential investment.

``As long as the perception of scandal and that Spain is a risky place to buy exists, potential homebuyers will be scared off,'' said Mark Stucklin, head of Spanish Property Insight, a real-estate consulting firm in Barcelona.

Madness on Costa Blanca

Ross and Anza Hinton decided not to stick around Spain's Mediterranean coast to find out if the new law would make their investment more secure. They sold their house in Benissa, nicknamed ``Little Europe'' for its large expatriate community, and moved to Hungary last year.

Ross, a 64-year-old Briton, and his Austrian wife had spent two years fighting the construction of a golf course on their property before the developer's plans were shelved. They would have had to pay 300,000 euros -- the same amount they invested in their home and swimming pool -- to develop the land.

The couple was concerned the developer would eventually win approval for the project.

``Although we have opted for a cooler climate, we can at least live in peace and not be threatened by the sort of madness that is blighting the Costa Blanca,'' Ross said from the couple's new home in Szank, south of Budapest.

`Over My Dead Body'

Back in Aspe, Brennan and Venables have hired a lawyer to try to protect their property, which they bought for 196,000 euros in 2002. They used their retirement savings to pay the 69,900 euro assessment, which includes value-added tax, for providing public services.

Venables, who isn't related to the British football coach of the same name, says he once splayed himself across the ground when earthmoving equipment started heading toward the property. Since workers can't enter their land without permission, Brennan says she always stays at home when Venables goes out.

``If they try to bulldoze my home, it will literally be over my dead body,'' she says.

Today, Brennan and Venables's garden is filled with matted weeds because they don't have the heart to care for the flowers and shrubs they once prized.

``This has turned into a living nightmare home and neither of us want to live here anymore,'' he says.

To contact the reporter on this story: Sharon Smyth in Madrid at ssmyth2@bloomberg.net