Schemes available include part-ownership, leaseback, retirement homes, timesharing and a holiday property bond, and are described below. Don’t rush into any of these schemes without fully researching the market and before you’re absolutely clear what you want and what you can realistically expect to get for your money.
Part-ownership in Spain
Part-ownership includes schemes such as a consortium of buyers owning shares in a property-owning company and part-ownership between family, friends or even strangers. Some developers offer a turn-key deal whereby a home is sold fully furnished and equipped. Part-ownership allows you to recoup your investment in savings on holiday costs and still retain your equity in the property.
A common deal is a ‘four-owner’ scheme (which many consider to be the optimum number of part-owners), where you buy a quarter of a property and can occupy it for up to three months a year. However, there’s no reason why there cannot be as many as 12 part-owners, with a month’s occupancy each per year (usually divided between high, medium and low seasons).
Part-ownership offers access to a size and quality of property that would otherwise be unimaginable, and it’s even possible to have a share in a substantial castle ( castillo), where a number of families could live together simultaneously and hardly ever see each other if they didn’t want to. Part-ownership can be a good choice for a family seeking a holiday home for a few weeks or months a year and has the added advantage that (because of the lower cost) a mortgage may be unnecessary.
It’s cheaper to buy a property privately with friends rather than from an agent or developer who offers this sort of scheme, where you may pay well above the market value for a share of a property (check the market value of a property to establish whether it’s good value). Part-ownership is much better value than a timeshare and needn’t cost much more. A water-tight contract must be drawn up by an experienced lawyer to protect the part-owners’ interests.
One of the best ways to get into part-ownership, if you can afford it, is to buy a property yourself and offer shares to others. This overcomes the problem of getting together a consortium of would-be owners and trying to agree on a purchase in advance, which is difficult unless it’s just a few friends or family members. Many people form a Spanish company to buy and manage the property, which can in turn be owned by a company in the part-owners’ home country, thus allowing any disputes to be dealt with under local law.
Each part-owner receives a number of shares depending on how much he has paid, entitling him to so many weeks occupancy a year. Owners don’t need to have equal shares and can be made direct title holders. If a part-owner wishes to sell his shares he must usually give first refusal to the other part-owners, although if they don’t wish to buy them and a new part-owner cannot be found, the property must be sold.
Leaseback in Spain
Leaseback or sale and leaseback schemes ( compraventa con subsiguiente arrendamiento) are designed for those seeking a holiday home for a limited number of weeks each year. Properties sold under a leaseback scheme are always located in popular resort areas, e.g. golf, ski or coastal resorts, where self-catering accommodation is in high demand.
Buying a property through a leaseback scheme allows a purchaser to buy a new property at less than its true cost, e.g. 30 per cent less than the list price. In return for the discount the property must be leased back to the developer, usually for 9 to 11 years, so that he can let it as self-catering holiday accommodation. The buyer owns the freehold of the property and the full price is shown in the title deed.
The purchaser is also given the right to occupy the property for a period each year, usually six or eight weeks, spread over high, medium and low seasons. These weeks can usually be let to provide income or possibly be exchanged with accommodation in another resort (as with a timeshare scheme). The developer furnishes and manages the property and pays the maintenance and bills (e.g. for utilities) during the term of the lease, even when the owner occupies the property.
It’s important to have a contract checked by your legal adviser to ensure that you receive vacant possession at the end of the leaseback period, without having to pay an indemnity charge, otherwise you could end up paying more than a property is worth.
A buyer may be able to buy out of a sale and leaseback scheme after a period, e.g. two years. Leaseback schemes are relatively uncommon in Spain.
Timesharing in Spain
Timesharing (multipropiedad), also known as ‘holiday ownership’, ‘vacation ownership’, ‘part-ownership’ or ‘holidays for life’, is easily the most popular form of part-ownership in Spain, where there are around 450 timeshare resorts with some 500,000 owners (90 per cent non-Spanish).
Timesharing has a dreadful reputation in Spain, where it’s often associated with fraud and crime, particularly on the costas and in the Balearic and Canary islands. Nevertheless, there are many reputable timeshare companies operating in Spain, where the best timeshare developments are on a par with luxury hotels and offer a wide range of facilities, including bars, restaurants, entertainment, shops, swimming pools, tennis courts, health clubs, and other leisure and sports facilities.
If you don’t wish to holiday in the same place each year, choose a timeshare development that’s a member of an international organisation such as Resort Condominium International (0870-609 0141, http://www.rci.com ), Interval International (0870-744 4222, http://www.intervalworld.com ) or Marriott ( 0800-221 222, http://www.marriott.co.uk ), which allow you (usually for an additional fee) to exchange your timeshare with one in another area or country.
It’s also advisable to check that the timeshare development belongs to the Organisation for Timeshare in Europe (OTE – http://www.ote-info.com ) whose members must abide by a strict code of ethics.
Although timesharing has a poor reputation in Spain, national laws do protect buyers and include requirements that buyers have secure occupancy rights and that their money is properly protected prior to the completion of a new property. Timeshare companies are required to disclose information about the vendor and the property, and allow prospective buyers a 10-day ‘cooling off period’ during which they may cancel a sales agreement they’ve signed without penalty.
If a deposit is paid, it must go into a third party bank account or an escrow or trustee account. Timeshare purchases can be registered with a Spanish notary and inscribed in the register ( registro de la propiedad) at the buyer’s request (it isn’t mandatory). A personal guarantee must be provided by a timeshare company that the property is as advertised and, where applicable, the contract must be in the language of the EU country where the buyer is resident or the language of the buyer’s choice (you cannot sign away any of your rights irrespective of what’s written in the contract).
If a new contract isn’t made in accordance with the new law it’s null and void. However, timeshare companies have found a way around the law by offering shares within a specially created club and other measures in order to circumvent the law such as trial packages or holiday packs (all considerably more expensive than a conventional holiday!), none of which have protection schemes for the buyer. Always seek legal advice before signing anything in connection with buying a timeshare (or anything else) in Spain!
Beware of muggers in popular resorts
If you’re thinking of buying a timeshare, you should be extremely wary who you deal with. Timeshare ‘muggers’ are rife in the most popular resorts throughout the main tourist season (or year round in the Canaries and Costa del Sol).
Touts compete vigorously to induce tourists to attend a ‘presentation’ (sales pitch) by pretending to be conducting surveys, using scratch cards and other competitions (everyone’s a winner – provided that you attend a sales pitch), and offering free drinks, meals, wine, cash, excursions and other baubles. Because of the adverse effects on tourism, some municipalities publish leaflets warning visitors against timeshare touts and their inducements to attend presentations (they usually target couples only). If you’re tempted to attend a sales pitch (lasting up to eight hours!), you should be aware that you will usually be subjected to some of the most aggressive, high-pressure sales methods employed anywhere on earth and many people are simply unable to resist (the sales staff are experts).
If you decide to go to a presentation, don’t take your cheque book, credit cards (or their numbers) or a lot of cash with you, so that you won’t be pressured into paying a deposit without thinking it over. Credit cards are among the ‘crooks’ favourite methods of payment and you shouldn’t rely on getting your money back from the credit card company if it turns out that you’ve been conned.
High-pressure timeshare companies try to take as big a deposit as they can (30 per cent isn’t unusual), as they know that they’re unlikely to get any more. You cannot usually be prosecuted in your home country for failing to pay for a timeshare property in Spain. Many companies are often registered in off shore tax havens, out of the clutches of local laws and taxes.
Don’t sign on the spot
You’re often offered inducements to sign on-the-spot such as a ‘discount’ (e.g. e1,200), a bonus week and no legal fees. A reputable company will allow you a cooling-off period, although you should never pay a deposit or sign a contract without giving yourself time to think it over and getting the contract checked by a lawyer. Avoid the hard-sell merchants like the plague, as reputable companies don’t need to resort to hard-sell tactics and never need to tout for business on street corners.
There are so many scams associated with timeshares that it would take a dedicated book to recount them all (and it would need to be updated every few months!). Suffice to say that many people bitterly regret the day they signed up for a timeshare! Complaints against timeshare companies run into tens of thousands a year and comprise 90 per cent of all property-related complaints.
It isn’t difficult to understand why there are so many timeshare companies and why sales people often employ such intimidating hard-sell methods. A week’s timeshare in an apartment worth around e100,000 can be sold for up to e15,000 or more, making a total income of up to e750,000 for the timeshare company if they sell 50 weeks (over six times the market value of the property!), plus management and other fees. Most experts believe that there’s little or no advantage in a timeshare over a normal holiday rental and that it’s simply an expensive way to pay for your holidays in advance.
It doesn’t make any sense to tie up your money for what amounts to a long-term reservation on an annual holiday (usually you don’t actually ‘own’ anything). Timeshares cost up to e15,000 for one week in a one or two-bedroom apartment in a top-rated resort, to which annual management fees of e200 to e500 (or sometimes more) must be added for each week, in addition to other miscellaneous fees. Most financial advisers believe you’re better off putting your money into a long-term investment, where you retain your capital and may even earn sufficient interest to pay for a few weeks’ holiday each year. For example, e6,000 invested at just 5 per cent yields e300 a year, which when added to the saving on management fees, say e200, makes a total of e500. Sufficient to pay for a week’s holiday in a self-catering apartment outside the ‘high season’ almost anywhere.
Often timeshares are difficult or impossible to sell at any price and ‘pledges’ from timeshare companies to sell them for you or buy them back at the market price are just a sales ploy, as timeshare companies aren’t interested once they’ve made a sale. Note, that there’s hardly any resale market for timeshares and if you need to sell you’re highly unlikely to get your money back. The Timeshare Council website (see below) offers online auctions of timeshare properties and in June 2006 there were 775 for sale on mainland Spain and 840 in the Canaries!
If you want to buy a timeshare, it’s best to buy a resale privately from an existing owner or a timeshare resale broker, whereby they sell for a fraction of their original cost. When buying privately you can usually drive a hard bargain and may even get a timeshare ‘free’ simply by assuming the current owner’s maintenance contract. The Timeshare Consumers Association (01909-591100, http://www.timeshare.org.uk ) publishes several useful booklets as well as providing comprehensive information on the website.
This article is an extract from Buying a home in Spain. Click here to get a copy now.