Buying Abroad – Take Care

Recently, the newspapers have once again been featuring the plight of British people who have bought foreign properties (this time in Spain) only to discover that there are defects in their title, the ramifications of which can be catastrophic for the owners as their dream of a place in the sun turns into a nightmare.

It is estimated that 400,000 Britons have homes abroad and there are many amongst that number who have had problems which could have been avoided had they been more circumspect in their dealings.

Here are some of the things you need to take into account if you are considering buying abroad:

Don’t overstretch yourself financially. Buying abroad often involves a much higher level of costs than is typical in the UK and fitting out a home is never as cheap as you think it will be. Make sure there is plenty of slack in your budget and that when the total costs are in, you are not taking unnecessary risks with your mortgage arrangements.

If you are contemplating having a foreign mortgage, remember that there are two components to the cost – the rate of interest which applies and the rate of exchange between the local currency and the pound. Both of these can significantly affect the amount you pay. Don’t forget the ongoing costs also – check the applicable taxes and other costs. Don’t rely on having rental income to cover your expenses. In many cases such promises, if made by a developer, fail to materialise. In other cases, renting may not be possible – for example, it may be prohibited in the deeds or by local byelaw.

Committing yourself too early. Most countries require a deposit to be paid before completion, as is normal in the UK. Such deposits may not be refundable, even if the builder never seems to get around to building the property or goes broke before the title has been transferred to you. Indeed, in some countries it can be the buyer who is responsible for any debts the builder runs up relating to the property.

Make sure you understand exactly what you are buying, the title which is being bought and, especially, what rights others may have over your property. One of the biggest areas for dispute is the validity of the title to the property, so make sure you use a reputable law firm to represent you. Never be tempted to ‘do it yourself’.

Make a local will. This should almost always be done and should normally deal only with your foreign assts. Make sure your UK lawyer has a copy of a notarised translation.

Location, location, location. The future value of your property will be heavily affected by where it is and how easy it is to get to. If, for example, the budget airline which flies to the local airport were to drop the route, what effect would that have?

Be sceptical. If a deal looks too good to be true, it probably is. If you are asked for a ‘commitment fee’ in cash up front, be careful. It is not uncommon for people who do not own a property to try to sell it to an unsuspecting foreigner by pretending they have the authority of the owner or that it is held in a different name ‘for tax purposes’.

If you are thinking of buying a foreign property, do make sure you take even more care than you would at home, where at least you have the benefit of understanding the system.

Partner Note
‘Which?’ offers a good general guide to buying abroad – ‘The Which? Essential Guide to Buying Property Abroad’.

This publication contains information which is intended for general guidance only. The information is provided in a concise form and is not substitute for obtaining legal advice. If you would like advice specific to your circumstances, please contact us.