Do you really own your place in the sun?

Finding the perfect holiday home can be a dream come true – but if you don't know exactly what you're buying, it could turn into a nightmare. Graham Norwood reports
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The Independent Online

Question: when do you buy a holiday home abroad, spend years enjoying it, yet still end up being told you do not actually own it? Answer: when it has no clear title.

It sounds desperately dull but obtaining clear title – which means ensuring only the registered owner has any right to the building and land – is crucial when ensuring individuals buy and sell overseas property without risk.

The well-publicised story of Linda and David Orams shows the potential dangers of buying in locations where establishing clear title is difficult.

In 2002 the Sussex couple bought a villa in Turkish-occupied northern Cyprus. A Greek family, which says it was forced to leave by the Turks in 1974, then claimed ownership of the land beneath the villa. Last month the British Court of Appeal ruled in favour of the Greek family so the Orams must now demolish the property and may have to pay hefty compensation.

"Due diligence procedures must be carried out," explains Stefano Lucatello of the International Property Law Centre, which advises Britons buying overseas. This includes "searching land registers and title deeds, checking planning, building regulations and permissions, searching in the mercantile registers – the equivalent of our Companies' House – for the developer's history, and various other searches which differ from region to region and country to country," he says.

"Don't be fooled by agents who say these searches don't exist abroad. They just want their commission quickly," he claims.

But although headlines have been made by northern Cyprus, problems with clear title occur elsewhere, too. As Mr Lucatello says, these problems can usually be overcome but less able agents either cannot be bothered or may not know how to do so. For example, in Morocco any new-build home, or an older property sold since 2000, will be registered on the country's new land registry. But if you buy a riad that has not been sold since 2000, it will have a "melkia" – a title not recognised by the registry. For the purchase to be legal, you must get approval of all members of the owning family. Good estate agents will ensure this is done.

Montenegro, popular with British investors five years ago, won an unwelcome reputation when some buyers found homes they "bought" had also been sold to others. In some cases, homes were sold twice – both times illegally – before a buyer finally realised what was going on.

"It's easy to check whether a plot or a development is recorded on Montenegro's land registry, which is efficient and accurate. If it's not listed, buying is a big risk. Buy something else," advises Kieran Kelleher of Savills' estate agency in Montenegro.

Even more dramatic concern about clear title exists in the Valencia, Murcia and Andalucia regions of Spain. Here, so-called "land grab'' laws permit developers to compulsorily purchase certain homes on the edges of heavily-developed areas. Some Britons – apparently unaware of these laws – have bought homes that have subsequently been compulsorily-purchased.

"It's heartbreaking but actually there aren't many people involved. To be honest, some of the buyers are at fault for failing to thoroughly research titles," says Barbara Wood of the Spanish buying agency, The Property Finders.

Despite widespread controversy, however, the laws still exist and some buyers are still being caught out.

John Howell, another international law specialist who advises on purchases, says there are three guidelines to follow.

Firstly, always use an independent lawyer – either one in Britain who is familiar with the country where you are buying, or a local one who can read documents in both their own language and in English. "Don't depend on a lawyer put up by the selling agent. They're not going to admit problems, are they?" says Howell.

Secondly, remember that if buyers use a British lawyer, there may be a chance of compensation if mistakes are made. This may not apply for solicitors abroad.

Finally, avoid buying in those difficult countries which have eccentric regulations such as having to include a local person on the deeds (as in Thailand) or setting up your own company to purchase the home (as in Bulgaria).

"There are plenty of other great places where you don't have these obstacles," he says. "Why don't you just take the easy option, and buy somewhere else?"

Case study: The flight from Egypt

Electrical engineer Peter Dunne knows exactly how important clear title really is. In 2007 he paid £44,500 for an off-plan three-bedroom flat, pictured right, at the coastal resort of Hurghada, Egypt. He used a solicitor recommended by a British estate agency – now in administration – yet the deal apparently went smoothly and when the flat was completed in April 2008, he spent three weeks there on holiday.

But when he returned in April 2008 he could not enter his flat, which had been fenced off by the builders. "The developer had gone into administration and the building firm claimed it hadn't been paid. It tried to seize the properties and said it had a court order," he says.

Dunne, from Fleetwood in Lancashire, then realised that the full four-month process to verify his ownership at the Egyptian land registry had not taken place. So although he has what appears to be a purchase contract, the ownership of the flat is disputed by the builders. "Under Egyptian law, the builders can't seize the place if it's permanently occupied, so I have a tenant there. But when the tenancy expires in April, I'll lose it unless another moves in, or I live there. It's a nightmare," Dunne admits.

Two year later, without resolution, he wants to sell but needs vacant possession – if that happens, he fears the builders would seize the property before he could find a buyer. He says: "I've paid for a property outright, yet can't use it myself or even sell it. If I get out of this with even a penny of my money back, I'll be lucky."