AIPP Consumer Guide 2009 - Complete PDF

BUYING OVERSEAS PROPERTY SAFELY

THE CONSUMER GUIDE FROM THE INDUSTRY BODY

A non-profi t organisation, the AIPP exists for one reason and one reason alone: to improve standards and professionalism in the international property market

Paul OwenChief Executive, AIPP

AIPP CONSUMER GUIDE 3

Welcomefrom Lindsay HopkinsWelcome to the AIPPs fourth annual Consumer Guide and Members Directory.

The AIPP was set up in 2006 with the aim of establishing clear standards and a code of practice for companies in the international property arena to follow. Members have pooled resources and collated a set of best-practice templates, with a shared aim of raising professional standards.

If you are purchasing abroad, be reassured that every Member of the AIPP has a Code of Conduct to follow and is committed to helping a purchase go through safely, with customer care being a key focus every step of the way. AIPPs membership is growing all the time and we take great pride in working to help you purchase international property with confi dence.

This guide is intended to give you some useful guidelines on buying property overseas and some practical steps to follow at each stage of the process. It will also show you what to ask when buying overseas and who to turn to for help. Its an essential reference guide that you should keep at your side throughout your search for your dream property overseas.

Lindsay HopkinsChairAssociation of International Property Professionals

Association of International Property Professionals Limited94 New Bond Street, London W1S 1SJ, United Kingdom

Tel: +44 (0)20 7409 7061 Fax: +44 (0)20 7409 7068Email: [email protected]: www.aipp.org.uk & www.aipp.ieUK Company Number: 5677417 Copyright 2009 by APITS Ltd. All rights reserved.

4 The role of the AIPP Chief Executive Paul Owen tells us all about the AIPP

6 How can we help you? From setting standards to stepping in to help 8 5 pitfalls to avoid Take note of these common mistakes for a problem-free purchase

10 The role of the agent What can you expect from an overseas property agent?

12 10 questions to ask an agent A good agent is worth their weight in gold these will help you fi nd one

14 What to buy From off-plan to renovation, we guide you through the choices

18 Alternative ways to buy Looking for a different way to buy? We look at some options

20 How much will it cost? We take four properties and give you an example of the purchase costs

22 Mortgages Consider the fi nance options available to help you buy your dream home

24 Why you need an independent lawyer Specialist independent legal advice is vital here we explain why

26 Transferring money Get smart about exchanging cash and you could be quids in

27 Letting your home Our guide to helping your property pay for itself

28 Jargonbuster A look at some common terms associated with buying overseas

30 Meet the Board The members of the AIPP Board introduce themselves 32 Code of Conduct By joining the AIPP every Member agrees to follow these standards

35 AIPP Members Directory Find AIPP Members in our A-Z listing

45 AIPP Member profi les Find out more about AIPP Members

66 Essential checklist A quick reference guide for a successful purchase

CONTENTS

4 AIPP CONSUMER GUIDE

The role of thePaul Owen, Chief Executive of the AIPP, explains how the industry trade body is working to help you buy property overseas safely

At the beginning of 2006, the Association of International Property Professionals was set up with the sole aim of improving standards of professionalism in the overseas property market.

Over three and a half years later, the AIPP has more than 350 Members around the world, companies that have voluntarily signed up to self-regulation in what is otherwise a largely unregulated industry. As the buyer, or potential buyer, of property overseas, you can now choose to buy with AIPP Members and benefi t from the reassurance that the company you are dealing with adheres to a professional Code of Conduct, and will face disciplinary action from their industry body if that Code is not followed.

The AIPP was formed to answer the need of a growing industry, and a desire to work together to increase professionalism with the aim of protecting both industry and consumer. By encouraging best practice and helping our Members deliver their most professional service, the AIPP is working to make the buying of property overseas better and safer for all.

Embarking on the purchase of a property abroad might be one of the biggest fi nancial and lifestyle decisions you have ever made. Throughout this process you will want to feel confi dent that the people you are dealing with are professional and accountable. None of our Members were obliged to sign up for regulation; in doing so they have recognised that what is good for the

A I P P T H E R O L E O F T H E A I P P

AIPP


consumer is ultimately good for the industry. So what is the AIPP? The AIPP is a non-profi t

trade association, providing self-regulation for overseas property companies. These are mainly property agents and developers, but the Association also includes lawyers, currency brokers, media companies, and a range of other service providers.

To become a Member, you must fi rst show a minimum level of relevant professional experience. Once membership is granted, the company and all its staff must abide by a professional Code of Conduct and the rules of the AIPP. Membership is not open to all; indeed, around 20 per cent of applicants to date have not achieved Member status.

To adhere to our Code AIPP Members must not mislead buyers, must not make exaggerated claims, and must not engage in transactions where confl icts of interest arise. They should not require you to sign a binding purchase contract without fi rst giving you time to refl ect and seek legal advice. And, importantly, they must recommend that you seek independent legal advice. If we could offer just one piece of advice (and throughout this guide we will offer much more!), it would be to ensure that you appoint a qualifi ed, independent lawyer to advise you on your purchase. It is their role to protect your interests throughout.

Now into our fourth year, we have covered quite some ground in raising the bar of professionalism within the industry we represent. We have developed best practice guidelines

for our Members, delivered industry standard training, and taken signifi cant disciplinary actions against companies found wanting in their ability to adhere to our rules.

Our work has served both Members and the public alike in creating a safer environment to work and to buy property. Of course there is much to do; our goals are long term. We have a vision to create an industry where all companies are working under a regulatory framework, have appropriate experience and training, and are insured to carry out the work they do.

There are few guarantees when buying a property or, indeed, making an investment of any kind. Markets will fl uctuate, and things might not always turn out as expected these are facts of life which can never be eliminated. But with the badge of AIPP membership, you can be assured that a company has relevant experience for their fi eld, is committed to training and best practice, and has voluntarily agreed to act with honesty and integrity.

Over the coming pages we offer you advice on who you need to help you in your purchase, what questions you should be asking, and how to break through the jargon of the buying process.

As the buyer of property overseas, you have a responsibility to inform and protect yourself. The AIPP aims to provide consumers with sensible guidance on how to approach the purchase safely, look out for the pitfalls, and navigate your way safely through the buying process. With this guide, we hope to achieve that.


A I P P H O W C A N W E H E L P Y O U ?

Over the last few years, the AIPP has been raising awareness of its work with consumers, and has helped many buyers in the UK and Ireland with their purchase of property overseas. This has ranged from independent guidance on the practical aspects of buying abroad to valuable help and assistance when as will sometimes be the case things havent gone to plan.

An important aspect of the AIPPs work is to help educate the consumer. If the buyer is informed, has sought the right advice, and approaches their purchase with their eyes open, they can signifi cantly reduce the chances of problems occurring down the road. Throughout this guide, and on the AIPPs website, youll fi nd lots of useful advice to help you along the way.

Central to the AIPPs role is the Code

How can we help you?From setting professional standards to stepping in if things go wrong, AIPP can be a valuable resource for buyers

of Conduct that AIPP Members must follow, and the associated Disciplinary Procedure which can be invoked if a Members conduct is called into question.

If you have a problem with an AIPP Member, we would always recommend trying fi rst to resolve this directly, explains AIPPs Chief Executive Paul Owen. But, if you dont feel happy with the outcome of your complaint to them, you can raise a complaint to the AIPP. We have a Disciplinary Procedure in place, and any formal complaint made about an AIPP Member will be subject to this procedure. We always try to help resolve complaints fi rst through mediation, and where thats not possible, consumers have recourse to our Disciplinary Tribunals.

The AIPP has helped achieve mediated resolutions in many complaint cases,

sometimes with agreed fi nancial settlements (totalling over 250,000 to date).

AIPP cannot order fi nancial redress for consumers. However, our mediation process has proved very successful in bringing resolutions to complaints in circumstances where, without the AIPP, consumers would have had nowhere else to turn.

A key requirement in achieving its aims is that the Association must have teeth. The industry demands an Association that is able and willing to take action against its own Members, when those companies have acted outside of the professional standards expected of it. Several companies have been expelled from membership as a result of disciplinary investigations, says Owen.


After years working around the world and across the UK with the Royal Air Force, Mike Rogers and his wife Linda decided to retire to a Greek island after considering other sunny locations such as Spain, South Africa, Turkey and France.

In the end we both realised that it was really Greece and its lifestyle which we have always loved most, so we investigated the opportunities to buy a home on one of the Greek islands, recalls Linda.

Their decision to opt for Crete was made in September 2008 after visiting a property exhibition in Birmingham. There they met AIPP Member Caversham-Barnes, who were competing to win the title of Best New Developer in the AIPP Awards the following month.

Mike and Linda found out about AIPP when they received an email from Caversham Barnes displaying the AIPPs logo and explaining what that meant. Linda says that it offered them added reassurance to know that the company belonged to an industry body. They felt this underlined the companys professional approach, and it was reassuring to know there was a Code of Conduct in place.

After four days inspecting properties on a variety of developments in Crete, the Rogers saw a Caversham-Barnes development that met all their requirements. In August 2009 Mike and Linda moved into their new home, a two-bedroom villa. Caversham-Barnes were very accommodating and everything ran smoothly, says Mike.

Case study: Buying from an AIPP Member

Constance Ryland bought a new home in Pacentro in the Abruzzo region of Italy. We bought the house in March 2008. Over the years my husband, my children and I have travelled around a lot, using London as our base. We have visited many countries but Italy has always stayed close to our hearts. We have had nothing but good experiences here, the food is amazing, and I fi nd that Italians are particularly good with the children. Constance and her family decided to buy an old house, tucked between the two towers of a medieval castle, and theyve undertaken major renovation works on it. It now consists of a master bedroom and bathroom, three balconies overlooking the castle, a rustic kitchen and a den for the children. The views are stunning as it overlooks a National Park.

As the Rylands are American they had to get used to the European way of buying property. When embarking on the process, Constance visited a property exhibition. I saw Paul Owen of the AIPP speak at the exhibition and was impressed. What he was saying made a lot of sense, and I could see the need for a governing body in the overseas property market.

The AIPP was able to provide Constance with some good general advice as she navigated her way through the process. For me they acted as a form of assurance. When I was unsure about whether or not to get house insurance (locals had told me that nobody did and it wasnt worth it), I spoke to the AIPP and they gave me very honest and useful advice. It was helpful to talk to someone independent. Whenever I emailed the AIPP I got a reply quickly, which was always rich in information and told me what the best action was. They were conscientious, polite and very, very helpful.

Case study: AIPP lends a hand

Although not universally good news, what it does show is our willingness and ability to act. Without teeth, AIPPs ideals might just be seen as a nice idea. That is not why were here. Were here to make it safer to buy property overseas, by enforcing our professional Code. In addition, were developing best-practice guidelines to help our Members adhere to that Code, and raise the bar of professionalism even higher. AIPP has a range of disciplinary sanctions available to it; it can fi ne or suspend its Members, or expel them in cases of serious misconduct, and it reserves the right to publish all upheld complaints.

We exist only to make this market better. As the buyer of overseas property, we are selling you nothing, but giving you something. Make the most of it.


Forewarned is forearmed protect your purchase by avoiding these common buyer blunders

1. Not using an independent lawyerYour lawyer is an invaluable asset in the buying process. They not only act as a facilitator but often as an interpreter between sellers, buyers, banks, agents and notary offi ces. It is important, therefore, that they are completely independent from your developer or agent, with no fi nancial interest in the purchase of your property. Many people make the mistake of thinking that the notary included in their purchase cost is a suitable substitute for hiring a lawyer. This is not the case. Notaries and lawyers perform very different roles. A notary will be working for the government and will legally oversee the property transaction from start to fi nish to ensure that everything is done within the states guidelines. However, a good lawyer will make sure your interests are being taken care of by performing essential services such as checking planning licences, obtaining transfer documents and advising on inheritance laws. Having an independent lawyer not only provides you with legally binding security, it also ensures that your best interests are being represented.

Action: Hire an independent lawyer who has no fi nancial interest in your property purchase. Remember, a notary is not a substitute for professional legal representation. See pages 24-25 for more on this subject.

2. Signing contracts too earlyOn certain occasions, such as at an exhibition or while on a viewing trip, you may be asked to sign a reservation contract and to pay a small holding deposit of around 2,000. This is simply an assurance to the developer that you are seriously interested in the property and that they can take it off the market. It is important to check in which instances this money will be refunded, or indeed if it is refundable at all. If you are asked to sign

A I P P F I V E P I T F A L L S T O A V O I D

pitfalls to avoid

a preliminary contract, this is a different matter entirely. Signing a preliminary contract commits you to buying the property or possibly losing your deposit (usually 10-20 per cent). You should only ever sign this document once it has been checked over by your lawyer.

Action: Always check the refund policy on a reservation contract. Only sign a preliminary contract once your lawyer has been through it.

3. Developer in breach of contractIf the terms of a contract have been broken for instance, if your property is going to be fi nished later than agreed then you may be entitled to compensation. However, even if you know the work will not be completed by the agreed date, you will have to wait until after this to make a claim. The amount of protection you have in this type of situation depends on the terms of your contract, and specifi cations in contracts can sometimes be quite vague. Make sure your lawyer checks through it before you sign anything. Another scenario could see your developer going bankrupt before completing your property, and if this happens your course of action will depend on the type of guarantee you have in your contract. An extrinsic guarantee means that the bank has accepted joint liability with the developer and therefore has a responsibility to complete the project. An intrinsic guarantee, on the other hand, simply promises that the developer will refund any money paid if they are unable to complete the project. However, the stark reality is that if they go bankrupt they may be unable to give you a refund. You should get your lawyer to check through contracts and the guarantees they come with, and any conditions that come with them.

Action: Get your lawyer to check through conditions of the contract, the type of guarantee, and the circumstances in which you will be entitled to compensation.

4. Unrealistic budgetingLeveraging can be a great strategy in a rising market but it is important that you are aware of the risks and dont over-leverage your investment. Taking out a mortgage that is the limit of what you can afford could be dangerous if property prices fall. In this situation, you could end up in negative equity, or even lose your investment. Renovations on a property can often end up

being more expensive than fi rst thought, so it is important to factor these in when considering a property. Buying a property abroad has numerous additional costs, which are easily forgotten by buyers when considering their budget. Fees for agents, lawyers and notaries can add up considerably, while purchase taxes can sometimes add up to 10 per cent on top of the initial property price.

Action: Only take out a mortgage that you can realistically afford to pay back even if the market falls. Remember to factor in additional fees and beware the costs of renovations.

5. Whose house is it? With agents and multiple companies involved in overseas house sales, it can be a challenge to work out who the seller actually is. Agents can often seem like they are selling a property, when in fact they are doing so for a third party. Due to this, unsuspecting buyers could end up paying for a property that ultimately they dont own. This situation can be avoided by getting a lawyer to check through the paperwork and contract before you sign. If the seller doesnt in fact own the property or the land, a lawyer can inform you of this and the reasons for it. Having the appropriate planning permission is no longer something you can feign ignorance about as a foreign buyer, so it is important that the relevant checks are done before committing to the purchase.

Action: Hire a lawyer to check through the contract before you sign. Establish exactly who owns the land and whether the seller has the right to sell it.


The Roleof the Agent

Wherever in the world you decide to purchase a home, chances are youll buy through an estate agent, or representative of a developer.

The level of commitment and service you receive from an overseas property agent can vary hugely, and not only by country, but as in the UK by region too.

However, unlike in the UK, when buying abroad as a foreigner youll have to navigate unfamiliar processes, cultures and languages. A good agent realises this and should offer you extra help and reassurance.

Remember that unless you employ a buyers agent or property fi nder, the agent is primarily acting on the vendors behalf and will earn commission or a fee to make the sale. But a good agent will also have your interests in mind, and many will provide the buyer with a comprehensive service before, during and even after the sale.

So precisely how far should you expect an agent to go to make not only buying abroad, but your life there afterwards painless and hassle-free?

The fi rst role of an agent is really to help you identify the area that suits your needs and budget. You might think you know where you want to buy, but be open for suggestions if an agent is based abroad theyll know more about the region and whats going on there than you.

Start by registering with a number of agencies, and once youve discussed

A I P P T H E R O L E O F T H E A G E N T

Salesman, tour guide, personal assistant we take a look at what to expect from a reliable property agent abroad


How to get the most from your agent1. Where possible always choose an agent who is

a member of the AIPP.

2. Ensure that youre clear about their role and

the services they will provide; ask them the 10

questions to ask an agent on the following

pages (p.12-13).

3. Always establish the fees structure from the

outset and remember that the agent only gets

paid if the sale goes through.

4. Consider employing a buyers agent or property

fi nder who works for you, not the seller.

5. In some countries, such as France, agents

need to be licensed.

6. Never work with agents who suggest under-

declaring the purchase price to cut tax.

your requirements with them, let them do the searching for you.

They should come back with suggestions and invite you out to inspect the properties or developments on offer. Some agents may even deduct the expense of an inspection visit from the fi nal cost of the property, if you go ahead with the purchase.

When you do start viewings, a good agent will offer to spend the day with you showing you the sights and passing on local knowledge not simply meeting you at the property and leaving once youve seen it. They will understand that its not just the property, but the area thats important too.

During your viewings, dont be scared to bombard your agent with queries about schools, local healthcare, pensions, local taxes, where to fi nd a reliable plumber, guidance on who can help with renovations and anything else to do with living or owning there.

Once youve found a property you like and had an offer accepted, things get a bit more technical and this is where a good agent can excel.

They can help you with those fi ddly bureaucratic things such as setting up a bank account, getting a tax identifi cation number, coordinating completion dates, and explaining the legal and buying process and the costs involved, especially as these tend to differ so much from the UK. Their knowledge of the role of the

notary in that region is always worth a lot, too.

Bear in mind, though, that when it comes to tax and legal affairs, a good agent should offer verbal guidance only, without pushing you to use a particular lawyer or tax advisor. It is imperative you choose an independent lawyer.

Perhaps where the role of an overseas agent differs most from that of an agent in the UK is how they can help after the purchase. Very often, their role continues long after the keys are handed over and can include all those things that come with settling into a new country and dealing with unexpected problems around the house.

This could be helping you with removals, getting utilities connected, re-registering a car, getting you registered as a resident, registering your children at their new school and even arranging for a plumber to come and fi x a leaking washing machine.

You might ask yourself, though, how many favours can you ask from your overseas property agent? They are professionals after all, and cannot be expected to run to buyers aid indefi nitely.

Many of the best agents maintain that a client remains a client for life. Paul Owen of the AIPP explains, The key lies in knowing what services the agent will and wont provide.

Different agents offer different things;

the important thing is to know exactly what your agents service includes and what it doesnt. In an off-plan purchase, for example, the process can take 18 months: will they be with you all the way or not? You need to know.

Owen also points out that what estate agents have in common in both the UK and abroad is that they are, except in countries that operate with buyers agents, being paid by the seller of the property, so they are primarily acting on their behalf, not yours which makes those that go the extra mile for you, the buyer, even more generous.


1. Who do you represent and what obligations do you have to me as a buyer?Establish from the outset exactly who the agent is representing, that is, who will pay their commission. Is it you or the vendor? In some countries it may be a combination, as the fees are often split between a vendor and a buyer, although this can be negotiable. Remember that the majority of agents are representing the vendor so technically they are acting as a broker, meaning that they only earn their money through successful deals. If they are not prepared to be straight with you about this, alarm bells should ring.

2. How familiar are you with Spain (or wherever you are buying) and the local area in which Im looking to buy?It can be reassuring when your agent has fi rst-hand knowledge of the country and area he/she is selling in. They can tell you where to shop, the best places to park, the beaches to avoid, the restaurants to use and so on. But check is the information they are giving you from personal experience or what they have read in

a book or even been told by others? This isnt to say that the agent must have personally visited every location in which they sell that would be impossible for some, especially as new properties are coming onto the market all the time. Above all, honesty is key here.

3. Could you explain how the buying process works and what your role is within it?What youre doing here is making sure that the agent you are working with is fully aware of the buying process and describes the formalities openly and honestly with you. Even if you are already aware of the ins and outs of the process, getting the agent to explain it should reassure you of their knowledge and experience.

4. How do the properties you market compare to others in the area, and has the local market been affected much by the economic downturn? Here you are looking for a balanced, informed consideration of the area and the state of the property market, not just an agent talking up the value of their own properties. Look for some indication that the agent is realistic about the current market conditions and rental potential. Answers such as: The prices are going up because everyone wants one of these properties; Ive even bought one myself, are not going to be of any help to you. You need more detail.

5. What checks do you do on the properties you sell? A good agent will not put their name to any property until all the appropriate checks have been done (or theyll be happy to tell you in advance that they have not made these checks). For example, when it comes to resale properties, ask the agent if permission to sell has been gained from all the owners. In Europe older properties are often jointly owned by several

A I P P 1 0 Q U E S T I O N S T O A S K A N A G E N T

questions to ask an agent


members of a family, due to inheritance laws, and each needs to be in agreement to sell. For off-plan properties the agent should at the very least check that the developer owns the land and that all building permissions are in place. Recently some developers have been unable to hand over title deeds to paid-up owners due to having outstanding debts with banks a reliable agent will advise about this. Remember that having full planning permission is a black and white issue, they should be able to answer this question with a simple yes or no.

6. If I do an inspection trip will conditions apply?With the concessions often given on property inspection trips, there may well be obligations you have to adhere to. These are usually reasonable enough, just make sure you check with the agent what they are before agreeing to the trip. For example, it may not be acceptable to wander off to meet friends or sit on the beach once theyve dropped you off at your hotel. Remember, dont sign anything before your lawyer has approved the contract. If you want to buy during the trip, brief your lawyer in advance.

7. What help will you give me throughout the buying process?You need to be aware just how far your agent is prepared to support you. Different agents offer different levels of service. Some cant do enough to help you, for example, setting up your new bank account abroad or getting you a tax identifi cation number. Others, though, are simply there to promote and sell the property. As long as each party knows what to expect from the start to fi nish, there should be no problem.

8. Do you sell to many British people and could I speak to a couple of previous clients? If an agent has sold to lots of British people, it hopefully means that they have been recommended a number of times and the service they offer meets UK standards. Asking for testimonials is always useful, whatever service you are using. Check the happy customers you speak to are genuine and dont have connections with the agent and might be doing them a favour.

9. Tell me about your company.This can help you to gain a gut feeling for the company, its history and its founders.

Ask questions such as: How long have you been selling properties overseas and where? You can get an idea of the companys ideals by asking questions about who owns it, and what their fi eld of expertise is. Ask to see the offi ces and meet the staff. Usually companies that have been around for years are reliable it means they are committed to a region and have ridden out the bad times there, rather than moving onto another destination as soon as things get tough. If they cant give you much background information, its either because the company doesnt have a lot or they arent training their staff very well, neither of which are encouraging signs.

10. Are you members of an industry body, such as the AIPP?If a company has decided to become a member of a professional body, it means they have voluntarily committed to a code of conduct to which they must adhere. It also usually means that they have been subject to a vetting procedure. In a largely unregulated overseas property market, having an agent who is a member of a trade body gives you the reassurance of knowing he/she is committed to professional service and standards. You have the reassurance of knowing that should the agency not comply with the code, you have recourse to their industry body. If the trade body is UK-based it is a much simpler form of recourse than chasing an overseas agent through the local legal system.


A I P P W H A T T O B U Y

Buying a property off-plan became popular in hotspots such as Dubai, Spain and Bulgaria when supply couldnt keep up with demand, leading developers to sell units before theyd been built.

Generally, off-plan homes are available on residential complexes, either for tourism or residential purposes. During boom years, when property markets see consistent annual growth, off-plan properties make attractive investments, as well as a way to bag a holiday home at below market value. In todays economic climate, though, some off-plan developments are experiencing diffi culties and delays due to lack of fi nance. Interested buyers are advised to research the developer and development site thoroughly and fi nd out how your money is secure if things dont go to plan.

The nature of off-plan means it offers clear pros and cons. Arguably the most appealing benefi t is price. When you buy off-plan, you secure the cost of a property at current prices. In a rising market, by the time the property is completed, usually one or two years later, it is likely to have risen in value,

thus making you a good return on your investment. Generally speaking, the earlier you buy into a project the better the deal. Beware that if property prices fall, things can go the other way.

Another advantage is the payment structure. Instead of paying the purchase price up-front, buyers pay stage payments throughout the build process, for example a ten per cent deposit, followed by 20 or 25 per cent instalments at different stages of construction, with the remainder paid on completion. This means you can secure a high-value asset for a low initial capital outlay.

Then there is the fl exibility buying off-plan offers. As your property isnt built yet, you can decide on fi xtures and fi ttings and, while most off-plan properties come with set plans, in some cases you can alter the internal layout.

So where can off-plan pose problems? Firstly, when you buy this way you are effectively taking a risk on a developer. Consider that the developer could have fi nancial diffi culties and never complete the project, that completion could be late, or that the development might not turn out as you expected. To protect yourself against these, and other potential pitfalls, you and your lawyer should do due diligence on the developer, and make sure your contract is watertight and includes penalties if the developer breaches the contract in any way. It is also advisable to visit some of the developers completed projects, to get a feel for the quality of fi nish. An important feature of many off-plan developments are bank guarantees. This is where your payments are guaranteed by a bank in the event that the developer is unable to complete the project, giving you extra security that your money is protected. Your lawyer should verify that relevant bank guarantees are in place.

In some cases, the developer may actually be using buyers deposits to pay for the build; its important that buyers are clear if this is the arrangement. For taking on this extra risk, youd usually expect to be rewarded with lower prices.

A fi nal danger that no one can control is changing market conditions. Ask yourself how it would affect you if your property ended up being worth less when it is complete than the price you committed to when you fi rst signed the contract. If youre buying for investment this would be disastrous, but if youre buying for lifestyle only, the risk could be worth it.

BUYING AN OFF-PLAN PROPERTY

Off-Plan:buying a prop

erty before it is built


New-build: recently completed and not previously lived in

The current economic climate has caused a resurgence in the popularity of new-build property. This is mainly due to the rise in repossessed properties that have fallen into the hands of banks, particularly in countries such as Spain and the US.

Banks have become the reluctant owners of a large percentage of new housing stock, which they want to offl oad as quickly as possible to recoup their lending. They are therefore prepared to cut their losses, and their properties are priced to sell, often at below build cost. They need quick sales and may be offering incredible incentives to help sell their properties. These include pre-approved, low-rate, fast-track mortgages, often for fully furnished properties with heating, air conditioning, white goods and, in most cases, building warranties.

Properties like these, which are ready to move into, are also known as key-ready. Remember, while you might be tempted by the price of a repossessed property that is nearly new, its sometimes the case that evicted owners vandalise their homes before leaving so a new owner may end up spending money on repairs.

Todays discounted prices are an obvious attraction of new-build, but what are the other benefi ts of buying this type of property? Like with off-plan, with new-build you take ownership of a brand-new property, one that has never been occupied before. But unlike off-plan, your property is complete so you know there is no chance of

losing your money if the developer goes bankrupt halfway through construction. Similarly, there is no chance of your propertys completion date being delayed. When buying off-plan it can often be diffi cult to visualise the completed interior, building and indeed entire complex, whereas buying new-build property means there are no unexpected surprises about size, views or neighbouring properties.

Generally, buying a new-build home means youll have very little extra outlay on top of the purchase price, as many come furnished.

Good developers build properties to modern standards, have environmentally sound construction methods, and incorporate the latest security, safety, electrical and plumbing systems in their homes.

Check your property comes with a building guarantee and have your lawyer confi rm the developer has proper insurance to cover any liability to meet the guarantees.

Your lawyer should also check the title deed is valid and that the property does not come with any debts, which the vendor may have secured against the property. In some countries, death duties, utility charges, unpaid rates and land taxes can stay attached to the property once its changed hands.

Finally, you may want to check that the developer, or others, are not planning to put up a wall of new homes in front of your view, once all of those in your phase have been sold.

BUYING A NEW-BUILD PROPERTY


The fi rst advantage of buying a resale property abroad is that it is already built unlike with off-plan property theres no danger of you paying a deposit and then the property not being fi nished, or suffering from delays. While they may not have the facilities and design standards of the latest shiny new developments, resale properties can offer more character and a better location than some newly built homes, and ready-made infrastructure.

A further plus point is that if you want to start using the property quickly, theres no

waiting around for the builders to fi nish before you set up house.

The buying process for resale properties varies according to which country you are buying in. For instance, in some countries the agents fees are split between the buyer and the seller, rather than paid by the seller alone. And in some countries, such as France and Italy, agents need to be certifi ed to legally sell property.

As with any overseas property purchase youll need to employ an independent lawyer to check that all is in order with the property. They will inspect the title deeds to check the vendor actually owns it and therefore has the legal right to sell it. An independent lawyer is particularly indispensable in countries with complex inheritance laws where assets are shared between several members of the same family. In such cases, all family members will need to give their permission for a property to be sold. Also, an independent lawyer will check that there are no outstanding debts on the property in Spain, for example, debts are charged to a property rather than a person and a new owner could become liable for them.

Dont be tempted to take any short cuts or try to beat the system, even if the agent claims, All the locals do it. Be particularly wary of being asked to pay for part of a property in undeclared cash, known as black money. This would involve under-declaring the purchase price of a property in order to reduce the taxes paid on it and not only is it illegal, it can backfi re on you. When you decide to sell in the future, you will have to persuade the new buyer to break the law and under-declare the purchase price too or youll end up with a large Capital Gains Tax bill. It simply is not worth the risk.

Make sure you get a survey done before you buy. In many countries it may not be the custom to get a survey but it will ensure there arent any unforeseen problems with the property that could end up costing you in the future. You can contact the Royal Institute of Chartered Surveyors (www.rics.org) for a list of surveyors in Europe.

Also be sure to check any local planning restrictions that might prevent you from making changes to the property, such as adding an extension or putting in a pool, before you sign on the dotted line. And dont sign anything unless its been checked over by your lawyer fi rst.

A I P P W H A T T O B U Y

BUYING A RESALE PROPERTY

Resale:a property pr

eviously owned and

now being sold through an

agent


Renovating a property requires a lot of time and patience, so it suits people who are able to visit the site regularly, or, even better, live close by while the work is being done so that you can easily be consulted or even project-manage the work yourself.

Problems and delays can occur, so bear this in mind if you have a specifi c deadline when you need the work to be done by.

When you begin looking at renovation properties, bear in mind that while many properties can be transformed, some are simply beyond economic repair. Take the builder youre planning to use to see the property before you buy it so they can cast their expert eye over it.

Before you buy, make sure you get an independent survey and valuation done. While an estate agent may say that a barn can be converted into living accommodation, dont take their word for it; get it checked out by independent professionals fi rst. A survey will also give you an idea of what the major renovation costs are going to be. Going over budget is an occupational hazard with renovation projects, as unforeseen costs can crop up while the work is being done. Try to have a cash cushion to allow for this.

Part of your initial research should involve fi nding out what the local planning procedures are, how long getting permission generally takes, and if there are any restrictions in place. For

instance, while you may want to add a large extension, planning restrictions may limit it to a certain size, which may not fi t in with your plans. Buying in Italy? You might think theres plenty of land to put a pool in, once youve got rid of the olive trees. But be careful, in Puglia, for example, olive trees are protected and cannot be removed. And fi nally, make sure youre aware of any new regulations that may affect the work youre doing. For instance, from 1 January 2013 all septic tanks in France have to be up to a certain standard.

Find out about these restrictions before buying, and follow the correct procedures otherwise you might end up having to undo all your hard work at a later date.

Mind the language barrier, too. If you need to attend planning meetings it may be wise to take an interpreter. You should also be aware that permissions and so on can take longer than you might expect.

When it comes to builders use tradesmen who are fully registered and insured, and preferably recommended by someone you trust. And remember, an architect with knowledge of the local planning regulations is as invaluable as a good builder often one can recommend the other. If you can, its advisable to get legal agreements or at least an agreement letter drawn up detailing the cost of the work and the start and fi nish dates.

Renovation: an old property in need of restoration work to make it habitable

BUYING A RENOVATION PROPERTY


Want a holiday home but dont have the cash to buy outright? Or perhaps youre looking for an investment instead? Here we take a look at the options available

If youre attracted by the idea of buying an overseas property but put off by the potentially large sums of money involved, there are a number of schemes that could be right up your street.

Anyone looking to purchase a holiday home, but lacking the resources or time to go it alone could consider buying a fractional ownership property or buying into a holiday residence club.

Pure investors wanting to gain from a bullish overseas market might consider pooling their money with other investors in a dedicated property investment scheme, while Frances leaseback scheme is one way to get a guaranteed rental return from your overseas home. Here we examine these four different options.

Fractional ownership Established in the US and Caribbean, the concept of fractional ownership has been pioneered in Europe by the Portuguese market, primarily on the many golf resorts along the Algarve, and increasingly on the Silver Coast. It is, however,

A I P P A L T E R N A T I V E W A Y S T O B U Y

ways to buyAlternative

becoming more available in other countries.In simple terms, fractional ownership works by

allowing buyers to own a fraction of a propertys equity, rather than owning it in its entirety. The size of fractions varies but typically they come in quarters, which give the owner three months (or 13 weeks) use of the property a year, and they also come in sixths, tenths and twelfths.

Fractional ownership is not timeshare in disguise. Unlike timeshare, it allows a number of unrelated buyers to enjoy occupancy rights based on equity ownership.

Each owner gains from any appreciation in the property value and can sell their interest at market value at any time. Enthusiasts believe fractional schemes will be a huge growth area over the next few years as the squeeze on mortgage fi nance makes buying a holiday home overseas outright more diffi cult.

As a rule of thumb, you should not be paying more than a 20 per cent premium for a fractional share of ownership compared to what you would


pay, proportionately, if you bought the house outright. You should make sure that the contract gives you what you need in terms of occupancy rights, that theres a good exit route and that management costs are going to be kept under control.

Holiday residence clubsIf you would prefer to have access to a number of holiday homes in a variety of locations around the world a holiday residence club could be an option.

These are similar to destination clubs in the US, but rather than being timeshare products, investors own shares in a holding company that in turn owns properties around the world. Investors are entitled to a number of weeks at properties of their choice, depending on the number of shares or units they own, and availability, of course.

One of the major attractions of holiday residence schemes is that they offer access to properties in locations that might be too expensive or adventurous to buy in on your own. However, some buyers might be put off by the clubs complex structures.

As an example, a company may have around 100 members (shareholders), a dozen luxury properties in western Europe and the Mediterranean, and a few more further afi eld such as the Caribbean and Southeast Asia. A concierge service and housekeeper is usually part of the service at each property.

In terms of exit strategies, the resale market for this type of scheme is still unproven. And look out for conditions governing when and who you can sell your shares to.

Property investment schemesFor people interested in property purely for investment purposes, one option is to form a property investment club, where a small group of people contribute a certain amount of money and collectively decide where to invest. This can work well and is treated as a tax-free entity by the Inland Revenue, though the individuals involved pay tax on the profi t they take out. Always seek tax advice on your purchase.

There are also property investment funds run commercially. These may take advantage of opportunities created by the current climate, such as foreign banks offering repossessed properties at signifi cantly reduced prices.

It may also be possible to invest in residential property overseas for your pension through a Self

Invested Personal Pension (SIPP) as long as this is done indirectly through a pooled fund and it complies with certain other criteria, including a veto on personal use of the properties. Speak to your independent fi nancial advisor for advice here.

LeasebackIntroduced more than 20 years ago by the French government, the leaseback scheme is an incentive offered to buyers so that the countrys economy meets the demand for tourist accommodation. Developments operating under the leaseback scheme are in tourism or business areas and have a fully managed rental scheme alongside hotel-style amenities.

When you buy a property through a leaseback scheme you own the freehold but lease it back to the developer for a (renewable) period of nine to 11 years. Terms, such as level of rental income and personal use, vary from development to development but obviously the more personal use you opt for, the lower the guaranteed rental yields (generally three to six per cent per year).

They can work especially well in dual-season areas such as the Alps, where building permits are provided more readily for leaseback schemes, or in some cases (for example, Tignes) they are the only type of new-build allowed.

As well as offering a turnkey ownership, leaseback is often considered to be a low risk long-term investment, with the reassurance of a government-backed VAT refund of 19.6 per cent.

This type of scheme suits those who can plan their holidays well ahead, rather than those who want spontaneous weekends away. It also doesnt suit those buying for the short term, although re-selling has been made easier so that if you sell during your nine-year lease period, the new owner takes over the remainder of the agreement.

While leaseback is not suitable for anyone looking to get the maximum rental income from a property, it is low hassle and releases the owner from paying council tax and utility bills.

Consider the risksGiven the choice of products and schemes available in todays overseas property market, its easy to be tempted into buying something that might not fulfi l your wish-list.

Before committing to any of the above, talk through your options with an independent tax expert. And never sign any contracts before they have been checked by an independent lawyer.


A I P P H O W M U C H W I L L I T C O S T ?

FRANCEThis seven-bedroom house, built in around 1900, is in Creuse near Boussac, in the Limousin region in the centre of France. The nearest airport is Limoges, or from Paris you can take the TGV. The property has many original features and is in good decorative order. It comes with a garden and three barns that could be converted. Thanks to its size, it would make a great holiday home for a large family and could be let to large parties. Alternatively, anyone looking for a change of lifestyle could run it as a cosy chambres dhtes and convert the barns into gtes!

Purchase price 156,450 (134,871)*

Mortgage option Interest and capital 25-year repayment mortgage, requiring a minimum 20 per cent deposit.

One-off purchase costs Deposit (20 per cent of 156,450) 31,290 (29,974)Legal fees (English-speaking lawyer) 1,500Notary fees and taxes 10,000 (8,621)Travel/accommodation/misc. 500 (431)Total one-off purchase costs 40,526

To buy this property youd need 41,000 in the bank ready to go thats working on you getting a mortgage that requires a 20 per cent deposit.

*Agents fees are included in the purchase price.

How much will it cost?Got enough cash in the bank to buy your dream home? We look at how much you might need to buy a property in four different countries including all the fees and legal costs

Exchange rates used: 1=1.16; 1=$1.6.


PORTUGALThis semi-detached villa is on a quiet development within a short drive of the towns of Loul and Almancil. It includes three en-suite double bedrooms, a swimming pool and a large basement/garage with the potential to be converted into additional living space (subject to planning consent). Faro airport is just 20 kilometres away, the beach and golf course are six kilometres and shopping amenities are two kilometres away.

Purchase price 265,000 (228,448)

Mortgage option Capital and interest repayment euro mortgage of 70 per cent loan-to-value (185,500=159,914), with an interest rate of 2.72 per cent and a 20-year term.

One-off purchase costs Deposit (30% of 265K) 79,500 (68,534)Lenders fees 2,209 (1,904)Independent lawyer fee 1,500IMT (transfer tax) 10,626 (9,160)Stamp duty 3,710 (3,198)Notary/registration fees 1,500 (1,293)Miscellaneous/travel 500Total one-off purchase costs 86,089

Budget to have 87,000 in the bank to take ownership of this property based on putting down a 30% deposit for a mortgage worth 159,000.

FLORIDAThis detached home is on a quiet development in High Point Drive, Westbury, 15 minutes from Walt Disney World and close to Orlandos other theme parks. Its a former show home so it has a number of upgrades. There are fi ve bedrooms and four bathrooms (three en-suite), a west-facing swimming pool with waterfall feature and an integral spa. The home is being sold fully furnished. Supermarkets, restaurants and the new Posner Park Shopping Mall are close by.

Purchase price $289,500 (180,938)

Mortgage option Interest-only US dollar mortgage of 70 per cent loan-to-value ($202,650=126,656), with an interest rate of six per cent and a 25-year term. (Minimum deposit of 30 per cent for foreign nationals.)

One-off purchase costs Deposit (30% of $289,500) $86,850 (54,281)Independent lawyer fee (1% of price) 1,809Closing costs (5%, including: lenders fees, legal fees, stamp duty, initial Home Owners Association fees, notary and registration fees) $14,475 (9,047)Miscellaneous/travel 800Total one-off purchase costs 65,937

Budget to have 66,000 in the bank to buy this property. This includes a 30% deposit for a mortgage worth 126,656.

SPAINThis charming detached villa is just two kilometres from the fi shing town of Moraira, on the Costa Blanca. Built in 2001, it has three bedrooms (one a master with en-suite shower room), a family bathroom, kitchen, extra toilet and spacious living area leading to a large terrace with sea views. All rooms have air conditioning, which doubles as heating, and double glazing. The property has secure off-road parking and a garage, and comes with access to a gated communal pool and gardens.

Purchase price 299,000 (257,759)

Mortgage option Capital and interest repayment mortgage of 60 per cent (179,400=154,655), with an interest rate of 1.83 per cent and a 20-year term.

One-off purchase costs Deposit (40% of 299,000) 119,600 (103,104)Mortgage brokers fees (1%) 1,794 (1,547)Closing costs of up to 13% (including stamp duty, tax, solicitors fees, notarys fees and land registry) 38,870 (33,509)Miscellaneous/travel 500Total one-off purchase costs 138,660

Budget to have 139,000 in the bank to take ownership of this property with a 60 per cent LTV mortgage (worth 154,655) this would include the deposit and all associated buying costs.

The above information is meant as a guide only, and these properties are not meant to be comparable. Always seek professional advice before buying abroad.


As the global economy fi ghts to recover from the credit crunch, banks around the world have understandably become more cautious about mortgage lending.

But the good news for buyers is that fi nance is still available in most popular overseas destinations. This is due in part to local European banks historically taking a cautious approach to lending, so they are weathering the fi nancial crisis better than, for example, UK and US banks.

There are a number of fi nancing options for anyone looking to buy abroad. They are: Get a mortgage directly from a large UK or international bank, which offer loans in a number of currencies, and may also have affi liate branches overseas; Use a specialist overseas mortgage broker; Borrow directly from a local overseas bank in the local currency (although many now have branches in the UK); Raise a new mortgage against equity in your UK property which is a risky option when property prices are in a trough, as they are now.

What currency you decide to borrow in is likely to have a bearing on which of these routes you take. And its vital to get this right, particularly with the recent fl uctuations in currency exchange rates. For example, if youll be letting your property

in euros, you should be making your mortgage repayments in euros to avoid having to transfer money. But it may also make fi nancial sense to make mortgage repayments in the same currency as your income, usually sterling. To decide which is best, youll need to do some calculations and speak to an adviser.

Its always an advantage to approach a bank or mortgage broker before you begin house-hunting abroad. Particularly in todays market, where buyers are strongly advised to obtain an agreement in principle before putting in an offer on a property this proves youre a serious buyer with the necessary funds in place. Identifi cation documents and proof of income are not required at this stage and dont become necessary until later in the process when the bank issues a formal mortgage offer. The other benefi t of having an agreement in principle is that it gives you, as a buyer, good negotiating power.

All lenders will require buyers to comply with an affordability calculation, which varies from lender to lender and country to country. And, while most lenders will offer the option of borrowing in the currency of the property location or in the currency of the applicants main income, these days they tend not to permit purchasers to borrow in a random currency because of the exchange rate risks. Note too, since the fi nancial crisis, generally its become tougher for self-employed

A I P P M O R T G A G E S

MortgagesHave you thought about how youll fi nance your purchase abroad? We look at different mortgage options and points to consider


people to get approval for overseas mortgage applications, especially when their latest accounts or tax returns are not readily available.

Whats availableSo what type of fi nancing is currently on the market, post credit crunch? Here we look at some examples of the effects of the recent downturn, and how mortgage options can vary from country to country.

If your plan is to venture no further than just across the Channel, Frances largest mortgage broker says its products for overseas buyers have changed little compared to a year ago. And while some French banks lending criteria have become stricter, others are hungry for new business.

Spanish lenders have become more cautious about lending to non-residents; a number currently offer 70 per cent LTV for non-residents, with most at 60 per cent or below. Many Spanish banks have experienced funding and liquidity issues because of funds tied up in unsold developments, so they are cherry-picking applications. However, for the right clients with the correct documents and profi le, lending is still available.

In Portugal some banks have lowered their offerings, for example, from 80 per cent LTV to 65 per cent. Most Portuguese banks also have upfront fees for studying applications and opening bank accounts, with lenders now requesting original copies of offi cial documents.

There was an increase in applications for fi nance in Turkey during 2009, driven by British buyers looking to snap up its affordable property. However many mortgage brokers use foreign (non-Turkish) banks for buying there as their rates have generally been more competitive than Turkish banks.

And in Italy only a handful of lenders offer mortgages for non-residents. Local banks have historically always been cautious about lending to overseas buyers.

In Florida, a number of lenders have pulled out of the market, restricting options available to foreign buyers. Banks are much more cautious

about who they lend to, and conditions include much higher minimum purchase prices and borrowers attending the US embassy to sign closing documents. But there are fi nancing options around. Fees and costs in Florida are quite hefty, but tend to be consistent. These include a loan origination fee to the brokerage of around two to four per cent of the loan amount, a valuation fee and processing/underwriting fees. Pre-paid items such as property tax and insurance are also collected at closing.

The remortgaging routeAnother option for raising fi nance, popular when property prices in the UK were rising, is for buyers to raise cash from a new mortgage on their UK home. This option might be particularly suitable for people who have paid off their UK mortgage, though they should consider the risks of having a secured loan on their main residence in the UK.

Advisers caution that people need to consider how much debt they feel comfortable taking on. This is particularly important in view of declining UK house prices and the global slowdown. Moreover, refi nancing deals may be harder to obtain than in the past.

Whichever route you choose to raise a loan for a property abroad, its crucial to get independent fi nancial advice. Dont over-stretch yourself fi nancially and be realistic about how your mortgage repayments abroad could affect your overall outgoings in the UK. Finally, always keep a little bit of money in reserve, for those unexpected months when things are a little tight, or your rental income dries up.

Remember, the examples looked at here are only a general illustration. Finance availability and criteria is subject to change. If you are relying on mortgage fi nance to fund your purchase overseas, its sensible to explore the options at an early stage and seek up-to-date, specialist advice about the fi nance options available.


an independent lawyerThink you dont need to employ a lawyer because youre using a notary? Wrong. You need a lawyer too here we explain why

When you begin investigating the costs associated with buying a property overseas youll notice that your purchase costs will probably include notary fees. A notary is required in all European countries and in many others too; they are the only professional who is legally qualifi ed to complete a property transaction.

What you might be tempted to cut back on is the cost of an independent lawyer. After all, its the notary who makes your purchase legal, and its not obligatory to employ a lawyer, so why should you bother? You may also be told by an estate agent or another overseas homeowner that theres no need for extra legal representation after all, the locals never go to the trouble. Follow their advice at your peril. One of the biggest mistakes a buyer can make is not to employ an independent lawyer, either to

Why you need

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economise or in the mistaken assumption that a notary does the same job. The roles of a notary and an independently employed lawyer are signifi cantly different, as we explain below.

The role of the notaryNotaries are legally trained and appointed as state representatives after passing special examinations in civil law. They work for the government to rubber-stamp and oversee all property transactions. They are effectively the offi cial government witness for the transaction, and produce formal documentation that puts the transaction on public record. They also guard against fraud by checking that the two parties involved the vendor and buyer are who they say they are. They also check that each party is in accordance with the contract they are signing.

A notary also ensures that the correct processes are observed when the title deeds are drawn up. This includes declaring the means of payment and whether a loan has been raised to buy the property. The notary retains the original deeds document, as this belongs to the government, and the buyer receives a copy. Finally, the notary ensures that the appropriate taxes generated by the property sale are paid.

Notaries are impartial and represent neither the buyers nor the vendors interests. That said, a misunderstanding that a notary represents a vendor often arises, since it is the vendor who tends to appoint a notary to handle a sale, usually as soon as they put their property on the market. The important thing to grasp is that if a notary realises that a contracts terms are not favourable


for you, the buyer, he or she is under no obligation to tell you so. If you want someone to help protect your legal interests you must engage an independent property lawyer.

Employing a lawyerPaying a lawyer to represent your interests is even more important when buying abroad than it is in the UK. Firstly, the law in the country you are buying in is likely to be different from the UKs, and secondly, as a foreigner buying overseas you are more vulnerable to illegal practices and unscrupulous agents.

In order to make sure you are properly protected, you need to make sure that the lawyer you employ is an expert in overseas property law and understands the law related to non-residents purchasing property in the country youre buying in. It is crucial that they are completely independent and not connected by any means with the vendor or the estate agent. They wont be acting in your best interests if they have a vested interest in the sale going through. Naturally you will need to understand what youre agreeing to and so you should employ a bilingual lawyer who is fl uent in English to help you overcome the language barrier. All legal documents need to be translated into English, and it needs to be done by a lawyer who will understand the meaning and relevance of the terms. The services of a good lawyer should cost no more than around two per cent of the purchase price.

Your lawyer begins work on the purchase long before a notary does. After all, by the time youre signing contracts in front of the notary you are

essentially agreeing to the terms of the contract and there will be no time for changes. But a lawyer will make sure that you understand and agree to those terms. The preliminary contract should tell you exactly what you are buying, who the vendors are, the material and legal conditions of the property, its price, and the forms and times of payment.

A good lawyer should check the planning licences and that the property is legal. They should obtain all the documents necessary for the transfer, advise you on inheritance law, and ensure that the property is free of any liens, encumbrances, or charges, such as mortgages. They will also act as a facilitator between the sellers and buyers banks, estate agents, and the notary offi ces.

On the day that signatures are exchanged before the notary, your lawyer will carefully check the draft of the deeds, which are written by the notarys clerks. He or she will also coordinate payments and the cancellation of charges, usually the mortgage. And once the notarys role has ended, your lawyer still has work to do, including satisfactory compliance with tax affairs and making sure the title deeds are registered at the Land Registry.

Despite slight variations in different countries as to their precise roles, a notary acts on behalf of the state and the law, while a lawyer acts on behalf of his clients. Using a qualifi ed and independent lawyer helps protect you in the purchase, prevents fraud, and provides legally binding security and, ultimately, peace of mind that the property youve bought is legally yours. You should not think about buying property overseas without one.

Save yourself some cash and use a currency broker rather than a bank when you send money overseas

An often overlooked but crucial part of buying abroad is the transferring of funds to pay for your new property. Amazingly, the way you send money overseas can save or lose you tens of thousands of pounds.

While your high-street bank will offer a money transfer service, dont elect to use it simply because it seems convenient. There is another option currency brokers, also called foreign exchange specialists.

Currency brokers specialise in currency transfers. Because they trade currency in large volumes, they can offer rates that are up to four per cent better than the banks, and they tend to waive commission and bank transfer fees.

When you open an account with a currency broker you are allocated a dealer who deals with you personally. Your dealer will not only strive to get the best exchange rate for all your transactions, but they will ensure your converted currency is transferred

Transferring

A I P P T R A N S F E R R I N G M O N E Y

forward contracts, regular payment schemes let you fi x your monthly rate of exchange in the future. Regular payment schemes are useful for making mortgage payments, paying property maintenance bills, transferring rental income back to the UK or receiving your UK pension abroad.

Most currency brokers will offer less competitive exchange rates for transactions less than a certain value, for example, this could be 5,000 or 10,000, and they tend to charge a nominal fee for electronic onward payment. How much the fee is will depend on the speed of settlement required, as well as the destination.

Its worth noting that from November 2009 the money transfer market is set to become regulated by the Financial Services Authority (FSA). This means currency brokers will have to be registered with the FSA, and operate within the FSAs conduct of business rules. More importantly for you, the consumer, currency brokers will be answerable to the Financial Ombudsman Service.

Finally, for peace of mind when choosing your currency broker, check that your money will be held in a segregated client account thats separate and identifi able from company funds. If possible, check the companys credit rating and ask for customer testimonials.


securely to your designated overseas bank account. Your dealer will handle your account over the phone or via email, and some companies allow you to transfer money through their website.

Ideally you should choose a currency broker before you start your search for an overseas property. That way youll have one less thing to think about when the time comes to send money abroad. You should also open an overseas bank account where you are buying as soon as you can.

The most straightforward transaction a currency broker offers is a spot contract. These are simple, one-off transactions, usually required with short notice they are ideal for deposit payments as agents and developers usually require funds quickly to secure the purchase of a property.

One of the most useful facilities offered by currency brokers is the forward contract, a type of buy now, pay later solution. Forward contracts allow you to fi x an exchange rate in advance, commonly up to two years in the future. Forward contracts offer peace of mind and allow you to budget safely. Generally, a 10 per cent deposit of the total amount to be transferred is required.

Currency brokers also offer regular payment schemes, which allow you to transfer money at regular intervals between the UK and abroad. As with

money


Renting out your overseas property can help with the mortgage repayments and give you some extra cash in your pocket. Read on for some tips on how to make it a success.

As a rule, apartments in city break destinations Barcelona, Rome, Venice and New York tend to rent well throughout the year, with two-bedroom properties being the most sought after. However, if you own a villa in a holiday resort your rental periods are likely to be restricted to the summer season, unless your pad is in a country that gets year-round sun.

Firstly, check out the competition to see what kinds of rates are being charged for properties like yours. Of course youll want to cover your costs, so whatever your monthly mortgage payment is, aim to make that your weekly rate. Consider offering a small discount if you feel a potential client is hesitating, especially if youre struggling to fi ll a gap, and be open to taking a reduced rate during quiet times. Be sure to budget for vacant periods. For example, a central Paris pad may be let 40-plus weeks a year, but in other French cities, realistically, the rental period is going to be much shorter.

To rent successfully a property needs to be of a certain standard. Keep it simple and uncluttered and stick to a neutral colour scheme. Compile a welcome pack for your guests including local attractions and restaurants as well as practical information like local doctors, dentists and the location of the nearest hospital.

Although you may prefer to receive your rental income in sterling, it can be better to distribute the income in both sterling and the domestic

Letting your homeRenting out your property can earn you extra cash here we show you how

currency because of currency fl uctuations. Use a local bank account to pay local staff. And cut down on extra charges by using a currency specialist rather than a high-street bank.

Good marketing is essential. You can transform your rental prospects by using a good agent try to fi nd one through personal recommendation. Fees vary, but if you own a short-term let in Paris, for example, 30 per cent of your rental income will be spent on management fees. Check if the fee quoted includes meet-and-greet duties. And if youre changing tenants regularly, bear in mind that you will incur extra charges for cleaning the property after each let.

If you want to avoid agents fees and manage and market the property yourself, be aware that it is hard work. There are several good holiday letting portals you can advertise your property on but dont just plump for the cheapest option. Put a note and a link at the bottom of all your e-mails discreetly advertising your property. Use the notice boards of your local shops and free newspapers, and its also cheap to set up your own website.

Finally, even if you make a loss on renting your property out, you still need to declare it, both in the UK and in the country where your property is. Find out about the local tax rules, and how your asset will affect your UK tax position. Most EU countries have double taxation agreements set up with the UK already. You can also deduct certain expenses and tax allowances from your rental income. Be sure to take professional advice on your tax position as everyones situation is different.

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Net yield The annual rate of income produced by a property as a percentage of its purchase price once all costs are covered, excluding mortgage repayments.

Notary A government-certifi ed legal clerk required by law to check formalities and rubber stamp a property transaction.

Off-plan Property that is for sale before it is built in effect you are buying the contract. Buying this way is usually cheaper than purchasing a completed or resale property.

Rental yield The amount of income a property produces in rent as a percentage of its purchase price. See Gross yield and Net yield.

RepossessionsProperties reclaimed by banks due to borrowers, including private owners and developers, failing to make loan repayments against those properties.

JARGON BUSTERReservation agreement The contract signed with a small deposit to reserve a property. The property is then held for an agreed period, while you decide whether to proceed with the purchase.

Return on Investment (ROI) Simply how much profi t your property investment generates.

Self-certifi ed (also Non-status) This is a type of mortgage suited to self-employed people whose income is hard to assess. Borrowers declare their income to lenders without having to produce documentary evidence of accounts or pay slips.

Turnkey A new property that comes ready for immediate use and is usually furnished.


An idiots guide to property buying termsBank guarantee These are guarantees from banks to repay you any deposits, should the developer of your property default on the building contract or go into receivership.

Capital growth The increase in the overall value of a property.

CondominiumApartments in a residential complex where owners also own a share of communal areas and typically let their property through an on-site management company for tourism purposes.

Currency brokers/specialists Firms that specialise in exchanging currencies and transferring money overseas. Their exchange rates tend to be more favourable than those available at high-street banks.

Currency fl uctuation Changes in the value of one currency in relation to another, for example the pound versus the euro.

A I P P J A R G O N B U S T E R

Deposit A small percentage of a propertys purchase price paid to secure that property from other buyers before you pay the full balance.

Distressed saleWhen an owner is forced to put their property on the market due to fi nancial or personal pressures, usually pricing it below market value for a quick sale.

Due diligenceThe research and investigation into a property and its surroundings done before deciding to purchase.

Equity The amount of a propertys value that belongs to its owner, once any mortgage loans or outstanding debts against it are repaid. Equity can be negative and positive.

Escrow account An account controlled by an impartial third party, usually a solicitor, which releases outstanding payments to a vendor only with the permission of the buyer and the vendor.

JARGON Exit strategy The way you close or liquidate an investment, in this case usually by selling a property.

Flipping The act of selling the contract for an off-plan property before it is actually built, ideally for a profi t. Because you never complete on the property your only outlay should be an initial deposit, and legal advice.

Foreclosures See Repossessions

Gearing See Leveraging

Gross yield The annual rate of rental income, before deductions, produced by a property as a percentage of its purchase price.

Hotspot A popular place to buy property where development struggles to keep up with demand.

Interest rate The rate of interest charged to borrow money. It is set by a central or national bank (in the Eurozone by the European Central Bank).

Key-ready See Turnkey

Letting agent A company that will arrange tenants and maintain your property for you. Usually they take a cut of your rental income as a fee.

Leveraging The process of using a loan called a mortgage if its against a property with a small amount of equity to potentially benefi t from a high value investment. Also known as gearing.

Loan to value (LTV) The amount of a propertys purchase price paid for by a mortgage, usually expressed as a percentage.

Market value What a property is worth according to comparable properties around it.


A I P P M E E T T H E B O A R D

Lindsay Hopkins ChairTrafalgar Square Overseas With 25 years experience in fi nancial services, Lindsay is a Director of several companies involved in the UK and overseas property markets, providing mortgages for overseas and UK properties and property funds. He founded Trafalgar Square Overseas Ltd in 2006, an overseas mortgage advice company and Member of the AIPP. Lindsay brings his wide knowledge of the fi nancial services world to his position on the AIPP Board. He was elected as Chair of AIPP in 2009.

Peter Robinson Deputy ChairIntelligent PartnershipHaving worked for a variety of London and Middle East advertising agencies in the retail, automotive and FMCG sectors (latterly for McCann Erickson), Peter entered the international property sector in 2001, working as marketing director for a Spanish-based estate agency. He then returned to the UK as marketing director for Homes Overseas magazine and exhibitions before setting up Richmond Green Marketing (RGM) in January 2006. Peter is now a Director of London-based Intelligent Partnership. He believes the industry must move forward into a new professional era and considers the AIPP as playing a leading role in achieving this.

Cindy Griffi th TreasurerCavendish Brooke International Cindy has been a fully licensed fi nancial adviser since 1989. In addition to providing investment and other fi nancial advice in the UK, she has assisted clients with their UK and overseas property purchases for many years. In 2004 she started her own company, providing advice on the international property market. As this is not regulated by the Financial Services Authority, Cindy joined the AIPP and committed to the Code of Conduct as a reassurance to her clients that the industry can operate professionally.

Robin Barrasford SecretaryBarrasford and Bird WorldwideRobin Barrasford, Managing Director of Barrasford and Bird Worldwide, realised the potential of the Bulgarian property market over six years ago and created Barrasford and Bird to bring this emerging market to the UK, and to educate potential UK purchasers about the opportunities in emerging overseas markets. His company now promotes property worldwide. Steadfastly believing in customer care and integrity within the overseas property industry, he is a fi rm supporter and founding Member of the AIPP.

The AIPP Board work unpaid to help make buying property overseas safer and to impose professional standards on the industry. They are voted to the board by AIPP Members and each serves for an initial period of two years

Meet the


Andreas Ioannou Alpha Panareti PublicAndreas is Managing Director of a land and property development company in Cyprus that was originally founded during the 1970s by his father. Alpha Panareti Public specialises in the development of resort complexes, with a specifi c emphasis on the investment market. Co-opted to the AIPP Board in 2009, Andreas brings extensive knowledge of Cyprus legal system, building methods, future government plans and development trends. He holds a number of other offi ces, including Vice President of Paphos Chamber of Commerce and President of the Committee for Tourism (Paphos). He is also personally involved in the promotion of green issues on the island.

Andy Bridge A Place in the SunAndy has worked in overseas property media for over three years, initially with the Brooklands Group and now as Managing Director of APITS Ltd (A Place in the Sun); prior to this he gained 15 years experience in publishing and related services. Andy has been working closely with the AIPP for the past few years in helping to produce the AIPPs Consumer Guide and Awards programme, as well as sitting on AIPPs disciplinary panel. Through his work on a high-profi le, consumer-facing TV brand, he is acutely aware of how this industry is perceived and of the importance of the AIPPs work in raising its standards.

Steve Long Casacalida PropertiesAs CEO and founder of Casacalida Properties, Steve has worked primarily in the Spanish market, though since 2006 has enjoyed the opportunity to diversify into other countries including Turkey and Egypt. His company was a double award-winner in the inaugural AIPP Awards in 2008, an awards programme focused on rewarding high levels of customer service. Steve is keen to highlight his support for the Association and all it stands for, and having experienced fi rst-hand the commercial benefi ts of membership, he hopes to use his experiences to encourage new Members to see the benefi ts of industry regulation.

Guy Tolhurst Intelligent Property NetworkGuy is a keen supporter of the Associations aims to improve standards and promote professionalism across the industry. He has a broad insight into the industry following several years experience, and his key achievements include the formation of Hunters Overseas Homes and the Overseas Homes Network, and winning Taylor Woodrow de Espana Best UK Agent for three consecutive years. Keen to increase and promote both Member benefi ts and consumer awareness of AIPP, Guy hopes to encourage more international developers to join the AIPP.

Nick Clark Property Investor MediaNick is Managing Director of Property Investor Media Ltd, and has been organising large-scale, property-focused events since 1989. The companys portfolio includes The Property Investor Show, and Nick introduced the fi rst AIPP Zone at a property exhibition in 2008. Nicks background is mainly in sales and marketing management and has been concentrated on publishing and exhibitions. He sees the AIPP as the fi rst proper attempt at creating an Association with teeth, and is keen to be part of the AIPPs long-term success.

Sue Ash Ash CommunicationsSue is a marketing and communications expert with ten years international property experience. She has worked with major developers and agents to market properties and to help grow their businesses. Sue played a leading role in bringing the industry together in 2005, with established and young companies, peers and competitors alike sitting down to discuss how they could all work together to improve the overseas property market. The formation of the AIPP is proof of her success. Sue chaired the Association for its fi rst three years.

Jeannie Lumb La Luz PropertyJeannie has been involved in international property for over 20 years, combining property work with lecturing and research. She has also bought and developed her own properties and knows where she wants the industry to improve. Experienced in the property markets of France, Greece, the UK and Spain, as well as delivering training to business people and civil servants, Jeannie brings wide knowledge to the table. Jeannie has also been instrumental in setting up the fi rst AIPP training courses.

Mark Rickard HiFXMark Rickard has been with HiFX for over eight years, primarily working with property agents and developers, establishing the best ways for their clients to transfer their funds abroad. In building strategic partnerships across various industry sectors, Mark has built an excellent understanding of the process by which British and Irish consumers purchase property overseas and an in-depth knowledge of how the industry can work together to achieve the best results.


Code of Conduct

A I P P C O D E O F C O N D U C T

1. General

1.1. Members shall adhere to the highest standards of honesty and professional integrity both in their dealings with the public and in their dealings with each other.1.2. Members shall conduct their affairs with integrity and dignity.1.3. Members shall, in particular, refrain fro

Documents

AIPP Consumer Guide 2009 - Complete PDF