The professionals involved in helping people to buy holiday homes abroad have
plenty of horror stories. But most problems stem from a lack of care on the
part of buyers rather than that the property is in a foreign country. People
act without thinking, according to John Howell, of John Howell & Co, a
firm of solicitors that specialises in international conveyancing. He says:
“They seem to leave their brains on the carousel at the airport. They forget
all the things they would do if they were buying property in Britain — like
taking independent legal advice — and end up signing things they do not
understand.” To avoid those potential problems, it is vital to use the right
professionals:
AGENTS
There is never a shortage of people willing to sell you overseas property, in
this country and abroad. But in most countries, including the UK, there is
very little regulation of their activities.
Pauline Gallagher, chief executive of the Federation of Overseas Property
Developers, Agents and Consultants (Fopdac), says: “Unfortunately the
barriers to entry are very low, so it attracts people who see it is as a way
of making easy money because of the large commissions paid by developers.
This can lead to misselling at inflated prices.”
Fopdac is self-regulating, but members are vetted and must adhere to a code of
conduct which among other stipulations requires them to provide consumers
with a choice of independent legal advisers.
Another way of making sure you are dealing with a reputable agent is to
contact an organisation such as the National Association of Estate Agents
(NAEA), which can provide names of members in the UK who specialise in
international property.
They also have a number of overseas members and a link to the International
Consortium of Real Estate Agents (ICREA), which also has a code of conduct
for its members worldwide.
Fopdac, www.fopdac.com , 0870
3501223
NAEA, www.naea.co.uk , 01926
496800
ICREA, www.icrea.org
MORTGAGES
There are two main ways of financing an overseas property purchase if you
don’t have the cash. One is to remortgage your UK property, the other is to
take out a mortgage on the foreign property. Several UK lenders offer
overseas mortgages but mainly in the popular markets. Banco Halifax Hispania
and Royal Bank of Scotland International, for example, lend on properties in
Spain only; Leeds Building Society and Norwich & Peterborough Building
Society lend in Gibraltar and Spain; HSBC in France only; while Barclays
lends in Spain, Portugal, Italy and France, and Lloyds TSB in Spain,
Australia, New Zealand, Canada and the US.
An alternative is to use a UK-based mortgage broker that specialises in
international loans. For example, Conti Financial Services can source the
money locally for you. It arranges mortgages in a wide variety of countries.
Kevin Fleury, senior partner at Conti, argues that taking a mortgage on your
overseas property can have practical advantages. “Interest rates on foreign
loans can be lower and the lender will want to make sure the property is
properly valued and offers adequate security. Most of the problems I have
seen are where people have paid cash for their overseas property and not
bothered to check things out properly. If you do pay with cash, you should
at least try to think like a bank.”
Banco Halifax Hispania, 01422 333868; Barclays, 020-8298 3223; HSBC, 0800
0858887; Leeds BS, 00350 50602; Lloyds TSB, 01624 638119; Norwich &
Peterborough BS, 01733 372006; RBS International, 00350 44166;
Conti Financial Services, 01273 772811, www.mortgagesoverseas.co
m; Propertyfinance4less, 020-7594 0555, www.propertyfinance4less.com
CURRENCY
If you are planning to buy an overseas property with cash from the UK, you
will need to convert your money into the local currency. This can be
expensive if you use a high-street bank. Fortunately, there is growing
competition from foreign currency specialists. They usually offer a better
rate, do not charge fees and provide the option of taking out a “forward
contract” so you can fix your exchange rate and not have to worry about
currency fluctuations. Mark Bodega, marketing director at HIFX, explains:
“We are able to cover our costs and make a profit on the spread between
buying and selling currency, and still give consumers a better deal than the
banks, because their spreads are so wide.”
Caxton FX, 0845 6582223, www.caxtonfx.com
; Currencies Direct, 020-7813 0332, www.currenciesdirect.com
; Foreign Currencies Direct, 0800 3285884, www.currencies.co.uk
; HIFX, 01753 859159, www.hifx.co.uk
; Moneycorp, 020-7589 3000, www.moneycorp.com
; Travelex, 0870 0100095, www.travelex.com
; Capital IFX, www.capitalifx.com
, 0870 777 9777
LAWYERS
Getting good legal advice is critical. Buyers can end up with question-marks
over ownership or be liable for debts, such as bank loans secured against
the property by the developer. You may also need to make a local will. Local
lawyers may have better local knowledge, but you will need to be sure it is
independent. Kevin Fleury, of Conti, suggests choosing one at least 50 miles
from a development to make sure that there are no conflicts of interest. If
you use a British solicitor who does international conveyancing there is the
advantage of a common language and the benefit of knowing that he or she is
covered by professional indemnity insurance. Specialists include John Howell &
Co, which has several foreign lawyers, and Goldsmith Williams, which has
developed relationships with reputable overseas solicitors in a range of
countries . The Law Society can supply names of other solicitors in the UK
and abroad.
Law Society, 0870 606 2555; www.solicitors-online.co.uk
; John Howell & Co, 020-7420 0400, www.lawoverseas.com
; Goldsmith Williams, 0151 2311292, www.goldsmithwilliams.co.uk
TAX
The tax implications of a holiday home overseas are often neglected. Bill
Blevins, of the chartered accountants and international tax specialists
Blevins Franks, says: “People often overlook the fact that when they sell
their overseas property it will be liable to capital gains tax in the UK, as
it is not their principal private residence. There may also be a similar tax
charge to pay to the overseas tax authorities.
Fortunately, the UK has double tax treaties with many countries, which means
you won’t have to pay twice but you may have extra to pay if the amount
charged overseas is less than in the UK.”
Tax may also be payable on rental income; in countries such as France there
may be annual wealth tax to pay on properties above a certain value.
Inheritance tax also needs to be considered. Last but not least, says Anita
Monteith, tax manager at the Institute of Chartered Accounts in England and
Wales (ICAEW): “Prospective homeowners should find out about local taxes
equivalent to our council tax.” UK accountants will be able to advise
overseas homebuyers, and if they don’t know about a particular country they
can access specialists through the ICAEW.
Blevins Franks, 020-7336 1022, www.blevinsfranks.com
; ICAEW, 020-7920 8100, www.icaew.org.uk
INSURANCE
Taking out insurance locally may be your only option in some countries in
Eastern Europe or farther afield; your local bank should be able to help.
But problems can occur if a claim arises and if you are dealing with a
foreign language. That is one of the reasons you may prefer to deal with an
insurer in the UK, where you will also be covered by the Financial Ombudsman
Service if something goes wrong.
Most UK-based policies such as Saga Insurance tend to focus on popular areas
such as France, Spain, Portugal and Italy. HIFX’s policy, underwritten by
Norwich Union, extends to Greece and Cyprus, while Andrew Copeland
Insurance’s Europlan includes Malta and Northern European countries such as
The Netherlands and Denmark. Wherever you take out insurance, make sure it
covers you for the periods when the property is unoccupied. Much of Saga ’s
cover does not apply if you leave your property unoccupied for more than 60
days.
Saga, 0800 0150751, www.saga.co.uk;
HIFX, 01753 859159, www.hifx.co.uk
; Andrew Copeland, 020-8656 2544, www.andrewcopeland.co.uk
