BUYING ABROAD:. . . you need a troubleshooter. FRANCES O'ROURKEfinds some experts who are helping Irish investors who were too trusting, careless, scared to face up to their problem - or just plain unlucky
DID YOU hear the one about the woman in France who didn’t pay management fees to her apartment block’s syndic, which is on the point of selling the apartment (and keeping the money)? Or the woman who defaulted on her mortgage payments in Spain – and found her bank had sold her villa before she knew about it?
Irish investors who buy abroad are often in a quandary when things go wrong – and more overseas buyers than ever are finding themselves in trouble right now. Who can they call on?
SPAIN (and 18 other countries, from Bulgaria to Brazil):Irish solicitor Tom McGrath started advising clients on properties in Spain, a country he knows well, and can now advise on problems from Bulgaria to Brazil. He fears that the problems he's dealing with now – properties being repossessed, large advance payments on uncompleted developments being lost, "guaranteed" rents not being paid, to name just a few – are just the tip of an iceberg.
The most common problem he is dealing with at the moment is that of people who have paid a deposit to buy a property off plans in developments where builders can’t complete, because they don’t have the money. “Often the client is faced with the undesirable choice of spending more money to recoup sums (by taking legal proceedings) or walking away.”
Other people have been duped by unscrupulous agents – e.g., one group he is advising had signed contracts with an Irish agent who promised to organise rentals for their properties and make mortgage repayments. Rents were not paid to clients, nor were mortgage repayments – which are the owner’s responsibility.
“One of the most common problems is that clients find that they have bought something which is not what they were originally sold by the estate agent” – finding instead they are nowhere near the sea/golf course/promised view and so on. Other problems he’s dealt with include a client whose contract was handwritten on a sheet of paper with no terms or conditions, and who had paid a deposit based on this contract. Or a client who bought a property in Germany (sold by an Irish agent) who later discovered that the unit was in a protected block that could only be sold to German citizens.
McGrath and his team help people sort out what can be rescued from what can’t and at the very least, to minimise their problems where possible. The most important thing of course is to get good advice before buying – on everything from clear title to tax, planning and inheritance matters; next is to act quickly if you are in trouble. In Spain, for example, people have had their properties repossessed for non-payment of mortgages because they didn’t know that notices had been served on them – in Spain. “Not opening your post is a bad, bad move. Spanish banks have approached me wanting to do deals, they don’t want to repossess.” McGrath can help people come to an arrangement with lenders – if they come to him soon enough.
Tom McGrath, 01 6610707/6788774, www.tmsolicitors.ie
FRANCE: Katherine Garnier runs a different kind of troubleshooting agency than most – because even clients who are happy with the property they've bought can run into countless unexpected problems. Garnier, for example, called herself "the queen of fuites" for a while because for months after she'd started her troubleshooting business in Nice, France, nearly two years years ago she found she was helping clients sort out problems caused by leaks.
At the start, she spent a lot of time helping people buy furniture for their apartments, or finding plumbers, cleaners, gardeners; problems people brought her included termite attacks and difficult neighbours as well as those leaks. She also helped people find reliable builders and architects, and local lawyers.
Now, she says: “People are contacting me because they have to rent out their properties, instead of giving them to friends, and they have to upgrade them. So leaking taps, worn sofas, doggy bathrooms, faulty shutters and old kitchens, which are fine for the family, have to be fixed before renting.
“I hear from people who are afraid that they might have to sell their flats if they are not rented for most of the year and they have decided not to come during the high season and get the income instead” – so now she is helping people find rental agencies.
She will attend meetings of an apartment block’s syndic – the management company – on clients’ behalf. She finds that many owners are now worried that their syndic is voting to do up buildings, adding thousands to their management charges.
“I am helping one person who is in arrears with the syndic and they want to evict him from his apartment.” If you don’t pay charges for a couple of years, French management companies have the power to put the property up for sale at the price of the money you owe.”
Katherine Garnier, 00 33 674185137, www.katherine-garnier.com
HUNGARY: you couldn't beat Budapest as a place to invest, thought a lot of Irish buyers in the past decade. Then its economy like ours went pear-shaped. Development sites are lying idle in Budapest as in Dublin – and this has left many Irish investors, who put money down on apartments, in trouble.
Enter Harry Sexton, a former Irish solicitor who has lived and worked in Hungary for the past decade, advising both commercial and residential investors.
What kind of problems is he advising on? “I have 68 Irish investors who’ve paid substantial amounts – some 90 per cent of €100,000 to €200,000 – to buy apartments in a development in the centre of Budapest where building work has stopped. Some owners were buying on the strength of borrowing against Irish property and face losing everything.”
This is just one of a number of similar problems he has dealt with. What can he do? The first prerequisite to the enforcement of legal entitlements, he says, is knowledge of a property’s current status: Sexton can do an online search of the Hungarian land registry to determine this. But he wouldn’t necessarily advise going the legal route. “If the developer has shut down, I try to meet the developer and the developer’s bank to see what can be worked out.”
Rita Papp, a Hungarian woman who studied business in Dublin’s DIT in the late 1990s, went home to Budapest and set up her own business in 2000.
“Many Irish buyers didn’t come to Budapest at all but bought second-hand properties through Irish agents. They expected to let quickly and to get better returns than they did; some ran into problems with planning authorities when they tried to renovate their property.”
Both she and Sexton say that some Irish agents were simply not trustworthy. Sexton found that many commercial, like residential, buyers were surprisingly naive, relying on developers and agents for advice.
Crucially, they didn’t get independent legal advice. Many paid deposits with no agreements on staged payments, or signed documents that purported to be contracts, but weren’t.
All that said, many investors – especially those who bought in the early noughties – have got properties that did well. And if people can hang on for the long term, Papp believes their investments will come right.
Harry Sexton: 003617840332 harrysextons@hotmail.com
Rita Papp: 0036302318451, privart@t-online.hu
POLAND: Terence Dixon of Kennedy McGonagle Ballagh (KMB) solicitors in Dublin got involved advising Irish people who'd invested in Polish property through membership of an association of independent European lawyers. He linked up with a Polish firm in Katowice, and together they advised Polish people in Ireland who needed help (usually over jobs) and Irish people in Poland – over property of course.
The principal problems Dixon is currently dealing with are those of people who bought property, often off plans, within the last three or four years. The property market in Poland hasn’t collapsed, he says, but has got tighter and rents have fallen. Investors who borrowed money against Irish properties that are now worth a lot less are being squeezed, trapped in situations where they can’t meet repayments, but can’t sell either.
“Some people stick their head in the sand. We try to see can the problem be solved – can the property be sold, hopefully not at a loss? Or can we renegotiate terms with the bank and plot an exit strategy? Banks want cash flow and will do deals. If you face up to reality, present your bank with a scenario, you should be able to get out of the situation.” And he also believes that if clients can hang onto their investment that long term, Poland is a good market to be in.
Terence Dixon, KMB, 01 6398200; wwwkmb.ie
Another useful resource is UK-based international company the International Law Partnership. It deals only with international legal work, i.e., legal work for people who live in one country but who have legal problems or requirements in another. The firm provides legal advice and assistance, property investment advice and tax advice.
www.lawoverseas.com
