Property
Property

Spanish Real Estate: How to Detect   
Fraudulent Investment Offers

Warning: The information set out below is a general guideline provided by DOMENECH ABOGADOS. Specific advice should be sought before any action in reliance on it is taken, as explained more fully in this website's legal notice.

The UK press is full of dreadful stories of foreign investors trapped in fraudulent Spanish investment schemes. A recent one, affecting over 2,000 foreign investors (mainly from Germany and the UK), relates to a business operating on Spain’s Costa del Sol known as “ Fortuna Land”.

The fraud used websites and telemarketing to offer prospective investors the chance to take part in (what must have sounded like too-good-to-be-true) property developments. The developments were to be operated through companies and off-shore payments were required (which in itself should have rung potential investors’ alarm bells).

Prudent investors tempted by the Fortuna Land’s offer should have asked themselves (or, better, asked their own Spanish lawyer) whether:

  1. It was suspicious that a business supposedly operating in Spain would request payment through a bank in Cyprus.
  2. It was odd to involve such an unconnected jurisdiction in the arrangements.
  3. Sufficient and independent investigation had been made as to the good standing of the companies involved (since what investors were being tempted with was not a direct investment in Spanish land but a participatory investment in a company).
  4. It was a good idea to invest when bank guarantees covering the investment were not offered.

Why is it every year that foreign investors become enticed by criminal organisations and trapped in this way?  We at DOMENECH ABOGADOS think the answer may lie in the following widely held misconceptions:

  1. Operating through off-shore accounts is necessarily tax efficient.
    This is simply not so. Most territories commonly labelled “off-shore” are included in the Spanish black-list of tax havens.  A foreign investor should not assume that investing through these territories is going to place him in a better position; on the contrary, much Spanish legislation is aimed at making it more burdensome and costly for investors using such territories.
  2. Intervention of a Spanish notary guarantees investment safety.
    Again, a widely held misconception.  A notary basically checks the identity of the parties to a transaction. For example, a notary certifies that whoever appears before her/him as a director of a company is in fact that that person.  But a notary has nothing to do with the transaction itself. S/he is not checking that the company’s publicity tells the truth or that a supposedly “guaranteed” building licence will ever be granted by the Spanish local planning department.  The only way for a foreign investor to get assurance on such matters is to engage the services of an independent lawyer to run all the relevant checks.
  3. Lawyers provided by the company inviting investment can also fairly advise the foreign investor.
    This is a terrible blunder. What about conflicts of interest? Why do people who, in their home country, wouldn’t dream of handing over large sums of money for an investment that hadn’t been first scrutinised by their own lawyers think such prudence unnecessary in Spain?


We at DOMENECH ABOGADOS will be happy to ensure that any investment you’re being encouraged to make in Spain is secure.  If you have such concerns, then please phone Christopher Lee on (00 34) 93 415 06 77 or e-mail cl@domenechabogados.com  

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