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General: Overseas Property Problems: Contracts - Simon Conn

Problem: contracts translated incorrectly

When buying a property abroad, you may receive one contract just in the local language, or two contracts – one in the local language and one in your own language. This may sound straightforward and completely above board, but you should never assume that what you’ve been handed is a ‘true’ version of the original.

‘Lost in translation’ is a term we’re all familiar with, but when it comes to contracts for an overseas property, you could be at risk of experiencing its full impact. In many cases, it has eventually come to light that the translation is not an accurate version of the original. In other cases, people have not bothered to have the contract translated at all!

Some buyers are simply too trusting, especially with development properties which are being sold by British-based agents. Others are simply trying to avoid the extra cost of obtaining their own translation – yet research indicates that one of the biggest worries overseas property buyers have is being given misleading or unreliable information.

There have been many media stories over recent months about investors losing out in overseas property schemes. Bulgaria and Estonia, for example, where innocent buyers put their money into projects that seemed completely legitimate and were, in some cases, recommended by independent financial advisers. However, many are now out of pocket with no property to show for their money, due to huge delays in building or developers going bankrupt. Nor is it just eastern Europe that things have gone wrong. Hundreds of Britons are reported to have lost money in an alleged housing scam in Orlando, Florida, earlier this year, whilst some investors in Italy and Spain have run into similar difficulties due to illegally built properties or developers going into administration.

In many cases, buyers took advice from a lawyer recommended to them by the developer. Others made the mistake of signing an ‘English version’ of their contract rather than obtaining an accurate translation. There are many things which could wrong as a result, one of the biggest being that the buyer ends up with a ‘hidden’ second charge on the property. This means that if the developer goes bust, the bank will call in the first charge on the loan (from the developer) and then chase the second charge (from the buyer) for any shortfall.

How to avoid this situation

Our advice is very simple. If you’ve been given just one version of the contract and it’s in a foreign language, you must obtain a translation. This might sound incredibly obvious, but there are still many cases where buyers fail to do even this. If you’ve been provided with a translated version of the contract, you need to ensure that it doesn’t contain errors, omissions or extras. Do not assume that it’s an accurate translation. One simple check is to see if it has the same number of paragraphs as the original. If not, there is almost certainly a problem.

Investors are often left in the dark over the contracts they sign due to inconsistent translation and subjective interpretation. The safest option is to check with your independent lawyer, or a professional translator. They can verify that the translation is a true version of the original.

Otherwise, you could unwittingly be agreeing to extra conditions or secured/unsecured charges not covered or applicable under the original contract. You most certainly need to know about areas such as due completion dates and the implications if these are not met. What amenities are being promised? And if you’re paying a deposit, is it refundable, and if so, under what circumstances?

Consulting an independent lawyer before signing a contract is not an option, it’s absolutely crucial.

Simon Conn

Simon has over 25 years' experience in arranging overseas mortgages in over 45 countries. He is involved in a number of projects, especially those involved in consumer protection. Simon has a strong media profile and is an established industry expert on matters relating to the purchase or refinancing of overseas property.

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