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The Morairaway Scam - Avoid Holiday Rental Fraud

This Article was revised and updated in December 2009

During 2009 there are at least two major scams in the news involving holidays rentals. As these would seem to involve deliberate fraud it seems unlikely that holiday money will be recovered and, at the present time, there has been no news of arrests.
Holidaymakers in UK, Ireland, France, Germany, Holland, Belgium and Poland where involved and the total fraud was in excess of 5 million Euros.

There are also other risks associated with DIY rental holidays, that could involve partial loss of holiday funds or lack of holiday enjoyment and satisfaction due to (sometimes quite petty) inconvenience, and this article endeavours to clarify all such risks.

Looking at the holiday rental risks and how we calibrate them in this article.

Summarising it all: The safest and most convenient way to book a villa or apartment holiday is through a tour operator or a bonded villa company - but this could be the most expensive.
The riskiest way is through a non-bonded company without a credit card facility e.g. Morairaway

The cheapest way could be to book direct with the owner but not necessarily in safest way as far as financial security, holiday satisfaction and convenience are concerned.
Booking through a local licensed rental agency could be the best option but the article writer admits to be terribly biased in this respect.

Looking at the different ways to book your villa holiday.

Assessing the risks - what can go wrong?

Cost is an important factor but sometimes the cheapest is not always the best.

Obviously the biggest risk is fraud involving total loss of holiday rental and sometimes flight costs as well if alternative accommodation cannot be found at the last moment.

Something could go wrong that affects holiday enjoyment and this usually depends on the expertise of the resort staff. Apart from technical breakdowns it is also important to consider the resorts staff's arrangements for getting you safely to the villa on arrival day.

The best made plans can go wrong and your holiday might not come up to expectations or even be totally ruined. You may have to resort to litigation in order to claim compensation, at least have somewhere to complain.

A. Booking directly with the villa or apartment owner - The most common and amounts to 80% or more of all holiday rentals.

Cost - Cheapest but not always so because a lot of owners are out of touch with market trends. The private owner has an advantage over other sellers because they are able to employ "casual" local labour to carry out services and to avoid VAT and other taxes, which a lot of them do.

Risk of Fraud - high risk because it is so easy, no authority controlling the operation and credit cards not normally accepted. Only moderate risk if the renters take commonsense precautions and identify the owners. All the same, in these difficult times, there have been cases of bank foreclosures and repossession.

Lack of Holiday Enjoyment - high risk! The casual helpers are not always able to act swiftly in order to resolve breakdowns and often do not speak the local language.
Most owners only have one property, so emergency re-location is not possible.

Litigation - unless the property is registered the local tourist office have no jurisdiction. Generally small claims court judges are lenient when it comes to awarding damages between private individuals.

B. Booking with a local LICENSED rental agency - Every region in Spain and most countries have a tourist authority, which licenses them and registers all of their properties. Details should be shown on their website and all documentation.

Cost - is moderate i.e. higher than booking direct with the owner because the agency has to maintain a public office, pay VAT and other taxes, make social security contributions and make a profit.

Risk of Fraud - almost negligible because the agency is positively identified. It is possible that the agency could become bankrupt, probably the tourist authority would appoint a liquidator to ensure that all contracts were honoured and the villa owners would become creditors of the failed agency.
No risk at all if paid with a credit card.

Lack of Holiday Enjoyment - low risk, agencies have access to professional trained staff and, if all fails they would have another property for relocation.

Litigation - the tourist authority have an arbitration scheme and all complaints via the local tourist office are investigated.
The agencies live in dread of a valid complaint against them and generally do everything to avoid one.

C. Booking with a local UNLICENSED rental agency - All risks are about the same as booking directly with the property owner and the cost is considerably higher. Not recommended unless the holiday is paid with a credit card but even then there is no protection by the tourist authority.

D. Booking with a tour operator or a bono fide villa rental company - the all-round safest top end. Also the most convenient, because they would have a varied range of properties in many resorts, but certainly not the cheapest option.

Cost - is usually the highest but then you pay for what you get.

Risk of Fraud - low as long as they have a bonding scheme, if you also pay with a credit card then it's a belt and braces job.
However it should be noted: There is a lot of confusion over the ATOL bond which only covers a package including air travel. See - Holiday Bond Protection

Lack of Holiday Enjoyment - low risk, they would either employ a professional agency or have their own local organisation.

Litigation - most use local rental agencies or their own registered organisation. They  also live in dread of a valid complaint against them in the small claims court.

E. Booking with a DODGY villa rental company - the quickest and easiest way to lose your holiday money. The Morairaway Scam is a classic example. Best to follow one of the recommendations above but, if you are determined, a least check them out below.

It's not rocket science (or checking out the dodgy rental deals) -

1. The Documentation: First: Simply make sure that you know exactly what is included and what you will get for your money. What services are included and which are extra? Do they meet you on arrival (sign of a good professional outfit), will there be a key safe or do they send them through the post?
Do you have complete identity details or the owner (or company) and the property?

2. Credit Cards: Can you pay this way? Sometimes this is not the cheapest method of payment but at a  least pay the deposit this way - then you are fairly well there! Obtaining a card operator's merchant account is not easy and depends on the local bank manager's references.
PayPal is normally not a solution. Payments are only guaranteed for 45 days and you would be paying the balance at least 60 days before.

3. Are they who they say they are? In the case of a private property owner get the name, address and postcode and check them out with the online telephone directory.
A company may have a VAT registration number but that means nothing. Check their bond with the bonding outfit or the ATOL website.
Match the website to the name with a whois lookup. How long have they been around (when was the first registration)?
Beware of those who try to conceal their true identity by registering with sites like DomainsByProxy.
A licensed agency would have registration details and be mentioned on the town hall website.

4. Does the property actually exist? Ask for the Google Map Reference and check that it looks like the one described.

Rental property registration laws in the Costa Blanca.

The laws regarding tourist renting were revised in July 2009. Rental Property Registration Laws.
Now all properties have to be registered and the registrant and property are positively identified.
Furthermore, where the renting is "commercialised" (i.e. advertised). the registration number has to be shown on the ad. together with the registration of the rental agency (where applicable).

Now this will go a long way towards preventing future Morairaway Type Frauds because those who register have to prove their identity and, of course, the property has to exist.
This may not stop the frauds completely but at least the risk of being identified will be a deterrent.

The problem: Currently none of the villa owners are complying but most registered agencies, tour operators and villa companies are rushing to get their properties properly listed. Hopefully, within a few months compliment will be almost total.
Good advice, even at this early stage: Insist on knowing the registration details before you book!

Links to other articles about Spanish real estate and renting.

1. Spanish Real Estate - A Crash or some Adjustments?

2. Spanish Real Estate - The Future.

3. Spanish Real Estate Survey - The Most Popular Areas could be the Best Investment.

4. UK Tax Amnesty for Owners of Holiday Homes

5. Tourist Rental Income 2007 - What's gone wrong? Overview of the situation.

6. What will happen next? Spanish tourist renting during the next 10 years.

7. How the Spanish authorities could react to the tourism crisis.

8. Making the best of it - advice for Spanish property owners who rent!

9. Property Values and Tourist Rental Income - Written in 2004. A very long article which foresees the present economic depression.

10. Spanish Young Persons Rental Subsidies.

İMike King 2009

Author's Bio: Mike King has lived and worked in Moraira sin 1971. Since 1990 he has run Villa Holiday Services - a Moraira Rental Agency with the reference: EE-0011-A
Villa Holiday Services is registered as a rental agency with the Delegation for Tourism of the Sate of Valencia. Mike is a member of the Alicante Association of Professional Rental Agencies (AEA).
The VHS website is VillaServers