A damning report on controversial Spanish "land-grab" laws, which have left foreign homeowners in the Valencia region facing huge bills and the loss of part or all of their properties, was approved by MEPs.
About 760,000 Britons live in Spain. Michael Cashman MEP, co-author of the report, has been championing the cases of 15,000 mostly British, Belgian, German and French property owners who petitioned the European Parliament for help.
The long-running row is over a 1994 Valencia land and town planning law, under which the local authority has so far allowed at least 20,000 compulsory purchases.
The Spanish government says the aim is to ensure that community development plans are not blocked by individual landowners.
But the law has been used to reclassify rural land as urban without the owners' permission - effectively giving developers compulsory purchase rights on foreign-owned homes at a fraction of the market value. Unscrupulous developers can claim back existing properties or portions of land - and charge the occupiers to contribute to the cost of installing roads and drains.
The rules were changed a year ago following an EU warning, but the European Commission says the rules still fail to protect citizens' rights. A decision on EU legal action against Spain is likely soon.
Mr Cashman said: "EU citizens who have bought property in good faith have had their dreams turned to nightmares and their land confiscated. Their basic rights are ignored and the authorities don't have the political will to deal with it.
"These are people who have gone through all the correct procedures only to find that what the developer has done is illegal. Others buy land for their holiday or retirement home, only to find it cannot be built on and is taken away from them.
"My message to Britons thinking of setting up in the Valencia area is not to think twice - think three times."
Mr Cashman's report, written with the Polish MEP Marcin Libicki, will be discussed by MEPs in Strasbourg next month. It says that Spanish urban development often leads to "spoliation of community and culture, and the massive enrichment of a small minority at the expense of the majority".
As a result, it says, fundamental EU property rights continue to be undermined.
The report also states that the contentious land laws can oblige property owners to "give up 10 per cent of their land without compensation and [face] an arbitrary financial charge - which can amount to tens of thousands of euros - without consultation of those who own the land".
Mr Cashman told MEPs: "Thousands of people are living with the sword of Damocles suspended over their home and rights."
But the centre-right Spanish MEP Carlos Jose Iturgaiz Angulo said the report would "damage Valencia and do great damage to Spain". He added: "People from the EU have a false image of what is happening in Spain."