The European Parliament has voted in favour of a report criticising Spanish property laws.
The report says Spanish legislation allowing developers to acquire private land below market rates breaches the European Convention on Human Rights.
MEPs were acting on complaints from Britons and other homeowners who feared their homes might be bulldozed.
MEPs say they hope the vote will increase pressure on the Spanish government to change its laws.
'Extensive urbanisation'
The European Parliament voted overwhelmingly to freeze hundreds of millions of euros in Spain's EU funding if the Spanish government does not tackle what the parliament condemned as "extensive urbanisation" practices.
In a full vote in Strasbourg on Thursday, 349 MEPs voted in favour, 114 abstained and 110 cast their vote against the report by the Danish Green Party MEP Margrete Auken.
MEPs from the Spanish conservative PP party were among those who voted against the report while those from the governing Socialist Party abstained.
The report was drafted after more than 100 petitions by thousands of expatriates living in Spain complaining of breaches of their land-ownership rights were sent to the EU's petitions committee.
One of the main campaigners behind the case, Canadian expat Charles Svoboda, says local and regional governments often rubber-stamp planning applications submitted by developers.
Under current Spanish laws, developers can then demand that home-owners sell their properties at prices well below the market rate.
If they refuse to sell, Mr Svoboda says, they may even have their houses demolished. MEPs backing the report say that constitutes a breach of citizens' legitimate ownership rights.
Speaking after the "yes" vote, Margrete Auken said this showed the European Parliament was willing to fight on behalf of EU citizens.
"We've shown now that this parliament can listen to the citizens and can take their case seriously and really support them.
"So it's much easier for them in the future to have the feeling that they have the EU institutions behind them."
'Endemic corruption'
The European Parliament also criticised the "endemic corruption" which it says the Spanish property market suffers from, and demanded that any plans which did not comply with EU law be halted.
This is the third time that the European Parliament has debated urban planning practices in Spain. It condemned the lack of redress Spanish and foreign residents have in the face of alleged development excesses in 2005 and 2007.
This time though, it says, Spain will suffer the consequences to the tune of millions of euros in frozen funds if it fails to act.
De "American dream" is de grootste Hoax aller tijden 
Je moet dat zeker niet als referentie gebruiken voor de rest van het land.
