Renting Out Your Holiday Home In Spain
Mortgage interest rates in the Eurozone are on the rise, placing Britons who have borrowed to buy holiday homes in Spain under increasing financial pressure. As a consequence, many are turning to holiday rentals to help pay the bills.
But after recent scandal stories reporting that most holiday rentals in Spain are illegal, and that some Britons have had fines of up to 30,000 Euros slapped on them for renting without a license, many owners are now having second thoughts.
"When I heard about this I immediately contacted my rental agency in Spain, but it was news to them as well," says buy-to-let investor David Harris, 52, a hotelier from Essex, who rents his 2-bed apartment in Mijas on the Costa del Sol to tourists. "Property forums are full of contradictory advice, which just leaves you more confused."
Aileen Hutchinson, 57, a semi-retired health and safety professional from Derbyshire is also concerned. "We have recently bought a house in Denia on the Costa Blanca, with the intent of renting when we are not using it to assist in its upkeep," says Hutchinson, whose townhouse is on a development with 18 other properties. "A disgruntled neighbor has warned us that we need a license from the Spanish Tourist Board to rent. With mortgages going up this is serious issue for half a dozen of our neighbors."
A recent survey at the Spanish property portal Kyero found that 82% of (mainly British) responders did not know whether rental licenses were required in their area of Spain. "Clearly, there is a lack of knowledge and awareness about this particular aspect of Spanish law," says Martin Dell, head of Kyero.
The question is further complicated by the distinction, under Spanish law, between 'tourist apartments' (apartamentos turisticos) and 'holiday homes' (viviendas vacacionales). "The former are a special category of property built and licensed specifically for renting out to tourists, usually in a complex with certain facilities and services under the management of one company, while the latter are private residencies rented out by owners to holiday makers on a part time basis, "explains Maria de Castro, of Costa Luz Lawyers in Andalusia.
This being Spain, the rules are often ignored, and some developers have been merrily mis-selling 'tourist apartments' as private properties to unsuspecting British buyers who are not aware of the distinction. 'Tourist apartments' have use restrictions, and need a license if rules are enforced. Fines can be incurred if they are forwarded without satisficing regulations relating services and facilities.
But most Britons own what Spanish law defines as 'holiday homes', so the question is do you need a license to rent these out to holiday makers, as you do in other countries like Portugal and Italy?
In Spain, with its system of autonomous regional governments, the answer depends upon where your property is.
"You do not need a license to rent out a private apartment or villa to holiday makers on mainland Spain," argues the owner of one rental management company. "We have had our specialist lawyers check this for us, and with 3,500 holiday rentals this season we can not afford to make a mistake."
I can not confirm that this is correct for all areas of mainland Spain, as regional restrictions do appear to exist. In Murcia, for example, you need to register with the department of tourism before you can rent a private property to tourists, and can be fined for not doing so. In Andalusia, on the other hand, you only have to inform the local government of your plans, and in the Valencian region you do not need to do anything, at least according to local lawyers and the regional government. So it does appear that most British owners of private properties on mainland Spain can relax, although you should always clarify your case with a local lawyer.
The islands, however, are another story. Powerful hotel lobbies in the Balearics and the Canaries have pushed for local laws that make it difficult or impossible for owners to rent legally to tourists.
"In the Balearics you can only rent official 'tourist apartments' to holiday makers, not private residential apartments," explains Isabel Loeffler of Loeffler Legal Center in Mallorca. "The only kind of residential property you can rent out is a detached villa, but only if you have a license."
The department of tourism in Palma confirms this, and adds that licenses to rent detached properties are no longer being rented in Mallorca (although it appears that they are still being gifted in Menorca).
It's a similar story in The Canaries. "It is illegal to rent a residential apartment to tourists on a weekly basis, and you need a license to rent a villa, though they are not issuing licenses anymore," explains Mario Izquierdo of Lanzarote Lawyers.
A quick search online, however, turns up thousands of private apartments and villas to rent in both regions, many of them belonging to British owners who may have no idea that they risk fines if they are caught.
"The situation is a bit of a mess" admits Kate Mentink, 63, from Edinburgh, who has lived in Mallorca for 27 years, and is now a local councilor and deputy mayor responsible for tourism and international integration in the popular Calvia jurisdiction in the South West of the island.
"My department's understanding is that all short term rentals to friends and family are fine, provided you declare your rental income and pay taxes, but renting to strangers through a tour operator, agency, or even the internet is not allowed without a license, explains Mentink.
Some reports of hefty fines for some British owners, it looks like warnings come before fines, at least sometimes. "Last week we had a case in the town hall of a British man who has been warned for renting out his apartment without a license.
Nobody I have spoken to can confirm that any fines have actually been paid in the Balearics or Canaries, even if they have been issued. "They may not stand up in court," says one lawyer.
Furthermore, the restrictions only apply to short term tourist rentals, not to longer periods that may suit owners who only use their properties for a few weeks a year. "Short term rentals are a hassle," says Jan Westwood, of buyer's agency The Property Finders in Mallorca. "If you use the right kind of contract you can get a winter rental, say from the yachting community, that is much more lucrative and easy on your property, for which you do not need a license."
Wherever you own in Spain, but especially on the islands, the best advice is to check with a local lawyer, and bear in mind that you can definitely be fined if you do not declare your rental income and pay tax on it. You also need appropriate insurance, correct rental contracts for every client, and to check community byelaws if you belong to a community of owners.
Despite the recent alarm about rental licenses and related fines, a much larger problem for British buy-to-let owners in Spain is disappointing rental results. "Nothing like what I was promised by the estate agent," complains David Harris. But that's another story.