Since Spanish Prime Minister Pedro Sanchez started talking about a 100-percent property tax earlier this year, the anti-tourism protests, and new legislation restricting holiday rentals coming in, there have been concerns from Spanish property owners, those who are dreaming of buying a property in Spain and tourists who feel they may not be welcome.
There seems to be some clarity emerging from the chaos, so we spoke to Spanish property expert Sean Woolley from Cloud Nine Spain to ask him to explain what’s really happening with regards to holiday rentals. Sean is a real estate agent with more than 20 years of experience. He also owns three rental properties himself and so is experiencing the situation first hand, as well as advising clients how to proceed.
So he is well placed to give us an update:
The Spanish have a housing crisis, particularly in city centres and the Spanish government have decided to put some measures in place to ensure that there’s more housing available for locals. As thousands of properties are tied up as holiday rentals, they are looking at this issue as a way to release some housing stock and make it easier for Spanish people to be able to rent long term and buy their own homes.
The new legislation is complicated and it’s been difficult to interpret, but we’re starting now to get some clarity.
In my opinion they’ve taken a sledgehammer to a walnut, but people who own properties and want to rent them out, do need to be aware of what this new legislation means to them.
Three properties, three scenarios
I have three investment properties, and on each of those properties and on each of those communities, I’m facing different scenarios exactly related to this, so I can give personal examples of what’s happening.
If you’re a buyer new to the market, you want to buy a property and you want to at least have the option of renting out short term, you need to be really careful. It’s still possible – absolutely possible – but you need to have the right people in your corner. You need to have a good lawyer and a good agent who know what they’re doing and who can guide you through the minefield because it is tricky.
If you’re with an amateur or you haven’t got a lawyer, you’ve got no hope.
In terms of the nitty-gritty, here are a few things you need to know:
You’re in a good position if you already have a tourist licence
If you already own a property and you have a tourist licence that enables you to rent that property out short term. It doesn’t matter what the community decide after you get your licence, you can still rent that property short term. The only thing that might scupper those plans, which I’m finding on one of our developments, is if the community has since found in its bylaws that it can ban economic activity on the development.
This wasn’t put in place for this purpose. However, if you do have this clause in the bylaws, you may find yourself facing restrictions anyway. You’ve still got your rental licence, so you are allowed to rent it out, but you may not be able to get the special number that you need from the registry which will enable you to advertise your property on websites.
At least 60 percent of the community must now decide whether to allow new holiday rental properties
If you’ve got a development whose community statutes allow holiday rentals and you haven’t got a licence, you will need to obtain the express consent of at least 60 percent of the community to enable you to apply for your rental licence. Different communities are doing different things in order to make these decisions. Some of them are doing it on a case-by-case basis, but due to the administrative burden, most are doing it as a blanket ruling once a year. The community can cast their vote to decide their holiday rental policy at either an annual general meeting, or an extraordinary general meeting.
Where I live in Monte Mayor, we’ve just had an extraordinary general meeting to discuss this issue. We have about 200 owners and only around 40 percent of owners were represented at the meeting to vote for whether they want to give express approval for rentals to be allowed in the community. At that vote, it was unanimous that rentals would be allowed, with some restrictions included, such as a minimum 7-night stay.
However, we need 60 percent of the community to vote in favour. Forty percent is simply not adequate to get this measure voted through. This doesn’t mean it’s the end of the line, or that holiday rentals won’t be allowed. Phase Two is to send the minutes of the meeting to all the owners, and wait a month for their response.
At that point, no response equals a positive vote.
This is how communities will ensure that they get express approval for rentals … if they want it.
Tourist licences and communities
The first thing I do when I buy an investment property, is to get a tourist licence. Although I don’t have any of my investment properties rented short-term, this gives me a bit of flexibility with what I want to do in the future. However, because this is being decided by each community, there are some differences in the rules and regulations, which I am experiencing first hand. On one development, I wouldn’t have a problem because the community are in favour, and we voted for it at the most recent annual general meeting.
On another development, we have a problem because of the bylaw saying that no commercial activity is allowed. While this previously hasn’t been an issue when it comes to holiday rentals, it’s now a bit of a grey area, with community administrators and lawyers interpreting the meaning of “commercial activity” in different ways. So, although I have a tourist licence, maybe I can’t use it.
The lawyers that I have consulted insist that I would be able to rent my property short-term on this development, but that it would be difficult to obtain the new code needed to publish the property online.
The final development has taken the decision to ban holiday rentals. They’ve said no, there isn’t a 60-percent majority in favour of allowing holiday rentals, so no holiday rentals allowed. BUT, because I have my license already, I’m OK, because they can’t ban me retroactively. Even on this development, I’m not entirely convinced that the community and administrators have adopted the correct voting procedure.
They simply put the matter to owners via an email poll.
Tourist licenses on a municipal level
There are more widespread threats as well. There are town halls and municipalities saying they are going to ban holiday rentals. When you read that in the press it sounds like you wouldn’t be able to go on holiday to Spain.
That’s just rubbish, nonsense, so please don’t worry about that.
What they’re trying to do is to control the industry, which is absolutely right and you must take the stories you read with a pinch of salt. For example, when you hear about Malaga’s ban on 16,000 holiday rentals, this doesn’t mean they are banning rentals. These were the ones that weren’t registered or licenced, and it’s a crackdown on illegal rentals, rather than a ban on legal rentals. However, they have applied a three-year freeze on new holiday rental registrations in certain areas, so you do need to ensure you’re informed before you buy.
There are some municipalities which are suggesting that they want to ban holiday rentals outright, or stop any new licences being issued. This means if you haven’t bought and you haven’t got a holiday licence in place and you do want to rent out your property, you need to avoid any municipalities which won’t grant any new licences. So do your research and choose an agent who knows their stuff, to avoid making the wrong location choice.
Licences can be transferred to new owners
We’ve recently received confirmation from the Junta de Andalucia that rental licenses are linked to the property, and NOT to the owner.
This is really important as it means that your license can be transferred to a new owner in the event that you sell your property.
Perhaps we will enter a two-tier market in which properties with licenses will be more attractive (and potentially more costly) than those without a licence.
Speed is of the essence
This is an evolving situation and so if you want to purchase a property to be used as a holiday rental, we advise you to move quickly. Purchase a property as soon as possible and apply for your tourist licence quickly. This will offer you the maximum protection against any future changes.
An option to consider is to buy on a new development. We’ve been speaking to developers, and they are all saying that it would not be in their interest to have anything in the by-laws of a community to ban holiday rentals or commercial activity. As very often it takes about a year for the development to be handed over to its owners, that gives you time to get your licence, get in, and be potentially safe from any future decisions of the community. It’s something that you need to look at very carefully with your agent of choice and with your lawyer.
Make sure that the property that you acquire is one that can do the job for you. But don’t panic, there are still plenty of areas and communities that are happy to have holiday rentals, you just need to choose wisely.
Expert Details:
Sean Woolley is the founder and director of leading real estate agency Cloud Nine Spain. He is the author of the book “From the Ground Up – The Insider’s Guide to Buying Spanish Property,” sharing his years of experience, real life stories, tips and tricks with buyers interested in investing in Spanish real estate.
•••••••••••
Read more from Sean and Cloud Nine Real Estate here in Dispatches’s archives.
Cloud Nine
Cloud Nine Spain is a real estate firm based in Marbella, Spain specializing in luxury properties.
