Like many people who purchase property in the Balearic Islands you may be considering renting it out for holiday lets. If so it is important to be aware that there have been some recent changes in the rules regarding rental licences which for many are causing some confusion. If you are confused about the rules regarding renting out property in the Balearic Islands here is an overview of what you need to know about the impact of stricter rules on rental licences for properties in the Balearic Islands:
What legislation regarding rental licences has been passed, by whom, and why?
On the 19th July 2017 Spain’s regional Balearic Parliament which governs the Balearic Islands of Majorca, Menorca, Ibiza and Formentera (and some smaller islets such as Cabrera, Dragonera and S’Espalmador), passed the reform of the Tourism Law 8/2012. This regulation was created with the aim of limiting the number of holidaymakers and the role of holiday rentals in the Balearic Islands.
Following the passing of this legislation, on the 8th August 2017 the Balearic Parliament also went on to approve Tourism Law 6/2017 which will activate new rules established by the government meaning that local authorities can now take legal action against illegal tourist accommodation that is not complying with the new law, this had previously been a regional government matter.
Until these stricter rules on rental licences were introduced holiday rentals were limited to semi and detached houses. Apartments were able to be rented out to holidaymakers through a loophole in the 1994 Urban Rental Law (LAU in Spanish) which allowed short-term rental of these properties, thus allowing landlords to circumvent the stricter requirements from the current Balearic holiday rental law.
The government introduced these stricter laws with the aim of curbing mass tourism which is sparking conflict with locals who have been complaining that they are being priced out of the rental market by holidaymakers, and to also stop fraud around this industry. It is widely believed that the introduction of this legislation was also as direct reaction of the powerful lobbying of hotels, mostly represented by their association ASHOME. This lobbying was against rental initiatives such as AirBNB, holidaylettings.co.uk and ownersabroad.com, which in the last five years have become extremely successful so depleting revenue from the hotel sector. In addition the Spanish version of our Inland Revenue tax agency wishes to more closely monitor the income that landlords are earning from holiday rentals which they feel is not being disclosed to them as it is often earned by foreign property owners receiving rental income in their countries of residence.
What are the new stricter rules for renting out property as a holiday let in the Balearic Islands?
Under this new stricter legislation those who wish to rent out their property on a short-term basis as a holiday let, which is defined as a property that includes a service, i.e. providing cleaning, laundry changes or villa manager, MUST now obtain a special licence to do so. Basically unless you have a licence you are letting your property illegally and now face a huge fine
The new law states that the rental period for any one property can only be up to 60 days a year and that the government will treat apartment rentals of less than a month as “tourist” thus requiring a licence. It also establishes quality control standards and property owners will be required to inform the local authority, and sometimes even the police, of the identity of those who are renting their properties. Some of these minimum requirements have been designed, according to the Balearic Government, to protect the consumer against fraud.
What is required to obtain a licence for a rental property?
To obtain a licence to rent your property commercially to tourists you are required to provide the following:
- The tenant will have the right to the use of the whole property for a period of time of no more than two months
- The rental of individual rooms is not allowed. A house may not be rented to various clients, each with an individual rental contract, at any one time.
As the owner you must also guarantee the following:
- A regular cleaning service – the cleanliness and general hygiene must be of a good standard and cleaning equipment must be provided.
- Provision of bed linen, towels, kitchen clothes and table linen which is regularly changed.
- Professional maintenance of all equipment and installations
- Provision of fire extinguishers with up to date service certificates
- Provide a professional office contact during the working day
- Provide a point for 24 hour emergency contact
- Identification of the property must be clear with the house name, number, plot number (as relevant) and street name all displayed.
What will happen if these new rules are not followed?
Owners who attempt to rent out unlicensed properties to tourists could be fined up to € 40,000 and online platforms will not escape punishment with a fine of up to €400,000 if they fail to display the license number.
What should I do if I plan to rent out my property in the Balearic Islands?
Licence applications have been frozen for the next 12 months until the local governments decide which areas holiday rentals will be permitted within on the islands.
Therefore, if you currently plan to rent out your property to tourists in the Balearics, ensure that you already have an existing rental or tourism licence in place. In the case of longer term rentals always ensure that you an effective rental contract in place in order to govern the relationship between you and your tenant and to prevent problems and disputes occurring in the future.
It should be noted that once a licence is issued, you will still have to re-apply for renewal after five years, this will not be automatic.
The only way in which you can rent out a property in the Balearic Islands WITHOUT a licence will now be by having a leasehold which IS NOT a touristic one, because you cannot get a license to rent an apartment to tourists if choosing this option. The property can however, be rented out NON TOURISTICALLY, for any period of time, by NOT offering and NOT providing any kind of services. The leasehold agreement will be one subject to the Tenancy Act, which allows you to rent out your property for any term of time.
If I rent out my property on non-touristic leasehold what does this imply, and how can I prove that it is a non-touristic rental?
If you are renting out your property for short terms possibly during the summer months, the Tourism Inspectors will naturally assume that you are undertaking a tourism rental. You may well be renting your property out to tourists, the word ‘tourist’ being an unfortunate coincidence, so to dissipate this assumption by the inspectors you would be well advised to take into consideration two factors:
- Have a contract between you and your tenant which shows that you are subjecting your leasehold to the Spanish Tenancy Act, by including some criteria and leaving others out, and which describes what you are doing fulfilling the terms and conditions of the Spanish Tenancy Act.
- Pay careful and close attention to how you advertise the property. A property advertised as a holiday home where some services are offered will undoubtedly attract the attention of the Tourism Inspector and persuade him/her to regard your property as being a tourist rental and therefore requiring a licence for which, as we discussed, you will be heavily fined for not holding one! Therefore to prevent this occurrence, contract and adverts must be complimentary and in harmony with each other and must NOT make your property sound like a tourism rental.