Short-term tourist rentals and holiday-lettings in the Balearics under the new Tenancy Act

Las Boas, Ibiza. Now in administration.

The reform of the Tenancy Act passed by the government in Madrid makes re-visiting the issue of short-term rentals all over Spain, but particularly in the Balearics, a worthwhile exercise. Indeed, what, if anything, has changed, and what are the implications for the rental market of the new Act?

By Will Besga, Mallorca Law.

Tourist rental laws in the Balearics have long been some of the most restrictive in Spain. From the summer of 2012, Holiday-home owners need a license to rent to tourists, but licenses are only given to detached homes and semis, and no licenses can be given for apartments and other types of housing. Up until a few weeks ago, holiday-home owners could use the national Tenancy Act (Ley de Arrendamientos Urbanos of 1994 or ‘LAU’) to get round local laws and rent to tourists. Now that the reformed Tenancy Act explicitly devolves the regulation of touristic rentals to the Autonomous Regions, does that mean that loophole has been closed?

Not at all. Holiday-home owners in the Balearics should still be able to rent out their homes on a short-term basis so long as they are careful about not offering services to their tenants other than the actual accommodation, have a suitable ‘LAU’ contract, and are careful with the wording of their adverts.

Let me explain: the national Tenancy Act and the Balearics Tourism Act have unwittingly generated two categories of short-term rentals: One is what the law calls “touristic”, whilst others are considered as ordinary, or non-touristic. I explained in detail the differences between the two in my last article on this question (Touristic rental licences in the Balearics). Essentially, “touristic” rentals include services, whilst “ordinary” rentals don’t.

If you want to engage in what the authorities call “touristic” rentals in the Balearics, you need a license from the local administration, which now only issues licenses for detached homes and semi-detached homes and certain townhouses. As I mentioned before, you cannot get rental licenses for apartments.

But what if you cannot get a license, because you do not have a detached property or a semi, or you simply do not want to offer services to your tenants? Then, the law seems to suggest, you can still use the national Tenancy Act to offer short-term rentals. This is true for owners of all types of property

Loopholes and confusion

The old Tenancy Act had a number of properties that were never regulated by it: military barracks, university houses etc. The new law has added another type of property that now falls out its coverage: ‘the temporal use of a furnished property, equipped for its immediate use, commercialised through touristic channels, when it is subjected to a specific, sectorial legislation’.

On first reading, one of the obvious conclusions is that there is now a growing magma of legislation, with the effect of blurring situations and creating confusion, which, in a climate of recession, is just about the worst thing a government can do. Yet what, if anything, do these few sentences in the new law change?

Well, the other obvious conclusion is that ‘certain’ rentals will now depend on a given region’s touristic legislation, if there is any in a given region. So in the regions that have no such legislation (eg, Madrid), this law doesn’t change anything. Yet what happens in the regions where, such as the Balearics, there are touristic laws and regulations in place?

Plus ça change

It is difficult to say with certainty, as the section is very ill defined, and it will take jurisprudence to establish exactly what is it that the MPs sitting in Madrid actually meant. But, in spite of it being a brand new piece of legislation, we can still extract the most likely meaning.

That is, that in the Balearic Islands, this new law should not really change things. You should still be able to use the national Tenancy Act to rent to tourists on a short-term basis if you are careful.

The new Tenancy Act only devolves the regulation of temporary rentals IF they are subject to, or subordinated to, or depend on regional touristic legislation. In the Balearics that means “touristic” rentals that meet the criteria defined by the regional law. But if you are not offering any services, and you are careful about the wording of your advert and contract, then you are not offering “touristic” rentals, and so fall under the National Tenancy Act, not the Balearic laws. So your right to rent is still protected under the Tenancy Act if you do it correctly.

Where does this leave us? Well, pending the application of the law by the authorities, you should still be able, as before, to use the Tenancy Act to rent short-term to tourists those properties for which you cannot get licenses (apartments, terraced houses etc), so long as you do not offer any services.

Owners of villas and semi-detached homes can also use this loophole to avoid having to get a “touristic” licence. Given, however, that the new law intends to subject touristic rentals to the regional touristic law, and the latter regulates detached houses and semis, I consider that if you have a detached or a semi, you would be better off with a licence offering services.

In conclusion, the current situation appears to give the Balearics tighter control over touristic rentals, that is, licensed rentals of detached properties and semis where services are offered. Yet holiday-home owners who cannot get a license (for example, because they own an apartment), or who, being able to get a license, they do not want to engage in a touristic rental, can still rent out their properties ‘ordinarily’ by avoiding meeting the criteria of a touristic rental, and therefore without needing a license.

Holiday rental licences balearics
Likely state of affairs in the Balearics under new Tenancy Act and regional laws

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice.

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