New Balearic Islands Holiday Rental Law

Lawyer Raymond Nesbitt briefly explains the new landmark amendments made to Balearic Islands’ Holiday Rental Law (Law 8/2012).

Introduction

The Balearic Islands Administration has recently approved Law 6/2017, of 31st July 2017 which introduces a batch of significant changes to its 2012 Tourism law. These changes came into force on the 1st of August 2017, on the day after they were published in the Balearic Islands Official Law Gazette (BOIB).

Because of how significant I think they are, and their wider impact on the short-term Balearics rental market, I am compelled to devote September’s article to shed some light on them. To clarify, this is not a new law that has been passed, they have simply amended 2012 holiday rental law. As this law was passed five years ago, I will not be analysing it as everyone should already be familiar with it and I already mentioned it in my recap article of 2015 Holiday Rental Laws in Spain.

I will briefly highlight the major changes to my mind without going into the minutiae.

 

EDIT 12th September: As reportedly there seems to be some confusion over my text, for which I profusely apologise, I will try to clarify the situation.

The confusion stems from readers not being familiar with the Balearics Tourism law of 2012, which I already mentioned I would not be analysing in this article. My article may seem baffling if you are unfamiliar with said law because I took for granted readers already knew it as it is a five-year-old law (which clearly was my mistake).

The matter of holiday homes is highly controversial amid Balearic politicians. This bill has been consensuated by political parties with opposing views and some of them even abstained from voting it in open disagreement with its thrust. Whereas some political parties welcome the idea of private holiday home rentals, others want to outright ban them. As a reflection of these polarising views, the bill is cobbled together with inherent contradictions which lead to some grey areas and confusion.

All existing rental or tourism licences are valid, regardless of whether you are resident or non-resident. So, if you have attained already a tourism licence you can continue business as usual. Going forward, this bill sets a one-year moratorium on issuing ALL new rental licences (Declaraciones Responsables de Inicio de Actividad Turística or DRIATS for short) for both detached properties and tenements within a community. Consells Insulars and town halls will now need to determine in their planning zones which areas are apt for private holiday home rental.

A new rental modality has been introduced for main homes where the landlord has his habitual residency. In other words, you must be resident in the Balearics to rent out your property as a holiday home under this new modality (the exact terms are unknown and will be developed by further regulation). To attain this new type of rental licence you must comply with the requirements I set out in my text below. Does this imply that non-residents can no longer apply for rental licences? No, it doesn’t mean that.

After the one-year moratorium has elapsed, hopefully the local Administrations will have defined clearly the boundaries of the new touristic areas where new rental licences may be issued (for both residents and non-residents alike). Any property outwith the specially earmarked ‘tourism zonings’ will not be able to attain a coveted rental licence (with the only exception if they already had one issued before this regulation was passed last August).

The logic behind this new rental modality, exclusive to residents, is to allow locals, who apparently are struggling to meet their mortgage repayments (sic), to make a supplementary income renting out their properties to tourists for a maximum of 60 days within a calendar year. Additionally, locals allegedly struggle to find affordable accommodation, particularly in Palma and Ibiza, which has sparked a social backlash on holiday homes this summer and Tourism in general. This public outcry has led local politicians to seek a sustainable tourism growth model which apparently has already hit a glass ceiling in the Balearic Islands.

The pervading idea behind the bill is to restrict furthermore rental licences and even go as far as to reduce them gradually over the next years. By the same token, new draft laws will restrict the number of properties a single individual can rent out to avoid speculation and concentration of properties in few hands which drives rental prices upwards (tut mir leid, Bettina). Year-on-year holiday home rental prices have increased by a whopping 40% in Palma city alone.

Batch of changes

 

Holiday-home

  • A new rental modality has been introduced which requires the landlord to be resident to rent out. Only properties that constitute the permanent residence of a landlord can be rented out under this new rental type! Let us examine the significance of this with an example for ease of comprehension: a British national resident in the UK, who owns a second holiday home in Port Andratx, may NOT rent it out as, by definition, he is a non-resident and it is not his main residence.

These properties can only be rented out for a maximum of 60 days within a calendar year. The landlord must have applied and attained a most sought-after rental licence issued by its consell or local town hall which is entirely at the discretion of the local Administration and is contingent on the zoning of your property (PIAT) and if it is earmarked as suitable for holiday rental. This new law introduces an overall capped number of beds (currently set at 623k) with each island being assigned a quota. This figure is planned to be reduced gradually over the next years by as much as 100k. No new rental licences will be issued over the next year until the touristic planning zones are determined by the town halls.

Oh, and I forgot to add that even if you manage the herculean feat to attain a coveted rental licence, the rental permission is renewable every 5 years providing you fulfil all the requisites – again. Meaning after five years they may not renew it, in which case you can’t rent it out after all.

  • When the property is marketed, in all publicity it should clearly state the rental code of the property.
  • A novelty of this bill is to allow for the first time ever for properties within a Community of Owners to be offered and marketed as private holiday homes. This can only be done if the majority of the property owners have approved it in a General Assembly and this agreement has been lodged at the Land Registry. In other words, if a Community of Owners forbids the use of properties as holiday homes a landlord cannot (lawfully) rent out his property (in the Balearics).
  • The person who markets the property must inform the Police of every lodger of age 16 and over in compliance with Spain’s Security law.
  • Short-term lets are restricted to 30 days (one month) to the same tenant and may not surpass this limit.
  • Only properties with a minimum of 5 years antiquity can be marketed as holiday homes (unless specific regulation states otherwise) and must have been used as a private residence.

Fines

  • Unlicenced holiday rentals (clandestine lettings): Landlords who offer rental holiday homes without having a rental licence issued by the Administration can now be fined between €20,000 to €40,000 (per property!).
  • Failure to communicate to the Administration change of property ownership on holding a rental licence (selling property). May result in fines of up to €4,000.
  • Serious offences: are now fined between €4,001 to 40,000.
  • Very serious offences: are now fined between €40,001 to 400,000.

Registering your holiday home to pre-empt fines – You can still be fined for non-compliance!

It should be noted that the fact you apply for a rental licence while you wait for it to be issued by the consell does not exclude you in any way of being fined in the interim.

Moreover, as I care to explain in my blog post regarding the region of Andalusia, if you apply for registration but you lack some of the prerequisites (i.e. your property does not have a mandatory Licence of First Occupation issued, article 50) you are breaking the law and you will be (heavily) fined by the Administration. Which is why I advise all landlords not to register their holiday homes unless they are fully compliant. Ignorance on the law’s finer terms will not be accepted as an excuse not to be fined.

Holiday-home in Mallorca, Balearics

Holiday-home in Mallorca, Balearics

Conclusion

If you are looking to buy property as an investment in the Balearic Islands (Mallorca, Ibiza, Menorca and Formentera) and plan to rent it out short-term, you may want to look elsewhere in Spain.

Pushed by a lack of affordable accommodation for natives, local politicians seek to limit the ability of property owners to rent out their properties as holiday homes, specifically targeting non-resident landlords. Clearly this matter is a serious local problem, but I question the right approach is to limit the ownership rights of property owners. I venture that limitation on planning permits and adopting a sustainable development growth model would perhaps be a more advisable alternative (read investor-friendly) as opposed to curtailing owner’s rights.

The changes brought about will also have unforeseen market consequences, possibly drumming up speculation, as properties within areas apt for holiday home rentals will likely be more valuable than identical properties in excluded areas from private short-term rentals.

This new regulation is so restrictive and has associated such stiff fines that it is honestly not worth all the hassle and risk of getting caught red handed without a rental licence. Many other regions in Spain (i.e. Andalusia) have more landlord-friendly regulations with laxer terms and lenient fines in comparison. Not to mention how they have created a system of online whistle-blowers with a whiff reminiscent of the best the U.S.S.R. had to offer the world, not. These measures have Kim Jong-un’s seal of approval.

This new regulation unabashedly wants to paint into a corner private holiday rentals, demonising them, making them a most unattractive proposition. It will likely be the death knell of the burgeoning private holiday rental industry in the Balearics on the heels of dubious local political interests. This new regional law in my opinion is borderline unconstitutional as it is a frontal attack to private property which is a legal right enshrined in art. 33 of the Spanish Constitution. Furthermore, it induces pernicious asymmetrical inequalities in regional holiday home regulation which may have a broader impact on foreign investment diverting funds to other more investor-friendly regions in Spain to the detriment of the Balearics.

I will self-restrain myself and resist the urge to comment on the attack to a free market economy and how these measures (artificially) stifle competition. I had already ranted at length on these counterproductive consequences and who they (really) benefitted in my articles of 2013 New Measures to Bolster Spain’s Ailing Rental Market and in 2015 Holiday Rental Laws in Spain. Unfortunately, time has proved me right in all my comments.

Ultimately, it may be needed for the State itself to step in decisively and curb the law-making enthusiasm of regional politicians; centralising regulation of holiday home rentals under common standards to iron out provincial lopsided regulation. This would be truly ironic, given how the Government itself in 2013 opened the legislative floodgates, leaving the door ajar for all regions in Spain to pass new laws on private holiday rentals. The Government should backtrack on its (derailed) policy and rein in legislative power on a matter of national importance to the Spanish economy.

Regardless, if you still remain unconvinced by my remarks and decide to fearlessly plough ahead and rent your property out, I strongly advise you to take legal advice on your Balearics holiday home rental as the new laws in place are so complex and the fines on non-compliance are humongous.

I should clarify this new law should not affect your decision-making if you are simply buying property in the Balearics with a view to enjoy the property yourself (in lieu of renting it out as a holiday-home). Balearics is a beautiful place to live in, despite its delusional politicians.

Politics: the art of creating new problems where none existed.”

 

We will be very pleased to discuss your matter with you. Please contact us for a free initial consultation. You can contact us by e-mail at info@larrainnesbittabogados.com, by telephone on 951 894 675 or by completing our contact form.

 

Article originally published at Larraín Nesbitt Lawyers: New Balearics Holiday Rental Law

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About Raymundo Larraín Nesbitt

After completing his dual law degree in Madrid (ICADE) in 2003 Raymundo went on to work for prestigious Spanish and English law firms in Spain before moving to the UK for several years to work for a British multinational. He is a prolific writer of legal & financial articles in English, with well over 140 articles published and widely used in the Spanish real estate sector. Raymundo now runs his own law practice in Marbella, where he advises local and foreign clients on all legal matters with a focus on conveyancing and non-resident taxation. He is regularly quoted by the international press as a reliable source in his field of expertise.

10 thoughts on “New Balearic Islands Holiday Rental Law”

  1. Calamajor

    Dear Raymundo,
    I have tried to find everything on this topic but I haven’t seen that it is
    “Only properties that constitute the permanent residence of a landlord can be rented out!”
    and
    “These properties can only be rented out for a maximum of 60 days within a calendar year. ”
    Are you sure that is correct? 60 days per year is what some political parties, Terraferida, etc want, but is it actually decided?

    Also, you forgot the deposits:
    Majorcadailibulletin August 22, 2017: “Under the national tenancy act (Ley de Arrendamientos Urbanos), an owner who rents out a property should pay the deposit for the rental into a bank. In the Balearics this means that the deposit goes into the account of Ibavi, the regional government’s housing agency. Although there is an obligation to make these deposits, they are often not made. The government at present lacks the means to force compliance, but under its housing law it will remove this legal vacuum. For non-compliance there will potentially be fines of up to 3,000 euros. ……. Another of the requirements is that a tenancy contract has to be signed”

    How big is the deposit and how do they get the money back?

    It would be very interesting to hear your comments about this, particularly since you are a Spanish lawyer.

    1. Raymundo Larraín Nesbitt Post Author

      Morning Calamajor,

      Let me start by clarifying that I do not comment on political agendas, I just limit myself to analyse an approved law. My articles are normally divided in two sections; a main body which analyses the law in a neutral manner (or at least I strive for it to be as neutral as possible) and a conclusion where I pour my own personal opinions. Take good note I am not analysing the full law that was passed in 2012, as I mention in my intro, I simply highlight above what to my mind are the most striking novelties of the new law which happens to ammend it.

      Your comments are referring to the main body of my article which simply extracts the novelties of the new law which amends the 2012 Balearics Tourism Law.

      Regarding the deposits, I haven’t ‘forgotten’ as you write. As I have commented in the past in other articles of mine regarding rentals, by law, tenants should lodge the fianza (letting deposit) in an organism dependant of the region where the property is located. In practice, it is seldom done. This is explained in detail in my article Urban Rental Law in Spain – Spain’s Tenancy Act or Ley de Arrendamientos Urbanos, LAU – under the heading “Rental deposit”.

      https://www.spanishpropertyinsight.com/2016/05/13/urban-rental-law-spain-tenancy-agreements-ley-de-arrendamientos-urbanos-lau/

      As for the mention of the 60 days and permanent place of abode of the landlord, this is concretely the excerpt of the new law you are unable to locate:

      Law’s intro: “Asimismo, independientemente de la tipología de edificación, se introduce una modalidad denominada alquiler de vivienda principal cuando la comercialización se lleve a cabo por parte del mismo propietario en su vivienda principal durante un plazo máximo de 60 días en un período de un año.”

      Amended articles:
      “Cuando la comercialización se lleve a cabo por parte de personas físicas exclusivamente en una vivienda de su propiedad, que sea su vivienda principal, independientemente de su tipología unifamiliar o plurifamiliar, por un plazo máximo de 60 días en un período de un año, la comercialización de estancias turísticas podrá llevarse a cabo con la modalidad de alquiler de vivienda principal. Para llevar a cabo esta modalidad deberán cumplirse los mismos requisitos y obligaciones establecidos en este artículo o desarrollados reglamentariamente, con las particularidades anteriores y las que se citan a continuación:

      En la presentación de la declaración responsable la persona comercializadora deberá acreditar que se trata de su vivienda principal de la forma que se determine reglamentariamente. También deberá indicar, en la forma que se determine reglamentariamente, la distribución de los plazos de comercialización durante el año, que no podrá superar los 60 días.

      Asimismo, solo podrá presentarse la declaración si la vivienda está ubicada en una zona declarada apta de manera expresa para acoger esta modalidad por los consejos insulares o por el Ayuntamiento de Palma, de conformidad con lo dispuesto en el artículo 75 de esta ley.

      La declaración habilitará para el ejercicio de la actividad por un plazo de cinco años, o el que se determine reglamentariamente, con el mismo régimen y requisitos de autorización y renovación establecidos para las viviendas sometidas al régimen de propiedad horizontal en el apartado tercero. Para la prórroga será necesario, además, acreditar que la vivienda continua siendo la vivienda principal del comercializador.

      Excepcionalmente, en esta modalidad se permite la convivencia de las personas residentes en la vivienda con las personas usuarias, siempre que este hecho se indique claramente en toda la publicidad y el número total de personas no supere el número de plazas de la cédula de habitabilidad o título de habitabilidad análogo de la vivienda.”

      Regards

  2. Calamajor

    Gracias! That was really interesting information. Then the revised law will change the whole market in the Baleares.
    I didn’t ask for any political information although I do understand why the Spanish authorities in different parts of Spain do what they do – I’m only interested in the correct legal information.

    The reason why I was surprised to read that only owners with permanent residence can rent out (if they get permission) is that I’ve read that they identified one person they call Bettina who rents out more than 700 properties in Mallorca. While they don’t mention the nationality of Bettina, I just assumed that she isn’t Spanish as Bettina doesn’t sound Spanish.
    https://majorcadailybulletin.com/news/local/2017/04/29/47730/limit-number-properties-owners-can-offer-for-holiday-rent.html

    Is my interpretation correct if I say that in a community (Edificio) where there are no Spanish residents – only non-residente – nobody will be given permission to rent out their apartments?

    1. Raymundo Larraín Nesbitt Post Author

      Careful, you are putting words in my mouth. As I’ve made clear in my reply to you, and also in the article’s introduction, I’m only commenting on the novelties introduced by this new law. I am not analysing the 2012 Tourism law.

      The Tourism law of 2012 contemplated different rental modalities to let out properties as holiday homes. This new law has introduced a new rental modality which requires the landlord to be resident in the Balearics. The exact requisites will be developed by further regulation as they haven’t been disclosed as of yet. Meaning if you are non-resident you cannot rent out your property as a holiday home following this new change in the law – something which I personally find unacceptable, but that is just my opinion. I hope that clarifies the misunderstanding.

      So careful, do not read my article above as “only residents can rent out properties”, because it would be untrue. This is simply a new modality introduced by the new law which needs to be regulated by further legislation at some point in the future. It is a bit of a grey area right now.

      Regarding a community of owners, I specifically mention the changes in my article:

      “Properties included in a Community of Owners can only be offered and marketed as holiday homes if the majority of the property owners have approved it in a General Assembly and this agreement has been lodged at the Land Registry. In other words, if a Community of Owners forbids the use of properties as holiday homes a landlord cannot (lawfully) rent out his property (in the Balearics).”

      And this is regardless on whether you are resident or non-resident. It applies to everyone.

      From the law itself:

      “No se pueden presentar declaraciones responsables para comercializar turísticamente viviendas sometidas al régimen de propiedad horizontal si lo impiden el título constitutivo o los estatutos de la comunidad de propietarios, en el sentido de que determinen la no posibilidad de uso para finalidades diferentes a las de vivienda. Para uso diferente del de vivienda se tiene que entender todo uso que permitiría una utilización diferente a la de satisfacer la necesidad permanente de vivienda. Para las modificaciones de estas previsiones se deberá estar al régimen determinado en el artículo 17.6 de la Ley 49/1960, de 21 de julio, de propiedad horizontal.

      Si el título constitutivo o los estatutos no impiden la comercialización turística de las viviendas en los términos expuestos en el párrafo anterior, o estos no existen, es necesario, para llevar a cabo la comercialización turística, y solo a estos efectos, un acuerdo de la junta de propietarios en el cual la mayoría de personas propietarias, que al mismo tiempo constituyen la mayoría de cuotas de propiedad, acepten expresamente la posibilidad de comercialización turística de las viviendas, acuerdo que la mayoría misma puede modificar. En este supuesto, resulta de aplicación el régimen determinado en el artículo 17.7 de la Ley 49/1960, de 21 de julio, de propiedad horizontal. Este acuerdo se tiene que inscribir en el Registro de la Propiedad, con el fin de informar a terceras posibles personas adquirentes de viviendas.

      Este acuerdo no es necesario si el título constitutivo o los estatutos ya admiten expresamente la posibilidad de comercialización turística de las viviendas. Para la modificación de estas previsiones se deberá estar al régimen determinado en el artículo 17.6 de la Ley 49/1960, de 21 de julio, de propiedad horizontal.

      En todos los casos, en el momento de cambios en los estatutos o acuerdos de la junta de propietarios que impidan la comercialización turística, esta tiene que cesar y se tiene que comunicar a la administración.”

      Existing rental licences and rental modalities remain unaffected by the new law.

      P.S. And now time for the important question – is Bettina single?

  3. cate

    Hi Mark
    I have a question regarding your recent article
    As you know many villa owners have only a touristic licence application which is stamped with a number but is not the final touristic licence. How do the new rules impact the many people in this situation?

    Also you talk about holiday homes but what about investment properties owned by Spanish companies that are not homes at all.
    Many thanks

    1. Raymundo Larraín Nesbitt Post Author

      Morning Cate,

      Mark Stucklin owns and runs SPI, but he doesn’t write every article such as the one published above.

      I take it you want to ask me your questions.

      Your first question is already answered by the article itself, the fact that you have applied for a touristic licence does not exempt you from being slapped with a heavy fine. The law requires you have a rental licence attained when you offer a holiday home, an application would not suffice because it could be incomplete or it could ultimately be turned down by the Authorities. Specifically the section dealing with pre-emptive registration does not exempt you from fines. You must be fully compliant to register and you should only offer a holiday home commercially if you have already attained a tourist rental licence for it from the town hall or Consells Insulars. More on this here:

      http://www.larrainnesbittabogados.com/entrada.php?id=232

      As for your second question, my understanding is that they must comply too. Property ownership through holding companies is legal and does not exempt the landlord from compliance providing he is offering a property as a holiday home subject to this regulation. Company administrators using POA register properties for this purpose all the time.

      Regards

  4. Calamajor

    Authorities on Mallorca have now developed an App to make it quite easy not only to find rental owners without a licence but also to quickly find the right place in emergency cases (health, fire) – as the newspaper writes: total transparency.

    http://www.mallorcazeitung.es/immobilien/2017/09/18/ferienvermietung-mallorca-app-totale-transparenz/54200.html

    Question: Is it still legal to rent out apartments long-term for non-residents as well as residents – with or without a licence?
    Long-term being 31+ days or 6 months or what?
    Such details are important when communities vote whether or not they will allow renting in their community.

    Hope Mark has the time to answer.

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