Lawyer Raymond Nesbitt briefly explains the new landmark amendments made to Balearic Islands’ Holiday Rental Law (Law 8/2012).
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
- 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.
- 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.
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.”
Larraín Nesbitt Lawyers, small on fees, big on service.
Article originally published at Larraín Nesbitt Lawyers: New Balearics Holiday Rental Law
Legal services Larraín Nesbitt Lawyers can offer you
- Conveyancing – Buying
- Holiday Rental Accounting Service (HRAS)
- Registration of Holiday Homes
- NIE Number (Tax Identification Number)
Holiday-home letting related articles
- Renting in Spain: Top Ten Mistakes – 8th of June 2011
- Let-to-Buy in Spain: The Smart Choice – 8th of April 2012
- Letting in Spain: The Safe Way – 10th of October 2012
- New Measures to Bolster Spain’s Ailing Rental Market – 8th of July 2013
- Tenant Eviction in Spain – 8th of June 2014
- Holiday Rental Laws in Spain – 8th of March 2015
- House Hunting in Spain – Interview with The New York Times. June 2015
- Taxes on Buying Spanish Property – 8th July 2015
- Non-Resident Taxes in Spain – 8th December 2015
- Resurgent Spain: Málaga Sees Strong Sales – Interview with Mansion Global (The Wall Street Journal). December 2015
- Holiday Rental Laws in Andalusia (Decree 28/2016) – 8th of February 2016
- Decree 20/2002: Andalusia’s Holiday Rural Rental Decree – 8th of April 2016
- Urban Rental Law in Spain – Spain’s Tenancy Act – 8th May 2016
- Buying Property in Spain – 10 Reasons to Hire a Lawyer – 8th November 2016
- Renting in Spain – Landlord’s Taxation – 8th of January 2017
- Renting in Spain: Non-Resident Landlord’s Rental Tax Relief – 14th of January 2017
- Buying Property in Spain from a Private Seller (Resale Property) – 21st of February 2017
- Buying Property in Spain from a Developer (Off-Plan Property) – 8th March 2017
- NIE Number Explained – 8th May 2017
- Community of Owners in Madrid to ban Holiday Rentals – 29th of June 2017
- Holiday Home Taxation in Spain – 8th of July 2017
- How to inspect an off-plan property overseas – Interview with The Sunday Times. July 2017
- Holiday Rentals in Andalusia Made Easy – 3rd July 2017
- Holiday-home lettings: Do NOT register with Andalusia’s Tourism Registry unless you are fully compliant – 21st of July 2017
- Palma de Mallorca to ban holiday rentals – 25th April 2018
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