This was a timely article and much needed after a couple of stories in the UK press which caused widespread panic among property owners and agents alike. We contacted Claus Sorensen at Spain-Holiday.com and he kindly allowed us to republish it. The original article can be found here.
02 January 2014
by Louise Brace
in Finance & legal
Updated 03 January 2014
Recent articles published in the British press criticising the newly introduced holiday rental licences in Spain have been met with consternation by many of our homeowner clients; understandably concerned to read that private holiday rentals are apparently to be banned or suggested hefty licence fees introduced, which will mean the end of the Spanish rentals industry, as we know it.
We were somewhat dismayed at how such an important subject could be so poorly investigated and misinterpreted. So much so, we wanted to set the record straight; to dispel some of the rumours and report the facts and hopefully resolve some of the concerns of both holiday homeowners and holidaymakers.
Let’s take a look at what’s fact and what’s fiction…
We start with a fact and a very important one at that. In the UK you could not rent your home out as a furnished holiday let without meeting set standards in safety and cleanliness, and declaring your earnings to the tax man. And this is essentially what the new law in Spain sets out to do. The motive behind the introduction of licences may be economically driven, or it may be due to pressure from the hotel industry. Whatever the motive, it doesn’t counteract the simple fact that regulating holiday accommodation is a good thing and a positive step forward in an industry that is predicted as the biggest growth area in travel in 2014.
Fact or Fiction? “Brits banned from having a holiday letting in Spain”
Fiction: Yes, it’s fiction. Spain is not banning ‘Brits’, or indeed any other nationality, from owning a holiday home and letting it out for short-term holiday rentals.
Fact: The holiday rental licence law in Spain does not set out to ban private holiday rentals, it’s attempting to set standards and regulate the industry. To ensure that renters are protected when they do choose a private holiday rental and to ensure that homeowners earning money through holiday rentals are declaring their income. Just as you would expect from the UK, Spain or indeed any tourist destination.
Fact or Fiction? “New restrictions on self-catering accommodation could push up the cost of holidays.”
This will be up to the individual owner and we hope it’s not the case. It is a fact that owners will need to take additional cost implications into consideration, but reports which suggest the costs are excessive to the point that owners will be forced to put up prices, or stop renting their home out, are just unsubstantiated.
So what costs are involved in obtaining a holiday rental licence?
Licence Fee: This will depend on the region the home is located in. In some regions there is a set fee based on the location, or local council. So far, we have found registration fees varying from 177 € up to 500 €. In regions, such as the Balearic Islands, the fee is worked out on a cost per guest, here’s an example: If your home sleeps eight guests and you are charged a fee of 24,84 € per guest. It will cost you 198.72 € to register the property.
In all cases, the licence fee is a one-off payment and in most cases, owners can more than cover this with one week’s booking during the summer.
Insurance: An owner will be expected to have a specific rental insurance in place, which covers public liability. This protects the renter should anything happen to them or their belongings, whilst staying in the holiday rental. Would you want to stay in a home that wasn’t properly insured to protect you? Holiday rental insurance also protects the owners against breakage and robbery. So it makes sense to get the right insurance.
Declaration of earnings: Homeowners are expected to declare their rental earnings and pay any due tax. This is not a new regulation and most owners are accustomed to paying taxes. It is definitely one of the main motivators for the introduction of the licence, as the Spanish Government estimates there is some 2.9 billion Euros in undeclared revenues on holiday rentals each year and understandably they are looking to recover some of this to prop up Spain’s budget deficit. If you want to find out more, read our article, Declaring the taxable earnings from your Spanish holiday rental.
Fact or fiction? “Owners will have to pass regular safety inspections and obtain hygiene certificates. Failure to comply will lead to hefty fines.”
Fiction: We are unsure of where these quotes are coming from, but we can tell you that we have been in contact with nearly all of Spain’s 17 regional tourism departments and there are no ‘regular’ safety inspections and hygiene certificates required to obtain your holiday rental licence. These would apply to ‘apartamentos turisticos’ and ‘casas rurales’. Accommodation that is run as a business offering touristic services, such as a ‘bed and breakfast’ establishment, serving food.
Fact: In all cases a holiday home will need to meet a set criteria, established to provide the renter with a decent standard of holiday rental accommodation. This also applies to the UK market and many other destinations throughout Europe. Taking into consideration the importance of Spain as a tourist destination, we believe this is a positive change for the Spanish market.
There is a basic criteria list, which is similar, but not identical, across the different regions and that an owner will need to follow. Features, such as size of accommodation based on number of guests, sufficient bed linen, working appliances, hot water, fire safety equipment and lifts if an apartment is on the fourth floor or higher, are some of the criteria specified.
In some cases, not all, an inspection will take place in the property during the application process, to ensure the standard criteria is met. And in some regions you may be expected to obtain an ‘Opening Licence’. Finally, in all cases, emergency numbers must be left for the renters i.e. police, ambulance, etc. and, we understand, in most cases, you will be expected to register your own contact details with the police, in case an emergency arises in your home.
A closer look at some of the regional differences
In Catalonia, licences were introduced back in 2011 and the regional government is now more or less on top of the situation, so owners in Catalonia do need to get their licences organised, as a fine system is sure to be introduced. Read our article on applying for your holiday licence in Catalonia.
On the contrary, you have Andalucía, where the licence system has yet to be introduced and the local government does not recognise individual holiday homes. Surprising, as figures from 2012 show three times more revenue was generated through holiday rental stays in Andalucia, than through hotel stays. At present, we are unable to tell you when, or if, the licence law will be implemented here. We have spoken with both the Junta de Andalucía and local tourism departments in the region, we will keep the information updated for Andalucia, as we receive it.
In the autonomous community of Valencia, it is not going to be made compulsory to obtain a licence, but you will still be expected to adhere to the standards set in place for licenced apartments. Read our article on holiday licences in Valencia.
In the Balearic Islands the law states you can only rent out a villa as a private holiday home, it does not extend to apartments, which can only be rented out short-term through the general urban law. Find out more about holiday licences in the Balearic Islands.
In 1995 a law was passed in the Canary Islands banning individual holiday apartments, unless located on a ‘touristic complex’ and falling in with several other guidelines. However, illegal lets continued to operate. Unfortunately for owners operating an illegal let, the Canarian government are coming down pretty hard and dishing out substantial fines to owners who have infringed the law. The law in the Canary Islands is made more complicated in that a private villa can apply for a tourist licence, but it’s unlikely that one will be granted, as there is currently a freeze on new licences. We can understand this must be frustrating for many owners, but the law has been in place for nearly 20 years and is unlikely to change.
Now let’s take a look at two conflicting reports made within one week of each other, from two British press sources.
Fact or fiction? “In Spain, the authorities are expected to ban unlicensed rentals next spring.”
There has been no official date given to ‘banning’ unlicensed rentals. In fact, there has been no mention at all of banning unlicensed rentals; only of introducing licensed rentals. One of the main reasons they couldn’t give an official date to ‘ban’ said unlicensed properties, is that in some regions the licence regulation still hasn’t been finalised and so licences have yet to be introduced.
Fact or fiction? “The Spanish government is expected to begin debating new rules on holiday rentals next May.”
This is a non-story as the Spanish government debated new rules on holiday rentals over a year ago, hence new regulations were announced from 1st June 2013 and the Spanish Government offloaded the responsibility to its 17 regional governments, tasked to enforce the new legislation.
Should the holiday rentals industry in Spain receive long-term damage, it won’t be from the introduction of licences, or adhering to new regulations, it will be from damaging press articles, such as we have recently seen. On this point we can only urge holidaymakers who prefer rental accomodation to see beyond this type of scaremongering and continue choosing private holiday rentals in Spain, supporting the industry and the owners.
As a homeowner, we urge you to stay calm, take a deep breath and investigate what’s happening within your local region. If a licence exists, prepare your paperwork and do what’s needed to stay within the law. You’ll benefit in the long-term, as will your guests.
At Spain-holiday.com we have already introduced licence numbers into our system in the regions where licences exist and are compulsory and will do the same across all regions, as they introduce licence registration procedures.
We are moving through a period of transition and it’s inevitable that some of us are adverse to change, yet we are moving to the future of holiday rentals, in a country where tourism is the biggest economy driver. We must learn to move with the times and embrace positive advancements.