Coming soon to a holiday rental near you...
Introduced on June 1st this year, changes to the existing law on Spanish residential rentals (LAU), which could affect the holiday rentals market, has led to much criticism and confusion amongst experts and holiday home owners. Despite the fact most of us are aware that changes have been announced, the specifics have been vague and inconsistent. Is there a new licence, how much will it cost, will it affect me and when? The truth is, right now, nobody has conclusive answers and that includes the 17 regional governments who have been tasked to enforce the new legislation.
Private owners of holiday lets want to know if they too will be affected by the new regulations introduced. The answer is some will, some won’t.
So what's it all about...?
Some will tell you that changes to the current regulations were passed in response to growing pressure from the hotel industry, who object to losing a significant percentage of their business to the holiday rentals market. Take Andalucía for example. In 2012 alone, three times more revenue was generated through holiday rental stays, than through hotel stays.
And it’s important to make a point here: revenue generated from holidays rentals also extends to the local economy. It's a fact that renters spend more money on local purchases, such as food and drink - both in restaurants and supermarkets, car hire, spontaneous trips and entertainment. This all helps improve the local economy and boost revenue for smaller local businesses.
Another suggestion is that the Spanish government are clamping down on owners who are not declaring their income from their holiday rental home and evading their tax commitments. Fair point really. If you are making money out of your home, you do need to declare it. And most homeowners do... Or do they?
Figures published by Spain’s Finance Ministry estimate that there is still some 2.9 billion euros in undeclared revenue from the rental of private homes and a significant proportion of this comes comes from short-term holiday rentals. And the Spanish government could sure do with that revenue right now.
On the flip side it’s also about ensuring that Spain’s all-important tourism industry is properly and efficiently regulated. That all accommodation is registered and achieves a minimum quality level. A standard requirement in most European countries.
And then to go hand-in-hand with the new rentals bill, there is also the introduction of the Energy Performance Certificate (mandatory in most EU countries) on June 1st. Designed to set an energy efficiency standard in all properties for rent and for sale, this is an initiative first laid out in the Kyoto Protocol from 2007 and, again, standard practice now in many European countries..
So why should Spain fall behind the rest of Europe on the quality standards of its accommodation, when it is one of Europe’s most popular tourist destinations? The answer is, it shouldn't.
What do these changes mean to me?
Well firstly it’s important to recognise the benefits, both to you as a holiday home owner and to the Spanish tourism market in general. Yes there are benefits whoopee! Regulating holiday rentals will bring Spain in tow with the rest of Europe; countries such as France, Italy and Croatia, all follow strict guidelines. Makes sense really.
And think about it. If you market your holiday rental, highlighting the fact that you follow the correct guidelines, you are sure to attract more renters who want to know that their holiday let is legitimate.
Guest quote: “The new guidelines sound reasonable to me. I don't want to turn up at a holiday let unless it’s legitimate”.
When and how should I apply for a licence?
At the moment the law is hazy and we advise that you seek clarification from your local town hall (ayuntamiento) and don’t be surprised if they don’t have the answer, or what they tell you today, changes tomorrow, because... this is so new, nobody yet knows what conditions to apply.
Spain recognises two types of holiday rentals and according to the category you fall under, will depend on what you will need to have in place and when, under the new guidelines:
Alojamiento turistico (Tourist accommodation)
These are homes or units functioning as a tourist business, serving food and offering other services to tourists. If you fall into this category and you don’t currently have a tourist accommodation licence, then you should start looking into this straight away; as all regional governments will be enforcing licensing rules within this category. You should register your property with your local town hall and they will explain what procedures will follow.
Casas vacacionales (holiday homes) - Most of you will fall into this category
You rent your home out for short-term holiday rentals, but you DON’T offer tourist services such as breakfast, entertainment, or other services to tourists.In this case, at the moment, you will need to be paying your taxes, have insurance in place and possibly need an Energy Performance Certificate. Then depending on where you are, will affect whether or not you need to apply for a licence right now, or in the future.
Some Spanish regions have been cracking down on holiday rentals for a while: Catalonia, the Canaries, Mallorca and Asturias are four such locations. However, it’s been implemented so inconsistently, that many owners are not even aware they need one. Example: Mallorca stopped issuing licences a while back, so even owners who want to do the right thing, are unable to do so.
We understand Vicente Granados, secretary general of Tourism at the Junta de Andalucía, commented recently that the Junta will be studying a similar model to that of Catalonia for holiday rentals in Andalucía; where every rental home needs a licence. However, it will be towards the end of this year before they have an approved plan of action. For more information on the law in Catalonia, read our article on the Regulation of Holiday Rentals in Catalonia.
So, to recap: If you just rent out your home to holidaymakers, without services, then in most regions, at least until the end of this year, you will not have to apply for a licence or should I say you will not be able to apply for a licence! As much as I would like to be able to give a clearer answer on this one, it’s too early days to be able to do so.
Our advice at Spain-Holiday is be patient, keep asking the question at the town hall, ensure you have everything else in place and watch this space as we’ll be providing regular updates.
What else do I need to be prepared?
- Declare your earnings and pay the due taxes
- Make sure you and your guests are covered with the right insurance
- If necessary, apply for your energy efficiency certificate
Whatever your case with the licence, right now everybody needs to declare their holiday rentals income and have the appropriate insurance, some of you may need to apply for an energy efficiency certificate and some the licence.
Let’s look at each step in more detail
Declaring the earnings from your holiday rental
Whether you live in Spain, or not; rent your whole property out, or just a part - an annexe or holiday flat for example, you must declare your income and pay the due tax. In some cases, such as the UK, you will also have to declare those earnings in your native country. Don’t panic, the tax you pay there, will be deducted from what you owe here in Spain. You won’t be paying twice.Click here to read our article on declaring the earnings from your holiday rental.
The Energy Performance Certificate - what is it, do I need one?
The Energy Performance Certificate (EPC) or Certificado de Eficiencia Energética CEE), was launched by Royal Decree on June 1st 2013. An assessor will grade your home for its energy efficiency and you will be given a certificate based on the results. Now anyone selling or renting a property - short or long term - will need one, but of course there are exceptions. Click here to read our article on the new Energy Performance Certificate.
Get covered!
Make sure both you, your holiday rental property and your guests are properly covered with the appropriate insurance. Accidents can happen and you don’t want to be legally or financially held responsible for any incidents that happen to your guests during their stay. Click here to read our article on insuring your holiday rental.
October 2013: Read our update on obtaining a holiday rentals licence in Catalonia
We also recommend Robert Black's concise guide to the Holiday Rental Law in Spain. Available for Kindle from Amazon. It's worth a read.