Spain’s New Property Legislation

The increasing number of homeowners who rent or lease their properties to tourists privately brings anxiety to the Spanish government. Local hotel sectors accused these private rentals as the major reason for the drop off of bookings in the industry. Since these homeowners pay no tax for their business, they keep their earnings and make no declaration to the government of the annual income.

In Malaga province, there is over 65,000 holiday lets being rented by visitors and tourists annually and almost three quarters of this figure is not declared. So Malaga loses €104.8 million which is supposed to be an additional income to improve tourism.

In fact, there is an existing law, Urban Rental Law (LAU), that protects homeowners’ right that allow them to rent their rooms, villas or second home to tourists for just a short time.

However, the government realized that these private rentals could be a hindrance in boosting the tourism of the country.

So, the Department of Housing created a new legislation in favor of the local hotel industry which will restrict homeowners to use their property as holiday lets. For hotel owners, private rentals taking over the Internal establishes an unfair competition and might shake the tourism of the country. According to the new legislation, if the owner fails to acquire a license to advertise their property, he will be penalized.

There are some areas in Spain that implement the law but according to Holiday Rental Managers in Madrid, this new law will limit the choice for tourists on how they want to spend their vacation in Spain. Tourism is one of the important foundations for a country to achieve progress, so it should be given importance. However, this draft law does not consider this concern.

Richard Way of Overseas Guides Company said that these rental licenses will only be granted to homes or properties that meet the health and safety regulations, which in some cases homeowners may not be able to achieve.

He also said that foreign buyers in the country could only pay for the maintenance of the property through rental income but without the benefit, buyers will just look somewhere else, greatly affecting the relationship between the foreign investor and the local economy.

According to David Tornos of the Tourism Rental Management Association, the new legislation is the “death blow to a growing sector that contributes enormously to the economy”. If ever the law becomes effective this summer, over 20,000 home rentals would be greatly affected by the restrictions of private property rentals.

These private home rentals earn more than 1.45 Billion Euros every year and over 150,000 families depend on this way of life.

Lawyer Antonio Flores of Lawbird said that offering rental homes in a legal way are is not a problem but if the government becomes “too restrictive it will drive more people into clandestine rentals”.

Mark Stucklin of Spanish Property Insight also said that the government should give importance to foreign investors and not restrict them with this law.

Implementing this law could bring good and bad effect to the economy and the tourism of Spain. Although it is for the benefit of the local hotels, this reckless action could make many Spanish families jobless or worse, income-less. All should be considered when making big decisions and the Spanish government should foresee the possible outcomes of this new legislation.

This is similar to what happened to Portugal which implemented the same system that required homeowners to have a rental license before accepting tourists and visitors to their homes. Of course, there was confusion between the government and rental homeowners but everything was solved as the system became clearer and was understood by people especially by foreign investors. Spain’s every step for this new legislation is crucial. Losing overseas investors is bad for economy, so the local government should be careful in implementing this new law nationwide.