Renting your property in Spain now and after the crisis

Spain has a love-hate relationship with tourists. Over 80 million tourists a year visit the country, and tourism accounts for 11% of the Spanish economy. But in recent years, the AirBNB phenomenon has meant locals can't afford to buy or rent in some cities, and the relationship is becoming increasingly strained.

That's led to an increasing regulatory burden for landlords letting tourist accommodation. At national level, since January 2019 all the major lettings platforms, like AirBNB and Homeaway, have been obliged to report data to the Spanish tax authorities. That doesn't just mean you'll have to pay tax on your rental income - it also means they know exactly how many days you've rented the property out, which can be an important factor in local regulations.

Since a lot of the concern about AirBNB lets comes from residents in city centre apartment blocks who have found Glaswegian stag parties and French teenagers looking for a good time don't help them get a good night's sleep, legislation has also been passed to give flat owners new rights. If three-fifths of the owners in any apartment block agree that they don't want tourist business, they can bar anyone in the block from renting short term. They can also charge a premium of 20% on common services to owners who rent their flats out.

However, most of the regulation of properties rented to tourists is done on a local basis, so you need to make sure you know the rules for your Junta and your municipality.

Now the things have changed due to the self-isolation requirement and crisis on the short-term market, thus another trend is taking place in the most European capitals – short-term rentals transform into long-term, that makes those properties affordable for locals (this wasn’t the case before and caused strict regulations). It’s useful for those who want to self-isolate from family or to move closer to the workplace. The experts say the things might get back to normal faster than we expect, and after the pandemic is beaten the market will recover quickly. Therefore, the market peculiarities and rules will remain the same with slightest changes according to the new environment.

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General requirements

We've summarised the rules in the main areas where foreigners buy - Andalucia, the Balearic Islands (Mallorca, Minorca, Ibiza and Formentera), Catalunya (and Barcelona in particular), Valencia and Madrid.

The Balearic islands have insisted on licensing since 2012, but in many areas, it has come in more recently, or has been tightened up very significantly. In some areas you'll need a tourist license to rent a property at all; in others (like Madrid), you'll be able to rent for a given number of days without a licence, but if you exceed that level you'll need a licence.

Your property will probably need to meet various technical requirements. These might include:

• car parking space (for higher quality properties)

• free wifi or internet access

• TV

• fridge

• air conditioning

• a lift (for higher floor apartments)

• washing machine, dishwasher.

Minimum sizes of rooms will also apply in most jurisdictions. While you'll be able to comply with some of the rules simply by buying equipment, others - like car parking and lifts - relate to the building, so you'll need to make sure you buy a property that meets the requirements.

Andalucia

Most municipalities in Andalucia, so far, have left regulation up to the Autonomous Community and haven't passed their own specific rules. That could change in future, of course.

You'll need to register. The process isn't onerous, and you can submit online if you have an electronic signature; you need your own ID document and the First Occupation Licence (cedula) for your property. If you're renting to tourists you will need to offer free wi-fi, and to have a heating and air conditioning system. Stricter regulations come into play if you own more than three properties.

Balearic Islands

Tourist rentals here have been regulated since 2012. Some zones are defined as 'saturated' and won't grant new licences, and licences will not be granted on new homes or during the first five years after completion. All homes rented to tourists must be licensed, and even then, if they're in 'sensitive' areas, can only be rented up to 60 days a year, with a maximum 30 days per rental. A maximum of three properties per owner is allowed. Getting the licence can be expensive, too - up to €3,500 per bed for a villa, less for apartments. In the municipality of Palma de Mallorca, there's a complete ban on renting apartments to tourists in the centre, though detached houses or rural properties can still be rented out. Fancy trying to fly under the radar? It's not worth it - the fine for letting without a licence is a massive €40,000.

Catalunya

In Catalunya, if you want to rent short-term you'll need to get a licence and a quality grading - the inspection for which costs €145. You'll need to get a copy of guests' passports and register the details with the police; there's an online platform for doing this, which makes life easier, but it's still a bit of a hassle.

In Barcelona, the rules are more restrictive. Since 2017, zoning rules have applied. No new tourist licences are being granted in the historic centre; the authorities aim to reduce the total number of licences over time. In the districts of Eixample, Sants, Gracia and Diagonal, the policy is "one in, one out", keeping the overall number unchanged. In other areas within the city, a quota system applies. And even with a licence, you can't rent a property out for more than 120 days a year.

Valencia

Across the region, landlords must register, and those with more than five properties must register as a tourism company. If you don't rent within two months of registering you'll lose your licence. You'll also need to renew the licence every five years.

In the municipality of Valencia, you can only rent a ground floor flat or a flat that's above trade premises, and not more than 50% of a single building can be rented out. In Ciutat Vella, the historic centre, you're only allowed to rent out for 60 days a year.

Madrid

In Madrid, as in Barcelona, there's a zoning system. You're allowed to rent for 90 days a year without restriction - except that holiday rentals must last more than five days. You must also offer free wi-fi.

In the central areas (Centro, Chamartin, Retiro) apartments rented to tourists for more than 90 days a year must have an independent access to the street, not shared with residents. There are lesser restrictions in the outer rings.

What lessons can we draw from the various different regulations?

• City centres are putting the tightest regulations on tourist rentals. Apartments are also becoming more difficult to rent. By contrast, in most areas villas and detached townhouses remain less restricted.

• Looking at the detail of grading systems, there's a big focus on quality of accommodation. Don't think you can economise on fixtures and fittings - high specifications are required even at the basic level. And in particular…

• If you haven't got wi-fi, you're dead in the water!

• Things can and do change. If you're buying a holiday home, our advice is to make sure you can afford any finance payments even if you have no rental income at all. If you can then rent it out, that's a bonus.

• If you are investment-focused, you might consider longer term rentals intead - though the yield on these can be rather low.

Longer term rentals

The basic term for long term rentals is three years - technically, a one-year contract that renews automatically for the first two years. After that period, a landlord can give 30 days' notice.

There are a few detailed regulations. You'll need a CEE energy performance certificate, which will cost you around €300. You'll also need to put the tenant's deposit in a third party scheme.

There's also a property transfer tax (ITP) payable on the lease. However, that's not your problem. It's the tenant who has to pay it.

Tax

Remember that wherever you have your tax residence, you'll pay tax in Spain on your rental earnings from a Spanish property. For non-residents, 'IRNR' tax will be deducted, at 19% for EU citizens, and 24% for non-EU. You'll be able to set that tax payment against tax in your home country under double taxation rules.

Is it still worth renting in Spain?

If you just wanted to rent for four weeks in summer, to help defray your mortgage payments, maybe not. On the other hand if you have a high-spec luxury villa and are prepared to rent all summer, or if you have an apartment in Madrid that you want to rent out for a single one-mo rental, then yes, it will be worth your while.

But the most important thing is that you understand the regulations in the area where your property (or intended purchase) is located. Make sure you get adequate information from estate agents; it's also worth talking to a rentals expert such as a professional property manager before you buy.