What Landlords Need to Know

20 August 2019

“If at first you don’t succeed, try doing it the way your property manager told you in the first place.” – Anonymous

It’s a mine field out there, folks. New laws and regulations have made being a landlord a slightly intimidating affair. But if you’ve got your ducks in a row, and have the facts, it can be easy as one-two-three! Affordable Mallorca is here to give you the latest information on what you need to know and do as a landlord on the island.

Signing rental agreement

Long Term Rentals #

We’ll start with the easy one.

First and foremost, unlike short term rentals, landlords currently do not require any special license for long term rentals. However, a written contract, agreed upon by both tenant and landlord, is beneficial to both parties. They are mostly bog standard contracts, but as every property has different scenarios, every contract will have specific clauses.

Rental Contract

Take into account the special aspects of your property and make it clear with the tenant-to-be what you expect. If you own a house with a pool and/or a garden, for example, it is best to stipulate who is responsible for the care and maintenance of them. Whether pets are allowed, deposits on furniture if the home is furnished, who pays utilities, annual refuse fees, phone and internet, and Spanish property tax are amongst other things to consider. Take the time and hash all these points out before anyone signs anything. It may seem petty, but most misunderstandings between tenants and landlords arise from just these sorts of issues.

Repairs

With regard to repairs and general good function of the home, the landlord is required to provide a structurally sound and habitable living space. Major or necessary plumbing, electrical or other structural works are the responsibility of the owner. Tenants, on the other hand, are required to return the property in same condition as when they arrived, minus normal wear and tear. It must be clean upon departure and without serious damages. Repainting walls or renovations are not usually required to be carried out by the tenant unless there is damage, such as holes in walls, that need reparation.

Rental Period

The newest and most common rental contract gives tenants the right to ask for a five year minimum lease, seven if the landlord is a company. This means owners cannot evict before that period is up, unless extenuating circumstances exist. Things such as divorce or homelessness on the part of the owner can result in a breaking of the contract legally but are not common. The minimum rental period is 12 months. Flexible rental periods are applicable during the first year of renting, allowing tenants to terminate the lease after 6 months with one month’s notice. Landlords can demand additional compensation if this occurs, though. After the rental period is up, owners can ask for a raise in rent based on the current rates of inflation, and not above that amount.

Deposits

Legally, owners are entitled to a one month’s deposit on unfurnished rentals and two for furnished ones. You can ask for more, but these are the minimums. If there is a failure to pay rent, landlords must first notify the renter and if there is no response, they may file a petition for an eviction order through the courts. The tenant has a ten-day grace period to pay, and if no payment is forthcoming, the eviction order is carried out. New laws are in effect to protect owners from flagrant non-payment, but the average time it actually takes to get rid of a tenant is one year, so be prepared for a long haul if this unfortunate act should occur.

Agents

If you are using an agency to rent out your property, note that it is usually the agents who handle collection of deposits and who mediate or assist with the contracts and signings. Normally, it is the prospective tenants who pays the agency finders fees.

Income Tax

Expect income tax on your rental to be steep. Non-residents currently pay 24% and are not allowed deductions. EU residents have a bit more flexibility and can ask if they qualify for a reduced income tax rate of 19%. They can also deduct certain expenses against the rental property so long as they are directly related to the income generated by said property.

Properties with Communal Space

One more consideration. If the property to be rented is part of a Committee of Property Owners (Communidad de Propietarios) where annual fees are paid for collective endeavours for the neighbourhood, building or communal space, property owners should check with the bylaws associated to make sure renting is allowed. It most likely can be cleared by asking the Owner’s Association, but better safe than sorry. No one wants to land in a messy legal situation or one that turns you into the neighbourhood pariah just because you didn’t check first.

Tenant landlord signature rental agreement

Short Term Rentals #

Now for the holiday lets.

When a property is rented out for short periods, no more than a month, this is considered a tourist or short-term rental. In order to legally rent these properties, a touristic license called an estancias turísticas en viviendas (ETV) must be obtained. To get permission to rent short term, owners must first make sure the area where the property sits is zoned for it. Basically, this means that whilst any and all properties potentially can be licensed as touristic rentals, not all areas of the island permit them. So…if your house sits outside one of the zones, and you would like to apply for a new license, you’re out of luck with regard to obtaining an ETV.

Several types of ETVs exist:

  • Villas or semi-detached homes can obtain an ETV 365 license, which allows owners to rent throughout the year and does not have an expiration date.
  • If you live in a building with more than one habitation (an apartment building), you will need an ETV 365-Pluri license. This lasts for five years before needing renewal.
  • Finally, there is an ETV 60 license, which is for people whose rental property is their main residence, but allows the home to be a tourist rental for 60 days per year. This also expires after a five-year period.

Fines are stiff, up to €40,000, if owners ignore the rules and get caught.

Where to Get Your License

ETV licenses are purchased from the Holiday Rental License Stock Exchange Consortium (CBAT) in Palma and are sold based on the capacity of the property as determined by the occupancy certificate. The capacity determines the number of plazas each property is entitled to. There is an island-wide maximum and the laws are strict to not go above them.

Costs

Different price points apply depending on the type of ETV license the owner holds, starting at €3500/plaza for ETV 365 holders, €875 for ETV 365-Pluri holders and €291,67 for ETV 60 holders.

A Few More Rules …

A few other rules apply before being allowed to be a holiday let, such as owners supplying a minimum of guest amenities such as sheets, towels and cleaning services. Individual rooms are not allowed to be rented, it must be the whole property and there must be one bathroom for every four guests. If the home is part of a building with other homes, the other owners must be in agreement to allow the rental. The plaque showing your ETV license number must be visible from the exterior of the property, and the ETV number must be included in all advertising materials. Additionally, the home must have an energy rating of D or above if built after 2008, F or above if built before that.

Per Season Rent

Another short term rental option open to property owners is the “per season” rental. This excludes the need for an ETV and requires guests have a minimum stay of one month. The property cannot be marketed on the open market or via any website as a holiday rental for this to be in compliance. House exchange plans and “free of charge” family and friends stays also fall under this type of option.

Palma's Special Status

Palma is a notable exception. It has a rather well-publicised and unique set of rules, whereby flats and apartments are excluded full stop from obtaining rental licenses. Detached houses may be eligible, but only if they pass the criteria set out above.

Those are the basics landlords should know. It’s a lot of information, but all good to know to ensure you stay on the right side of the law.

Disclaimer: The laws change regularly, and whilst these are the most up-to-date on record, they are subject to change at any time. Please consult a lawyer or real estate specialist if you have any questions.

Signing tenancy contract

Sources #

Balearic-properties.com
Portomallorquina.com
Directmallorca.com
Ptireturns.com
Thelocal.es
Elpais.com
Lawyersspain.eu
Spain-holiday.com

#Rentingproperty #holidayrentals #rentallicense

20 August, 2019

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