Crackdown on illegal holiday lettings

[fifi]

Yes I do understand it Waybo. It is the same advice which was given to Deso (from the Forum) which he posted on here a while ago after his complex consulted a Lawyer about their situation. Basically they are advising people (who really have to take the risk) to advertise their properties in exactly the way that they have suggested and not as Tourist lets. Avoid mentioning holidays, airport transfers,  safes,  cleaning and all of the usual wording that is in a Holiday letting advert. I would imagine that you shouldnt put a calendar on the site either. They suggest that you have recorded proof also that you have advised the Website owners that you are advertising a residential let (and not offering a Touristic service)

If your advert looks like it could be for a long term let on a Residential complex it would be safer. I think thats the idea behind it anyway.[]

Im thinking about it here and I had a quick look at the Urban lawhttp://noticias.juridicas.com/base_datos/Privado/l29-1994.html and it doesnt cover holiday letting but was changed a number of years ago to allow the owner more say in the duration of the let.

 Janet mentioned in her article above that when Tourismo offered website information as some of their proof of illegal Tourist letting the accuseds Lawyers defence was that the Holiday Lettings companies state that they are not responsible for checking information contained in their websites  (in other words what they are advertising is not proof of a Touristic let?) and it was inadmissable as evidence because Tourismo said that they wont accept what the website says as fact, so if you have  proof that you have sent a letter to them stating that you are not offering a Touristic service it may help. What does everyone else think? []

[suebrown]

quote:Originally posted by old_stumpy

I would be glad to see the end of the unregulated private rental market.  I own a modest house on a small complex which I bought many years ago at a price less even than today's prices, so I have very little capital exposure and no mortgage.  We visit 5 or 6 times a year and our family also.  I have never rented the house out nor will I ever do so.

On our complex the typical renters are northern pikeys or southern chavs - boozy, noisy and uncultured.  The fewer the better and preferably none at all.  Let them stay away or go AI, it keeps them out of my way.  It's a shame if the local economy suffers, but we come for the scenery, not the bars and restaurants.  The view driving west across the mountains via Cardon and north along the west coast to Pajara and Betancuria (my favourite drive) is the same whether there are one or a hundred bars in Corralejo.

The price of houses will collapse, maybe, but then new buyers will come in at the cheap prices and eventually a new equilibrium will be reached.  People will get hurt.  What do you expect?  The world is in the middle of a major depression - why should home owners on Fuerteventura be immune?

[suebrown]

Dear Old stumpy
 If there are no private rentals there will be no independent cheap flights either. So you won't be able to visit your idyllic holiday home when you feel like it, nor will your family be able to take advantage of your generosity.

[waggy]

quote:Originally posted by Florence

So Portugal and Italy also dish out fines.  Honestly, sometimes its quite easy to see why there are some countries in the eurozone doing so badly.  Stifling business and missing out on tax collection...

I rather think it's the other way about, Florence. Perhaps they're doing so badly  because people have been dodging their taxes and the revenue authorities have not been enthusiastic enough. Looks like they've had a good kick up arris and are now making up for lost opportunities.

[Cameron]

Theres no tax to be gained from preventing private rental. Plenty to be gained from multiple lets though. Plus the added bonus of an annual licence fee renewal. Tax avoidance and prevention of homeowners from gaining an income through rental to pacify large holiday companies are two completely different things.

[sharky]

quote:Originally posted by fifi


Im thinking about it here and I had a quick look at the Urban lawhttp://noticias.juridicas.com/base_datos/Privado/l29-1994.html and it doesnt cover holiday letting but was changed a number of years ago to allow the owner more say in the duration of the let.

Fifi, I've looked at this legislation http://noticias.juridicas.com/base_datos/Privado/l29-1994.html, and cannot immediately find a minimum term for "non-holiday" lets, any ideas?

I had heard, some time ago, that a non-holiday let was considered to be nothing less than 45 days but I don't know if that still stands with all the ammendments that lot do.

[fifi]

Hi Sharky, I havent studied it in any great detail. I was looking to see if maybe there was an obvious loophole in the law by claiming that you are letting out under the Urban law act but like you say it does not seem to apply to short term lets.  I think that is the reason why the advice given was to avoid any reference to the letting being short or of a Tourist nature in the adverts. It would be then up to the Inspectors to try and prove that you were not letting out for a shorter period than is covered under this Law.  I will try and study it a bit more when I have a chance and have a look for any ammendments which may have been made and if I spot anything interesting will post it here.[]

[gusangus]

Looking through the boletins they are not going for Residential or Turistic etc they ae fining people for not having an inspection book and a complaints book which will not be issued unless you have a licence
this is taken fron a boletin

 FACTS:
First: exploiting tourist apartment 232
the so-called complex "El Marques Palace" lacking
the book of inspection of tourism.
Second: exploiting tourist apartment
232 of the complex known as "El Marques Palace"
lack of leaves of claims.
The facts above described arise
advertising and information contained in the
corresponding web and issued report page
by the inspection date 31 tourist service
January 2011.
DATE OF BREACH:
Done first: January 25, 2011.
Second fact: January 25, 2011.
INFRINGIDAS SUBSTANTIVE RULES:
Done first: article 84 of the Act 7/1995, of
April 6, Canary Islands tourism management
(BOC No. 48, April 19). Article 41 of the Decree
190/1996 of 1 August, controller of the procedure
for the exercise of sanctioning powers
in the tourist area and tourism (BOC) inspection
(No. 103, August 21).
Second fact: article 20.1 of the Act 7/1995,
6 April, Canary Islands tourism management
(BOC No. 48, April 19). Article 8 of the Decree
168/1996 of 4 July, which regulates
the characteristics of the leaves of claims and the
claims procedure
(BOC No 88, July 22).
CHARACTERIZATION OF THE OFFENCE:
Done first: 76.9 article of Act 7/1995, of
April 6, Canary Islands tourism management
(BOC No. 48, 19 April), amended by the Act
14/2009 of 30 December (BOC No. 2 of 5.1.10).
Second fact: article 76.4 of Act 7/1995,
6 April, Canary Islands tourism management
(BOC No. 48, 19 April), amended by the
Law 14/2009 of 30 December (BOC No.2, of)
5.1.10)

[waggy]

quote:Originally posted by Cameron

Theres no tax to be gained from preventing private rental. Plenty to be gained from multiple lets though. Plus the added bonus of an annual licence fee renewal. Tax avoidance and prevention of homeowners from gaining an income through rental to pacify large holiday companies are two completely different things.

I entirely agree, Cameron. But I was talking about what has happened, not as we would want it.

[waggy]

http://www.myadvocatespain.com/buying-property-in-spain/landlord-tenant-spain
Any use? Ref. first para on 'minimum duration of leases' of lease.

[fifi]

Originally posted by gusangus

Looking through the boletins they are not going for Residential or Turistic etc they ae fining people for not having an inspection book and a complaints book which will not be issued unless you have a licence
this is taken fron a boletin


Yes that is the way most of the fines are worded Gus.There is another fine that I have seen too for lying to the Inspectors which I think was around €1500 and some cases  are worded slightly differently.
 Two of the fines are for Commercial admin failures which cover both Tourist and Residential lets although according to Janets blog the wording was unimportant because the fines are still for letting in an illegal manner.

I am just trying to figure out why the advice was given to advertise as if you are covered under the Urban Law because I dont think that there is any protection offered by doing so other than perhaps throwing Inspectors off the scent for a while.

[fifi]

quote:Originally posted by waggy

http://www.myadvocatespain.com/buying-property-in-spain/landlord-tenant-spain
Any use? Ref. first para on 'minimum duration of leases' of lease.

Hi Waggy, thanks for that.[] I have a feeling that there is a minimum time though even though the Landlords were allowed extra freedom when this law was ammended years ago. I have a feeling that Sharky might be right when he mentioned 45 days but im not positive.

[gusangus]

Some people have taken their address off the ads but left their name on it  which is easily traced through the Land Registry data base and will give all relevant details. I think it would be safer to get off the internet ads and start an email campaign based on your own customer data base and friends that way you can "legally" say you are letting  family and friends use the property as there will not be any proof to the contary

[fifi]

You are not allowed accept any money from Family or Friends either Gus so no money to be made there.[][] I agree with you though that advertising does seem to be risky.

I found a copy of the Urban Law in English (I havent read it all yet)http://www.eui.eu/Documents/DepartmentsCentres/Law/ResearchTeaching/ResearchThemes/EuropeanPrivateLaw/TenancyLawProject/TenancyLawSpain.pdf

Just trying to see if there is any minimum mentioned.

[gusangus]

three months plus let is classed as a residential let and it should be remembered that a contract should be drawn up, To cover yourselves against rent arrears etc use a format as reccomended here   http://www.eyeonspain.com/spain-magazine/rules-evicting-tenants.aspx

[appy ammer]

its always made me smile when people have advertised their propertys on here and say it in a manner they are doing it to cover the mortgage as though its the norm. It may well be the norm but dont advertise it, i'm sure some think its a tax deductable transaction or more than likely they dont even realise the tax implications.

That sun does weird things to peoples reasoning;)

[fifi]

I skimmed through the English version of the law and cant see anything that states 3 months Gus but I may have missed it. It does say this though.

Regarding the residential tenancy,
article 2 LAU states that occupied buildings must be essentially assigned to satisfy a
permanent housing necessity. It should be noted that this article uses the word
"essentially"232 (primordialmente) which means that the apartment must be used
mainly with residential purposes and not the contrary.

[gusangus]

The things that people have said to me when I have tried to warn them of what is happening  "my accountant in the uk deals with that"
"Its against my human rights " ."it won´t happen here" "they can´t do that  we let in the uk and it´s no problem" the corresponding crackdown on the black economy also raises the question of if you are paying someone to clean and maintain your property and they are not "autonomo" or have a sl company. then any payment to them is illegal and can bring grief, and so it goes on

[gusangus]

Thats the figure we were given when we bought our place, we were asked if we were going to let. as our complex is residential  we were advised that the shortest let was three months. as we were not letting it did not matter. how accurate that  is  is a another thing

[SurfJames]

There's a Spanish implosion looming....!

http://globaleconomicanalysis.blogspot.com/2011/12/spanish-implosion-deficit-up-receipts.html

The article says that Spain needs to cut 40 Billion from a budget of 90 Billion. That's a massive cut.

To put it bluntly, the authorities are gonna clamp down hard on illegal lettings. This is gonna be a cash cow for them. Just look at these figures:

7000 prosecutions = 126 Million Euros
20000 presecutions = 360 Million Euros
50000 prosecutions = 900 Million Euros
100000 prosecutions = 1.8 Billon Euros

This will balance the books, and the way they have structured the fines, you have to pay up quick otherwise the amount increases considerably. Ignore it and the debt will be placed onto the property and the asset, in effect, passes to the authorities.

[Gordond]

I'm not so sure there is a so called "Spanish implosion" looming for some very simple economic reasons. Yes, Spain are in the huge financial potty poo poo. If the Spanish authorities clamp down to this proposed level nationwide seriously, can you seriously imagine the shockwave that will permeate their flat-lining property market? A well documented problem like this which became well known outside of Spain would damage the housing market even more.

Probably Spain's biggest problem is unemployment which is at about 22% and a huge proportion of this is in the construction business. Add in to this the unsold housing stocks which they are desperate to sell which aI've read is anywhere from 1.2 to 2.5 million houses. If Spain were to seriously "clamp down" on illegal lettings, which oversea investor would buy a house which they couldn't generate an income from? Or which property developer will buy up developments to sell on to an foreign end-user when there market will be hugely restricted.

The first thing to put into context at this point is this "illegal fine" business. The most pertinent points for me is : How much money will they actually get from these fines, because for 100000 properties it ain't going to get anywhere near 1.8 Billion Euros after any legal process.

Secondly, how are they going to get the money? Everybody says the same thing : The property has to be sold, but there is also another point to consider from the very end of Surfjames post, which is that the "the property and the asset, in effect, passes to the authorities."

Does anyone honestly think in their right mind that the Spanish Government wants anything to do with tens, if not hundreds of thousands of properties that are heading their way through tens, if not hundreds of thousands of individual judicial processes and appeals, over months, if not years which they need to sell at a fraction of their market value to get any money? Why do you think that the advice given to people is to "sell it".

To who? For what price?

This is about scaring people into paying up quickly.

This is still a relatively local or regional story which is still relatively contained, but could have cataclysmic consequences for their property market.

Someone posted further up about Spain possibly leaving the EU. Nah, isn't going to happen. If Spain leave the EU on a Monday, they will be bankrupt by the Tuesday. Back in the day when Spain was building houses for fun, there were very specific economic conditions that were fuelling their housing boom. They had to meet specific economic criteria to enter the Euro back in 1992, one of which was % of debt against GDP. Now we all know that this has gone completely Pete Tong all over Europe in the last few years, but Spain are by no means the worst. Spains biggest advantage 20 odd years ago to fund their housing boom was a 45% devaluation in the Peseta. This exchange rate valuation was the biggest single factor in this housing boom, probably the biggest driver behind it all.

As we all fondly remember, this meant cheap beer, cheap hols and cheap houses. Now they are in the Euro THEY ABSOLUTELY CANNOT DEVALUE LIKE THIS AGAIN.

So why stay in the Euro? i'll tell you why : Cheap Money.

Spain absolutely must stay in the Euro to benefit from cheap bond issues to fund their debt. Anything else would be probably mean instant collapse and no politician wants this on their watch. Countries are borrowing on the open market through bond auctions. If a country has to offer over a certain level for the market to buy their bonds, then the market seems to look very unfavourably on this, and start asking for a much higher rate, and 7% seems to be the tipping point. A couple of months ago Spain was at 6.6%, France is currently at 3.3%, the UK is 2%. Greece is 30 odd% the last time I heard.  Since the change of government last month Spains last bond auction has came down to 5.09%, so the markets are looking more favourably on this new government and what they are saying they are going to do. With the housing market being so utterly fragile, they want to stimulate it, not kill it off.

They need to sort out the countries finances, which the new PM says he will do. Whether that happens or not, I'm not holding my breath.

However, in relation to bonds, the fund set up by the ECB to buy up sovereign debt offers repayment of 1%, making debt payments far more achievable.

This is why they wont leave the EU, because they absolutely can't afford to.

Does anyone think that the new PM, Mr Rajoy, knows about this problem? Maybe someone should get his e-mail address, post it on the internet so anyone who thinks this is a problem can contact him or his office directly telling how much millions and billions of Euros he would raise if it was licenced and taxed? Or if facebook and twitter can be used to topple middle east governments, maybe it could be used to let the new government know about this problem?

Just a thought.

[SurfJames]

Excellent post Gordond.

I reckon eventually they will have to 'cave-in' and start issuing licenses to property owners again.

[gusangus]

Issuing licences won´t be an option,   owners will have to purchase a licence after the property has been inspected and the required inspection books issued,  I think then that the fine for illegal letting without a licence etc  will probably increase dramaticaly

[potash]

The one option if you have a big mortgage on a property and they wont let you let is hand the keys back to the bank and add it to the stock pile they already have around there necks.

[gusangus]

property sales are on the increase maybe people are using this opportunity to get a holiday home for personal use cheaply
http://www.tumbit.com/news/articles/4486-sales-of-spanish-property-to-foreigners-experiences-growth.html

[Cameron]

Oh goody. Lots more proerties lying empty for 48 weeks a year then.

[Gordond]

I'm going to apologise in advance for the length of this post, but I've been reading over Christmas. Beforehand I had no idea what a "sub-prime" mortgage was.  I didn't know what a "Credit Crunch" was or why it happened or why it happened to particular banks first or why it affected the worldwide economy. These first 2 paragraphs are directly from one book.

"The housing market in the US was in desperate straits. Millions of Americans on low incomes – and in some cases no income – had been persuaded to buy houses on the back of historically low interest rates. Many had been sold mortgages that had incredibly low interest rates of interest with low repayments for the first few years and then reverted to a much higher rate afterwards. All this was predicated on house prices continuing to rise, so that the value of the home would quickly outstrip the value of the loans made against them. Then when house prices began to plateau and to fall; and on top of that, when interest rates went up, millions of people found they could not meet the repayments of their loans. "

Now, read that again and substitute the following :
"US" or "American" for Canary Islands.
"and in some cases no income" – Holiday villa owner who can't rent it out due to fear or fine.

I also read this in the next paragraph.

"All of this had two effects that proved disastrous for the US. First, defaulting loans turned into securities and held by American banks changed from assets to massive liabilities. Sceondly, in the US, unlike the UK, a property owner can simply hand back the keys to their house and walk away. That meant that the US housing market crashed, leaving empty and half completed homes dotted across the country, and now the whole country would have to pay for it."

Northern Rock, Bradford and Bingley and Alliance & Leicester were the first to fail. These were lenders whose whole businesses were about lending to home buyers. They got the money to do this by borrowing from other banks, which is entirely normal. What happened during this period was no-one would lend to each other because no bank was sure whether they would get their money back. A"credit crunch." Banks who were hugely exposed to the housing market and the decreasing value of their mortgage book was affected first. The equivalent here are probably the so called "Caja's".

If a house is repossessed by a bank, it changes from being an "asset" to a "liability". It moves from one side of their balance sheet to the other and banks who are heavily exposed to the housing market have a spate of repossessions, they are seen by other banks as a financial bad risk, who then wont lend them money, and then the bank collapses (See Northern Rock, RBS, Bradford & Bingley etc). Add into that falling house prices where a banks mortgage "book" was 10 billions last year, 8 billion this year, and because of falling house prices, say 6 billion next year, then which bank is going to lend to another when the price of the asset/house is constantly falling?

This is why the banks don't want to repossess. The more they repossess, or have keys handed back, the bigger risk they appear to other banks. The more they repossess, the lower house prices become because the banks want to get rid of them, sell them at a knockdown price, and everyone else has to lower their prices to compete. And remember here that anyone buying one of these knockdown price bargains then cannot legally rent their property out for holiday lets to raise the money to pay the mortgage!

As we all know, the difference for thousands of property owners in the Canary Islands is that holiday rentals is how they pay their mortgages. As we all know the difference in Spain and the Canary Islands is that people are now being prosecuted for renting their villa out. They are legally preventing a home owner from raising the funds to pay their mortgage. Rightly or wrongly it has always gone on and a lot of the time it is through ignorance. In thousands of cases someone has been looking for a way to boost the value of the hard-earned savings they have accumulated for years, they pass an estate agent where they see "Fabulous rental potential", they put some money down to start the process off. It isn't until much further down the line after they are legally committed and can't back out that they find out, sometimes not until after they have received the keys for their property that they can't rent it out for holidays legally. This scenario as we know is very, very common.

I personally believe that the threat of a huge fine will be the tipping point for tens of thousands of owners who can't pay, and therefore wont pay. Keys are going to be handed back at an alarming rate. The liquidity in the property that will be lost will mean less to some people than a six figure fine and a criminal record. Yes, they say they will pursue people for the fines, but do you honestly think the Spanish government have the will, means, or money to go after the hundreds of thousands of people, many overseas, who will be prosecuted?

And remember that the more keys handed back, it will be far worse for the bank, possibly fatal.

I think every President of every bank should be invited to the public meeting in Tenerife on the 15th of January and given a front row seat. They should get this invite in the knowledge that the clampdown currently being enforced will lead to less mortgage payments for them, then repossessions, with the real possibility that their bank will not be able to survive, throwing them out of their very well paid jobs and putting all of their bank staff and colleagues on the dole queue next to the builders, plumbers and shop workers who are currently there.

As we all know we are in the middle of a recession. If the Spanish Government are not very careful here, they have legislated themselves into another, much worse one. They need to start issuing licences now.

[SurfJames]

Hi Gordond,

You've hit the nail on the head mate. Most people I talk to have no idea what the credit crunch is about. The banksters have shafted everyone - good and proper this time.

And just to finish off your excellent post.......just consider the Bond Market that's going on, because this is gonna be the next bubble to burst. Govts are selling thier debt as Bonds to the Chinese etc, at low interest rates. The money raised keeps us afloat, as it is used for public expenditure. But, when these bond sales fail, interest rates will have to shoot up.

My advice to everyone, is to prepare for the worst and get in place a strategy for coping with higher rates. And DON'T borrow at the moment. These barstwewards wil take your house off you.

And, just another thing, under EU law, you cannot just hand back the keys. You will be persued for the outstanding debt against your assets in the UK.

The banksters are to blame for this, and they've got off free of the crime. Property prices will be falling for a while yet.

[appy ammer]

i think we should ave both sides of the story,are there any "big bankers" on here;)?

[emmi]

Excellent posts by Gordond and SurfJames.  This is the kind of information which needs to be drilled into the brains of the Spanish Authorities regarding this issue.  They just don't seem to be able to learn from the mistakes of other nations.
Now, how can you get this info to the meeting taking place soon?