SUMMER RENTALS REVISITED

As you may recall, I mentioned that there is a Spanish general law (the Tenancy act) that regulates leasehold activities in this country. It has been said by some, rather erroneously, that leaseholds must have a certain minimum term, and that anything under one year, or six months, or eve a month, automatically classes your tenancy agreement as a touristic one, and therefore an illegal one.

This mistaken account shows the two points where the understanding in this issue has gone wrong. Let me take them in turn.
In regard to the term of a lease, you are perfectly legally entitled to rent out your house or flat for any period of time you like. It can even be 24 hours. More over, this leasehold can be done under the above-mentioned Tenancy Act. The key is that in this country, this Act covers ‘permanent housing needs', that is, tenants seeking a lease of certain duration to call your property home, but it also regulates leases that might be agreed for purposes other than a permanent home for the tenant. There is nothing materially that distinguishes these two types, as they are subject to the same piece of legislation.

A leasehold, then, that is agreed for a week, for instance, clearly is not designed to satisfy a tenant's need of permanent habitation, but it falls in the category of ‘purposes other than' longer term habitation. Either way, the law protects your activities as a landlord and allows you to rent out your asset for any period of time without it being necessarily classed as a touristic rental.

After this general, Spain-wide law, there came a regional touristic-regulatory law. This very badly drafted piece of legislation does not, and cannot, affect the general tenancy act that we are by now so familiar with. What this law does, is to ban ‘touristic rentals' UNLESS a license has been applied for and obtained. Last time I mentioned the conditions you have to fulfil to obtain a license: basically, only semi detached or detached houses, where certain services are provided, can be subject to a touristic license. This naturally means that you can always rent out touristically your house or semi, yet not your flat. The latter, you can only rent out non-touristically.

So we come now full circle: do you own a semi or a detached house? Then you can have the choice of renting out your property either as a touristic rental, by obtaining a license, COMPULSORY providing services and charging your clients VAT, OR you can rent out your property, without a license, therefore without providing ANY kind of service, and therefore without charging VAT. In this second case, the rental will be subject to the Tenancy Act. And in either case, the property can be leased for any period of time.

Do you, on the contrary, have a flat that you wish to rent out? No problem. In this case, you leasehold cannot be a touristic one, because you cannot get a license to rent an apartment TOURISTICALLY. You can, however, rent it out NON TOURISTICALLY, for any period of time, by NOT offering and NOT providing any kind of services. Again, your leasehold agreement will be one subject to the Tenancy Act, which, as we know, allows you to rent out your property for any term of time.

Thus, without a license, you must rent out your house or your flat (for which you can never get a touristic license) in a non-touristic way. So what does this imply, and how can you prove that it is a non-touristic rental?

Tourism inspectors will assume, because you are renting out your property for short terms, because it is in summer, and because Majorca receives millions of tourists a year, that what you are doing is a touristic rental. Well, you may be renting it out to tourists, but this is just an unfortunate coincidence of words. To dissipate the assumption, you must pay attention to two things, first, to have a contract between you and your tenant that shows, by including some criteria and leaving others out, that you are subjecting your leasehold to the Tenancy Act and which describes what you are doing fulfilling the terms and conditions of the Tenancy Act. Second, you must pay attention to how you advertise the property. A property advertised as a holiday home where some services are offered may tilt the touristic inspector into regarding your rental as a touristic one and, if you don't have a license (if a house because you didn't want to apply for it, and if a flat, because you simply cannot get it), then you will be severely fined. Adverts and contracts must be in harmony with one another and must stay clear of sounding as a touristic rental.

In sum: it is your property, and the law allows you to rent it out to whoever you please, whether a businessperson or a tourist, and for whatever period of time. You just have to use and apply the law appropriately, and you will have a trouble free season.

Will Besga is a lawyer in Palma. Will.besga@etl-mallorca.com