Fasnia in Tenerife. | Ayuntamiento de Fasnia

The prohibition of holiday rentals in tourist areas by the government in the Canary Islands has been definitively annulled by the Supreme Court.

The government issued a decree in 2015 which was later challenged by the National Competition Commission and the High Court in the Canaries. The Supreme Court has ratified a ruling of the Canaries court that was delivered in May last year.

The courts have taken the view that the "only plausible explanation" for the Canaries law was in order to "favour traditional accommodation", i.e. hotels. They have considered it to be a breach of principles of necessity and proportionality that are set out in the national law for guaranteeing the unity of the market.

The Supreme Court is of the view that there was no justification "in the general interest" for the Canaries regulations. These did not outlaw holiday rentals but only permitted them away from tourist areas. In essence, an exclusion zone was created in coastal parts with tourist areas, and holiday rentals were to only be allowed behind this zone, a certain distance inland.

The ruling is of potential relevance for the Balearics insofar as it addresses principles of zoning for holiday rentals. The Balearic government has said that the cases are different and has not been particularly concerned by courts' decisions regarding the situation in the Canaries, where the government has since revised its regulations.

In May this year, the Canaries government substituted the original 2015 decree by giving island councils and town halls the right to establish "exceptions". The new regulations limited holiday rentals to "residential land", without specifying tourist areas, as the 2015 decree had. The exceptions could therefore be on non-residential land, the implication of this being, for example, in the heart of a tourist resort.