On the one hand, letting out a flat in Spain is not particularly difficult for the owner at the outset, but on the other, it can cause a good deal of trouble later on. Let’s look at the types of letting and the pitfalls.
Long-term letting of a flat in Spain
Let’s start with long-term letting. Long-term letting of a flat in Spain is governed by the Urban Leases Act (Ley de Arrendamientos Urbanos). And it is important to understand that this law protects the tenant’s rights as far as possible. So before signing a long-term tenancy agreement, we recommend consulting a lawyer or a trusted estate agent to get a clear picture of the rights and obligations of both parties and to assess the possible risks.
To begin with, the minimum term of a long-term tenancy in Spain is 5 years if the owner of the property is a private individual and 7 years if it is a company. Even if the original tenancy agreement was signed for one year, it is renewed automatically unless the tenant wishes to end it. The landlord may terminate the agreement early only in exceptional cases, with mandatory prior notice of their intentions to the tenant and payment of compensation.
Once the 5 or 7 years have passed, if the landlord has not notified the tenant four months before the end of the term of the intention not to renew the agreement, it will be automatically renewed again for 3 years.
Unlike the landlord, the tenant in Spain is not bound by such strict terms: after the first six months of the tenancy, the tenant may terminate the agreement at any time. All that is required is to give the landlord at least one month’s notice of the decision.
It might seem that there is nothing particularly alarming here, and that one long-standing reliable tenant is better than a frequent change of occupants. But this is exactly where the pitfalls begin. The key word is “reliable”. If the tenant’s financial situation worsens and they stop paying the rent, they will have to be evicted through the courts. And that is a long and costly process, since it requires a lawyer and a prosecutor, and it can take from six months to several years.
The situation is made worse by the current health crisis in the country and the temporary moratorium on evicting tenants who do not pay. If minor children live with the tenant, the situation becomes even more complicated.
We want to draw landlords’ attention to one important point: however events unfold, even if things are not going your way, you must never take the law into your own hands. You must not enter the home, change the locks, evict the tenants yourself or cut off the utilities: the police will treat all of this as unlawful.
If any dispute arises, you can only act through official channels, through a lawyer and/or the courts. It is advisable to contact a lawyer immediately, as soon as rent arrears appear. The sooner the landlord starts dealing with the problem, the smaller the debt for utilities that builds up, and the sooner they can free their property of dishonest tenants.
To protect yourself at least to some extent, you need to take the choice of tenant seriously: check their documents, employment history and salary, and try to assess how stable their financial situation is likely to be. It is also worth taking out insurance against unreliable tenants. In addition to the usual deposit, the law allows you to require extra guarantees from the tenant in the form of a bank guarantee (aval bancario).
Long-term letting of a flat in Spain does not require any permits or licences. If the home is let with a parking space and/or a storage room, this must be stated in the tenancy agreement.
The landlord will have to pay tax on letting a flat or house in Spain: residents must declare the income in their personal income tax return (IRPF), and non-residents in their non-resident income tax return (IRNR).
Short-term letting of a flat in Spain (holiday lets)
Short-term letting of a flat in Spain (holiday lets) carries less risk for the owner of the flat or house, but involves more work.
Short-term letting of a flat in Spain requires a holiday rental licence. Without this licence, letting the home is considered illegal, with all the consequences that follow in the form of fines from the tax authorities. The fines are substantial, from several thousand to several hundred thousand euros. What is more, without a licence you cannot advertise on major portals such as Airbnb, Booking and so on.
Holiday rental licences are issued by the local authorities. The town hall websites have up-to-date information on the requirements, timescales and procedure for obtaining a holiday rental licence. In some regions the issuing of licences was suspended several years ago. These include, for example, Mallorca and Barcelona.
A holiday rental licence is tied to the property and has no expiry date. Accordingly, resale houses and flats that have a licence sell for much higher prices than properties without one.
As a rule, short-term letting of a flat in Spain carries less risk for the owner, since the tenants’ stay is limited by the term of the agreement, by the length of their holiday, by their flights and so on. Any overstay has to be dealt with either through the portal where the listing was placed and the payment was made, or by calling the police. It is important that letting a flat in Spain is done legally, with taxes paid and with the licence we mentioned above.
Tenants who come to Spain on holiday often say they would like to stay on and turn the arrangement into a long-term one. In that case the landlord will have to weigh up all the possible risks we described in the previous section.
Seasonal letting of a flat in Spain
There is one more type of letting in Spain: seasonal letting. This is when a home is let not for the whole year, but not for a short period either. Seasonal lets are often tied to the school year, for example from September to June. As in the first two cases, you will have to pay tax on letting a flat or house in Spain.
Seasonal tenancy agreements in Spain are not renewed automatically, unlike long-term ones. They are also governed to a greater extent by the terms set out in the agreement itself. As for the legal framework, seasonal letting in Spain is also governed by the Urban Leases Act, but the rules that apply to let commercial premises are applied to the property.
With seasonal letting in Spain it is very important to draw up the agreement properly and set out the rights, obligations and liability of the parties in it. You cannot do without the help of a professional lawyer here.
Our professionals who specialise in letting property in Spain will be happy to answer all your questions and help you let your flat in Spain on the best possible terms for you.
