The local press has been full of comment about the recent regulations that have been brought in to control the rental of properties on the island and in Spain in general. This has obviously created a lot of worry both for residents and for those who own holiday property here and to say the least some confusion as to what is and is not allowed and regulated.
We approached Chele Fox, long-time President of the Cala Llonga Owners’ Association for some clarification.
What’s happening and why?
In essence, with more and more online property letting portals and the growing trend to rent out your property (or part of your house or apartment) to make a little extra money, the Balearic authorities are cracking down on those who do not have tourist licenses right across the board. They want to redefine both the areas on the island and types of housing in which this is allowed. Their claim is that tempting holiday rental rates have resulted in less and more expensive long-term rentals being available to locals and those seasonal workers in need of reasonably priced accommodation. This is particularly relevant in towns and cities, where the value of properties for sale or rent has risen so much that it is driving locals out.
Sound familiar? Think the Lake District, Cornwall, Devon, and Wales: this is not just happening in Spain.
What has made the whole issue more complicated is that Menorca, along with the rest of the Balearics, is also currently introducing a new PTI (Island Territorial Plan) to clearly define the island’s areas and designation as Urban, Residential, Tourist and Rural.
The rural (or rustic) areas have also fallen foul of the new legislation, whereby no more tourist licenses will be granted. Rural and agrotourism hotels are permitted, so why not country house estates, where owners are investing in making huge improvements to long-abandoned land? And, indeed, why can’t you rent out your property, wherever it is, as long as you fulfill essential accommodation requirements and pay your taxes?
There is a general sense of malaise on the island. On the one hand, everyone is keen to protect the environment and reduce mass-occupation in the summer months, but on the other, it seems that the legislation is inconsistent and that individual owners and not big companies who are renting in bulk are being penalized.
Tell me more
Well, the conflict originates from a seemingly uncontrollable new market on the internet, where there is a greater variety of rental property available than ever before. Landlords can earn more from their property on short-term summer holiday rentals than they can achieve on annual tenancies; others who are under financial pressure have been introduced to a new way of supplementing their income by renting out their homes for a few days here and there and going off to stay with relatives or friends. These rentals help everyone to cover part of their ever-rising maintenance costs and rates.
Many owners have had their ngers burned with disastrous year-round lets, so one can understand the flip side here. It’s just a fact of life, but the speed of this change means that authorities everywhere have been caught a little cold and so are nding it dif cult to implement the right balance in urban and rural areas. It is appreciated that holiday rentals rents bring wealthier, higher spending visitors who help the tourist sector by spending in the supermarkets, shops and restaurants and on many other services. Better perhaps than the all-inclusive holiday visitor.
So, what’s the plan?
What the authorities in Menorca want to achieve is a range of decent and fair regulations, not to prohibit the rental of property.
It’s complicated, though. There have been complaints regarding the fact that many of the properties holding older licenses don’t have an expiry date on their license, and that inspections are not conducted frequently enough due to lack of personnel. The new rules decree that new licenses have an expiry date of 5 years, and, to everyone’s astonishment, houses that are less than 5 years old are not eligible to apply for tourist licenses at all.
What’s the outcome?
There still isn’t a definitive outcome as it is being so hotly disputed – not just between the 8 Town Halls on the island but also the various political parties. However, the new regulations regarding tourist licenses were first brought in during 2012: these were quite strict and meant that properties had to reach a standard that was acceptable in the authorities’ eyes. Without a license, there could be no legal rental, and of course, for any legal rents you had to pay your tax. It was quite logical to set a reasonable standard for the accommodation, especially against a past back-drop of nightmare stories of rogue landlords, no water in the swimming pool, double bookings, misleading property descriptions. All these resulted in disgruntled visitors. Not to mention hotel chains which were unhappy about a black market threatening their livelihood, despite the fact that these two industries attract different clienteles.
As the rules currently stand, all tourist area properties will carry on with their existing tourist licenses, and any that were applied for before July 2017 will be granted under the old legislation. What has yet to be resolved in tourist areas is whether apartment blocks/complexes will be issued with them, although the general opinion is that they will, provided the owners’ community allows an individual apartment owner to apply for a license. To be honest, it seems totally unfair not to be permitted a tourist license anywhere in a tourist area.
How have you become involved in this as the president of the Cala Llonga Owners’ Association?
My involvement has been based on my commitment to the interests of Cala Llonga owners. Cala Llonga is Mahón’s largest (and most prestigious) urbanisation and, although we were officially taken over by the Town Hall several years ago and it is no longer obligatory to be a member of the Owners’ Association, over half of the owners continue to contribute so that we can keep it looking as good as it does.
We are in essence a tourist area but officially categorized as urban, or residential. For some reason, whenever there are any articles in the Diario about tourist licenses, a photo of Cala Llonga always seems to feature. This is my fourth interview with the press/media in Menorca since the furore started, and I wish I could look into a crystal ball and tell everyone that all will be resolved soon – but of course, I can’t.
However, on 13 February, I and a couple of other committee members met with the president of the Consell Insular, Susana Mora, and the mayoress of Mahón, Conxa Juanola. We were assured that the intention is to allow tourist rentals to all detached houses in urban areas, meaning that places such as Cala Llonga, Binixica and Santa Ana can carry on much as before – but always with a valid tourist license.
If you are found to break the rules by advertising a property for rental without the appropriate license then you can get ned. Airbnb are currently facing a 300k euros fine for promoting numerous apartments in Mallorca.
For the Roqueta reader, what does this mean?
In order to rent your property, you need to first establish into which zone your villa is designated. Is it a tourist or a residential area? S’Algar and Binibeca are tourist zones so no problem. Cala Llonga is designated a residential one. No problem again so long as your property is detached, and you have or will obtain a tourist license.
The simplest way forward is to seek advice from your maintenance company or one of the rental agents here. They should provide expert advice in this eld as they will only take on a property if it is properly regulated.
Companies such as these should be able to help you through the red tape required. It costs in the region of 300 euros to get your license if you do it yourself. Those renting out their homes should also be aware that rental income needs to be declared to the Spanish taxman. Make sure you seek out professional advice too.
Any other advice?
Whatever property you own, it is now a fact that if you are thinking of advertising that it is available for rental, you will need a license. Make an approach to get professional advice before blindly ploughing ahead. Better to be able to make an informed decision, rather than fall into an unforeseen problem.
The local papers have taken this on as a very hot topic and report on developments almost every day. This is a summary of some of their reports.
The PTI (Island Territorial Plan) is the document that sets out the new regulations. This is currently being amended by the Consell Insular (Island Council) by applying zones where properties may or may not be rented to tourists.
The change was announced in January this year and should be approved in February. The new zoning means that some areas will no longer be considered tourist areas, such as Cala Llonga, Santa Ana and historic town centers; other places including Fornells,
Es Grau and Cales Coves are exempt as their populations are so low, so they are not considered residential.
Tourist licenses to allow the rental of property that are already issued will be respected. This is another source of discontent as the originals are for an indefinite period and new ones are for only ve years.
Under the new regulations, the property to be offered for rent needs to have an efficient energy certificate. However, 90% of the rental properties were built before 2006 and 70% before 1990 when this requirement was not in place.
Properties must also be at least ve years old before they can be rented to tourists. This has had a negative effect on current and future building contracts. For those projects already under construction, banks report that the owners are asking for loans or only part completing as they cannot budget how to nance the new building without being able to rent.
Local builders warn that these investors will leave Menorca and look elsewhere for easier options with less complicated rules; this is despite the fact that most of the builds are in tourist areas where there are often many plots still available.
Those involved in the construction sector are understandably furious, as they fear it will slow down potential contracts. And this at a time when they had finally started to feel the recovery after the crisis. Since 2015, 112 million euros have been spent in Menorca on building houses, mostly detached or semi-detached. Now, none of these can be legally rented out as they are under the 5-year rule. The figure is still far away from the boom year of 2006 when 157 million euros was spent: triple the amount of last year.
The suggestion by Podemos, the left-wing party, that people should be allowed to rent out spare rooms in their homes for 60 days a year has been turned down by the Consell; it is alleged that this would be very dif cult to control. The result is that some people with properties in the historic city centre of Ciutadella say they will have to sell them, one commenting he may have to leave the island.
This new regulation also puts a greater strain on people coming to work for the summer months. The reduction of availability will make it harder to nd affordable accommodation. This is already a big issue, with reports in the summer of 2017 of restaurant workers having to sleep in their cars for weeks on end. And, of course, a consequence will be an additional strain on restaurants and bars nding staff to deliver a top quality service to visitors.
The implementation of these regulations is a big issue. Despite new laws that were passed 6 months ago that gave the Consular the right to much heavier nes of up to 400k euros for illegal holiday rentals, there are still widespread offers on the web of properties to rent without a license.
The American company Airbnb is one of those companies who are promoting large villas for rent (a front line one with sea views at 1000 euros per week), apartments, rooms and even camper vans (74 euros a night), all without a corresponding license number (the number must be quoted in the advertisements by law).
On 1 February the Govern (Balearic Government) ned Airbnb 300 thousand euros; in 2017 the platform earned 80 million euros gross on the islands from rentals, so possibly they will not be too worried. They say they have not received the fine but will appeal anyway. There is also a fine pending for Tripadvisor from December.
Despite this Airbnb have just announced that for mid-July they have a 60% occupation on the island on the properties they advertise. It is calculated that owners who use the site earn an average of 13,000 euros annually, so you can see the attraction for them.
UIB, The University in Barcelona, has undertaken a study that shows the Balearic Islands have the greatest intensity of tourism in the world with numbers only higher in the Virgin and Cayman Islands, but these are tax havens and do not have the same number of tourists.
The powers that be need to make up their minds and decide what are the priorities for the tourist industry going forward. Are they satisfied with a status quo at the level of today, or do they wish to encourage controlled growth? These new regulations seem to indicate an objective of a fairer rental market with an acceptance that the restrictions brought in may cause a slowdown.
There is already a shortage of beds in the high season in Menorca, and these new rules will only reduce the numbers available. With this reduction, it may also force the arm of some of the hotel groups to focus more keenly on the all-inclusive offer, and this will obviously bring less spend into local business hands than villa or apartment self-catering.
From the time of writing to the time you are reading this article, who knows what may have been announced, implemented or planned. As the expression goes: watch this space!