10.31.07
Posted in Articles, Canary Islands, Spain, Uncategorized at 2:31 am by admin
“Recent reports suggest that most holiday rentals in Spain are illegal without a licence, and can incur fines of €30,000 for unsuspecting owners.”
A recent article by Mark Stucklin (Sunday Times Home Section, 16 September 2007), looks at one of the latest issues facing Spanish property owners and investors – whether or not you need a licence to rent.
Bad news travels fast, especially over the Internet. As speculation, confusion, half-truths and plain wrong information spreads, many owners are now scared of being denounced by disgruntled neighbours and stung for a whopping €30,000.
The truth however, is that most property owners are unaffected. In reality, you’ll only need a licence in certain parts of Spain.
So, where do you need a license?
In the Balearic and Canary Islands for a start. According to Isabel Loeffler, (head of Loeffler Legal Centre, on Mallorca) “In the Balearics, you cannot rent out private residential apartments,” …“The only kind of residential property you can rent out is a detached villa, but only if you have a licence.”
Palma’s tourism department confirms this. They also go on to say that in Mallorca, you can’t even get licences to rent out detached properties anymore. Strangely, they’ll still grant you a licence if you’re in Minorca – typically Spanish.
It’s the same story in the Canary Islands. The authorities there want to promote hotel occupancy over private rentals.
One exception is “apartamentos turisticos”. These are purpose built properties – specifically for renting out. Perhaps suitable for big developers, they’re not really suitable for an ordinary homebuyer who’ll want to spend time in the property. Plus, they carry a whole load of restrictions and potential extra costs.
Renting out your property on the mainland appears to less of a problem. Lee Jones, head of OPI Property Management and Lettings, categorically states “you don’t need a licence to rent out a private apartment or villa to holidaymakers on mainland Spain”.
They had their specialist lawyers check out and confirm this and with “3,500 holiday rentals this season”, they have to be certain they won’t be liable for fines.
Enforcement of the Law (in Spain)
“With so many “illegal” holiday rentals going on, the law and the reality on the ground are oceans apart, which is not unusual in Spain.”
If you look on the Internet you’ll come across literally thousands of private properties for rent throughout Spain and the Canary and Balearic Islands. A lot of these are owned by Britons who have no idea whatsoever that they are breaking the law.
Those who are aware of the licence situation don’t really seem to have a clear idea of how the rules are interpreted and enforced. Undeniably it’s a bit of a grey area – as is often the case when it comes to Spanish laws.
In terms of licenses, the law appears to vary from place to place. For example, in Murcia province (Eastern Spain) if you want to rent out your private property to tourists you’ll have to first register with the department of tourism, although hardly anyone does. In most other parts of the country, you just have to inform the local government about your plans to rent.
The real concern is most likely just wanting to keep tabs on who is earning the money, in order to make sure as much taxes as possible are received.
Long-Term Rentals
Curiously, there’s seems to be no restrictions on long term rentals, if you want to rent your place out for the whore summer or winter, for example.
Renting out for longer periods can have a number of advantages and disadvantages. Although, you’ll get lower weekly income, you’ll have a steady income for a longer period of time. There’ll be fewer empty periods and probably a lot less wear and tear.
Be careful though. If you own a property in Spain and rent it out to a tenant for a period of a year or more, they’ll acquire all sorts of rights that could make your life a nightmare.
Advice
It’s Spain. Nothing makes sense. The only real advise is to speak to a local lawyer who knows the specific licence situation in your particular part of Spain.
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10.30.07
Posted in Articles, Spain at 12:21 pm by admin
Choosing a good agent is the key to a safe and happy investment. You need one that you can trust. In Spain real estate agents vary quite considerably in terms of competence and ethical standards from one agent to the next.
Like anyplace, you’ll get both good and bad. Over the years, real estate agents in Spain have developed quite a reputation – you’ll hear all sorts of horror stories – many of them true.
In 2000, the Spanish authorities deregulated the property market. Before this you had to be a member of the one of the two professional real estate associations – API and GIPE, to facilitate Spanish property transactions.
Since deregulation, almost anyone can set themselves up as a real estate agent, regardless of professional qualifications or affiliations.
Although there’s some that should certainly be avoided, the majority are highly trained, multilingual, competent with high ethical standards. Finding a good real estate agent in Spain is rarely a problem.
Types of Estate Agents
There’s various types to choose from. Some are more suitable than others depending on your situation.
Spanish Estate Agents
A lot of the Spanish agents don’t speak English – especially in the rural areas. UK buyers generally tend to use foreign estate agents because of this – it’s just easier. This is changing though. Nowadays you’ll find an increasing number of Spanish agents with English-speaking staff in Spain’s many popular tourist resorts.
A lot of the Spanish agents are affiliated with the API or GIPE, membership of which indicates a high level of training and professionalism. The only thing you have to check is that they genuinely are a member. These titles are often abused by agents.
Normally average size Spanish agents just focus on the surrounding property market. The larger ones can often have nationwide chains and networks throughout the whole of the country, extending to the Balearic and Canary Islands.
Foreign Estate Agents
Spain has hundreds of foreign estate agents operating throughout the mainland and on the Canary and Balearic Islands.
Normally these estate agents will focus on buyers and sellers from their home countries. The English try and sell to the English, Germans to the Germans etc. It makes sense. People want to purchase from someone they feel familiar – someone who speaks their own language.
Unfortunately though, over the years there have been numerous cases of incompetent and unscrupulous behavior carried out by some of these foreign agents. They involve everything from charging excessive commissions to aggressive sales tactics and blatant dishonesty – anything to close a quick sale.
Watch out for these kind of operators. You’ll find them mainly in popular resort areas like the Costa del Sol, Costa de Almeria, Costa Calida and Costa Blanca.
Inter-Agency Networks
An inter-agency network is collaboration between various estate agencies whereby they share clients, properties and commissions. One agent might have a property but not a buyer while the other agent might have a buyer looking for the other agent’s property etc. It’s mutually beneficial for both parties.
It should also be ideal for the buyer – he’ll have a much wider choice of properties to choose from. What often happens though, is that as well as splitting the commissions, the agents will also increase the commissions, seeing as they’re not getting as much as they normally would. So in the end the buyer pays more – and for something that’s of little extra value really.
Corredores
The traditional rural method. A corredor is a local broker who works in rural, often remote areas. He or she (but normally he) knows all the locals and is in the “know” about who’s looking to get rid of their dwelling and go onto purchase better (or other) things.
If you’re looking for a property in an area, not covered by the larger agents, this is often the best option. It’s also the cheapest. (Most Corredores don’t speak English, by the way.)
Both the buyer and seller are charged just 1% commission each. Buying from a foreign or modern Spanish agent you could pay up to 35%!
Finding a corredor can be tricky. They don’t normally work from commercial premises so you’ll have to ask around, maybe spend some time relaxing in the village. Eventually, you should find one – if the village has one!
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10.15.07
Posted in Articles, Buyer's guide, Canary Islands, Spain at 12:42 pm by admin
Buying off-plan is a very popular investment option with numerous advantages for the developer, the estate agent and you (the buyer).
For developers, it’s a way of financing part of their project with someone else’s money. It reduces their risk.
For estate agents, selling off-plan means earning juicy commissions from the developer. It’s also easier for them to just take the commissions and run. They don’t have to worry about any complaints or hassles from the buyer who take possession later on.
Estate agents love to sell off-plan. Apart from the generous commissions, it’s an easy sale. The ideal candidate is your typical naive amateur speculator. All the agent has to do is mention “guaranteed high-returns” and the rest is history.
So what’s in it for you?
Money, basically.
A significant proportion of foreigners looking for a holiday home in Spain will buy off plan. Most are amateur speculators looking for a risk free, high return investment.
Advantages
The main advantage of buying off plan is the price. You should earn a discount of around 10 – 30% off the current market price.
The reason off-plan developers charge less is because they have to compensate the buyer for the risks they are taking – handing over hundreds of thousands of euros for something that hasn’t been finished, possibly even started, invariably involves a form of risk.
They also compensate the buyer for providing them with the capital they need to help finance the development.
Quality is also a major advantage. When you buy off plan, you get a property made with the latest building materials using the most up to date techniques.
In Spain, brand new properties should be the best in the market. They’ve been constantly improving building regulations here over the past few years. That said, it does of course depend on the specifications offered by the developer.
When you buy off-plan you’re also entitled to a number of guarantees from the developer. Under Spanish law, you’re covered for different types of build defects for different periods. Off-plan properties are guaranteed against the most serious structural defects for 10 years. You should get the same advantage if you were to buy a property from a developer that’s just been finished.
Unlike buying a new property or a resale property, when you buy off plan, you can (sometimes) have an input into the style of the property (colours, floorings, certain fixtures etc.). Buying off plan can be tremendously flexible in this respect and the degree of flexibility varies enormously from developer to developer.
If you at any stage you decide that you don’t want to continue with the purchase – if you change your mind about the development or the area – you might be able to sell on the purchase contract to a third party, making a (potentially large) profit in the process. All this could be done without the expense of completing on the property.
This has been the case in the past but nowadays, with the market being more saturated; it’s becoming more and more difficult to sell on properties before completion.
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Posted in Articles, Buyer's guide, Canary Islands, Spain at 12:30 pm by admin
A recent article by Mark Stucklin (Spanish Property Insight), strongly recommends using an independent Spanish lawyer as opposed to one appointed by the agent or developer. “It is true that you can buy a property in Spain without using a Spanish lawyer but it would be very unwise on your part.”
Buying a property in Spain
Buying or selling a property in Spain, just like back home, can be a detailed and often complicated process. Unexpected issues and costs often pop up unannounced.
In Spain and the Canaries, you run the same kinds of risks when you buy or sell as you do in the UK – meaning a good lawyer is essential. What you need is a Spanish lawyer, who speaks English and is independent from both the estate agent and the developer. You need one that can give you impartial advice and look solely after your interests.
Buying from a Developer
You’ll need a lawyer if you’re planning on buying off-plan. He or she should make sure the contract you’re about to sign gives exact details of what kind of property the developer is going to produce, with all the correct licences and guarantees and, as much as possible, within the specified time frame.
Otherwise, you are completely unprotected and you could end up with…well, anything, really. What’s written down in the contract is paramount; it’s your only genuine security.
New development projects often take more time than the developers predict. A Spanish lawyer can make sure the contract suits you but at the same time is reasonable and realistic.
Buying a Second Hand Property
For resale properties, the lawyer needs to make sure that the person selling the property is the legal owner and that there are no outstanding debts on the property. In Spain, debts stay with the property not the owner, so if not properly checked you could end up inheriting all kinds of hassle.
Your lawyer will also check that the physical characteristics (size, number of bedrooms etc.) of the property fully correspond to the details in the title deeds.
These are two fundamental checks that the lawyer needs to make. There are countless others, depending on the property type, location and circumstances – everything from water rights to community fees.
Using an Independent Spanish Lawyer
Most people use the lawyer appointed by the agent or developer because they assume it’s the easiest and safest option. In some cases, like on an inspection visit, they simply won’t have time to look around for an independent lawyer.
“63% of British buyers end up using the lawyer recommended to them by their estate agent. Of these 20% report being very dissatisfied with the legal service they receive.”
Normally, the agents just want to close the sale as quickly as possible. In a lot of cases, the staff get paid on a commission-only basis, so of course they’ll recommend any lawyer who’ll facilitate the quickest easiest sale for them – often their in-house lawyer.
You can never be too sure about the kind relationship that exists between the agent and the lawyer. There could be all kinds of deals going on. This is why you need a lawyer who you can be certain is working for you and you alone.
It’s best to find one before you begin the purchase process. Ideally you should have found a lawyer before you contact an agent. That way, you won’t be pressurised into using the agent’s lawyer.
Locating an Independent Spanish Lawyer
There are plenty of English speaking Spanish lawyers in Spain and on the Canary Islands. The easiest way to find a good one is normally just through recommendations from friends and acquaintances. The British Consulate can supply you with a list of English-speaking lawyers in your region. You’ll find a list of all the British consulates in Spain at the following link – British consulates in Spain.
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Posted in Articles, Spain at 2:27 am by admin
Most people dream of having their own holiday home – a place in the sun, where they can jet off to at any stage of the year, by themselves or with family and friends.
Getting approved for a second mortgage however, is often more difficult than for primary mortgages, so it’s a good idea to weigh up the advantages and disadvantages before you invest.
Benefits of owning a holiday home
Provided the market remains prosperous, you should be gaining equity on the property every year. You can also rent it out during the periods you are not using it and help to pay off the mortgage.
Going on holidays will be a much more pleasurable experience, knowing that the place your staying in will be equipped with your favourite foods, clothing and recreational items. You’ll have a lot less stuff to pack.
Your vacation home can become a retirement retreat, if you decide that you’d eventually like to live there full time. Once you’re ready to move, you can always sell the main property and invest the money in the holiday property – your new home.
Financial Considerations
It’s often looked at as a luxury available solely to the wealthy and to some extents this is largely true. Approvals for second mortgages are more difficult to obtain and higher down payments are often required, as lenders feel borrowers are generally more prone to missing payments on their holiday homes.
So, even for those in a position to be afforded a second mortgage, there are still a number of financial considerations to take into account…
One of your main considerations will be cost.
Even though you won’t be living there the whole year, you’ll still have to pay all the traditional costs that apply to your primary residence, like property taxes, and utility bills etc. Renting your holiday home out can sometimes mean that you’re no longer eligible for certain tax exemptions or that you’re liable for more tax payments.
Another thing to consider is whether or not you want to spend all your holidays in the same location. Staying in a hotel can be expensive (especially with a large family) and the thought of having your own holiday home is a nice idea but if you’re someone who prefers to travel to different places every year, maybe you should consider other options.
Is the holiday home suitable for winter and summer vacations? If not, you might end up spending additional money on hotels and other services that the holiday home should negate. Also, the burdens of meeting the bills that come with a second home might actually limit your ability to take a second vacation.
Guidelines
Make sure you research both the area and the property extensively before you sign on the dotted line. Spend some time in the location before taking the plunge.
Look at the different properties types available. Less expensive timeshares, for example, can make you feel just as at home but could save you substantial amounts on property taxes, fees etc.
Know the tax laws. What you’re planning on doing with the property can greatly affect the amount you’ll be taxed or allowed to deduct. Find out exactly what you can and can’t do with the property and how certain things like renting it out will affect your tax situation. There are numerous English-speaking tax professionals in both Spain and the Canary Islands who can help you with this.
Turning dreams into reality
Maybe you’re not yet in a position to buy a holiday home but some years down the line you might be. Consult a financial planner or advisor, tell him about your plans and he should be able to come up with realistic targets that can help you reach your financial goals. If you stay disciplined and start far enough in advance (i.e. now) you should be able to turn your dreams of owning place in the sun into reality.
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