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Spain: Letting your Property

Overview

Many people planning to buy a holiday home are interested in owning a property that will provide them with an income, e.g. from letting, to cover the running costs and help with the mortgage payments. Letting a home for a few weeks or months in the summer can more than recoup your running costs and pay for holidays. Note that it’s difficult to make a living providing holiday accommodation in most areas, as the season is too short and there’s often too much competition. If you’re planning to let a property, it’s important not to overestimate the income, particularly if you’re relying on letting income to help pay the mortgage and running costs.

The letting season varies with the region, e.g. 12 to 16 weeks on the Costa Brava, 20 to 24 weeks in the Balearics, 24 to 30 weeks on the Costa Blanca and the Costa del Sol, and year-round in the Canary Islands. However, you’re unlikely to achieve this many weeks’ occupancy and you should budget for around half of these figures, even when letting full time. Apartments and townhouses tend to have year-round letting potential, whereby villas (especially large ones) are in demand from Easter to late autumn plus Christmas.

You may be unable to meet all your mortgage payments and running costs from rental income, even if a property is available to let year-round. Most experts recommend that you don’t purchase a home in Spain if you need to rely on rental income to pay for it.

Buyers who over-stretch their financial resources often find themselves on the rental treadmill, constantly struggling to earn enough money to cover their running costs and mortgage payments. In the early ’90s many foreigners lost their Spanish homes after they defaulted on their mortgage payments, often because the rental income failed to meet expectations.

Comprehensive information on letting your Spanish home can be found in Earning Money from Your Spanish Home by Joanna Styles (Survival Books).

RULES & REGULATIONS

If you let a property in Spain, you’re required by law to pay tax on your rental income in Spain and not in the country where the income is received (e.g. in the UK). Since July 1995, all legal short-term ‘tourist’ letting in the Canaries has been conducted by registered letting agencies, thus ensuring that income tax is paid on earnings. In other parts of Spain, the authorities have a problem getting foreign, non-resident owners to comply with these regulations and many simply turn a blind eye, although there are fines of up to €6,000 for offenders. However, several regional governments (e.g. the Andalusian) have advanced plans to follow the example of the Canaries and it’s expected there will be widespread clamp-downs on illegal letting.

If you provide bed and breakfast or something similar in a rural property, you must obtain a permit from the local tourist board and have the property inspected. If you’re planning to buy a community property, you must check whether there are any rules that prohibit or restrict short-term letting. You may also be required to notify your insurance company.

Contracts

Most people who do holiday letting just have a simple agreement form that includes a property description, the names of the clients, and the dates of arrival and departure. However, if you do regular letting you may wish to check with a lawyer that your agreement is legal and contains all the necessary safeguards. If you plan to let to non-English speaking clients, you must have a letting agreement in Spanish or other languages. If you use an agent, they provide a standard contract.

However, if you do longer lets, you must ensure that you or your agent uses the correct contract. In Spain, ‘long-term’ lets usually refer to lets of one year or more, for which contracts (arriendos de vivienda) are for a minimum of five years. The contract for short-term lets, usually of one year’s duration or less, is called an arriendo de temporada. These contracts are available from tobacconists (estancos), but they don’t apply to holiday letting.

Because of the dangers of a tenant refusing to leave after the rental period expires, some foreign landlords are wary of letting to Spaniards.

LOCATION

If income from a Spanish home has a high priority, then the location must be one of the main considerations when buying. When considering the location for a property you plan to let, you should bear in mind certain factors.

More pages

Page 1: Overview
Page 2: Climate
Page 3: SWIMMING POOL
Page 4: KEYS
Page 5: Rental Rates & Deposits
Page 6: Handling Enquiries
Page 7: MAINTENANCE
Page 8: INCREASING RENTAL INCOME

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