Whether you are a property owner or not, I’m sure you’ve been following the Holiday Let (Vivienda Vacacional) debacle with interest. Since the Canarian Government finally issued regulations back in 2015, Decreto 113/2015, 22nd May after years of an unofficial standoff, the law has been heavily criticized, mainly because it was full of discriminatory clauses that excluded many property owners from exercising their right to legally let their properties under this system, never mind the grey areas that were difficult to interpret and portions that made no sense whatsoever!
Associations have been set up specially to defend property owner rights and to demand necessary amendments to the regulation that was drafted in a hurry so that it could be passed in time for elections. The main issue with the regulation as it is drafted is that it immediately excludes properties that are built on land classified as touristic from entering this rental system, with the idea to prevent direct competition with hoteliers. I mean, does it make sense that property owners in an area such as Caleta de Fuste, that is classified in its entirety as touristic, cannot access the holiday rental system? Where else would tourists look for accommodation if not in the main tourist areas? There was also a lot of confusion between Town Halls and Cabildos regarding said classification and many licences that were incorrectly granted based on erroneous certificates issued by Town Halls at the very beginning were later revoked much to the property owner’s dismay.
Even though the Canarian Government guaranteed Holiday Let Regulations would be amended by the end of 2015, this never happened so the various associations and affected individuals protested the government’s lack of commitment to the issue which had left so many in limbo, not being able to legally rent their properties short-term. The result of this inaction drove people to continue to let their properties illegally which created another set of problems.
This office has received several enquiries from property owners who have received notifications from different branches of the tax office stating they are in breach of the law by renting their properties on a short-term basis without first obtaining the proper licence. How have the majority been found out? Inspectors regularly trawl third-party websites that advertise these rentals and by pulling up tax records to compare, they discover said property owner does not declare the income received and does not have the correct licence.
The whole purpose behind the government passing a law was to finally regulate this rental issue that had persisted for years, where the vast majority failed to declare the income derived from the activity, so not only was the Canarian Tax Office out of pocket but it also posed another danger that may seem insignificant, but if you think about it carefully, it does have an impact on how tourists view the islands. Imagine if any old property could be let out to tourists without proper equipment, amenities, security features or a basic lack of cleanliness, what type of experience could these holiday-makers come to expect from the Canaries? How many would return after a bad experience?
Since 2015, many properties have been registered for holiday let and this has of course given rise to a shortage of long-term rentals, which in turn affected access residents had to decent and affordable dwellings. The surge of holiday rentals or the fact that many property owners would charge residents the same price they would a tourist created serious problems across all the islands and the Canarian Government took note. After caving into the pressure it was under from all sides, the impact of holiday rentals was studied in-depth and they began to draft a Project Law (which to date remains incomplete) that would take these issues into account in the amendment they would subsequently pass as law.
As you can imagine, the court system has had to deal with numerous cases either appealing owners’ rights to legally let their properties or opposing fines they have been issued with by inspectors. The Canarian Government tried to introduce an environmental criterion to their motivation behind the imposed restrictions but the Canarian Supreme Court found their reasoning “insufficient and unconvincing” in general and as a result in many instances, it has ruled in favour of complainants, not only for disallowing rentals for those properties situated on touristic land but for not permitting individual rooms to be rented out in traditional Bed and Breakfast style.
The outcome of one of the last rulings in December 2018 is that the restriction based on land classification has been removed, meaning that this particular market is now open to the masses despite the Canarian Government’s continued protests and even though Holiday Let Regulations have still not been officially amended, the Islands’ Cabildos are now accepting applications without the up until now obligatory Land Classification Certificate.
This is a massive win, but it does not mean there won’t be negative consequences at the same time because we will surely see another decrease in the number of suitable properties available to residents which has already been the cause of so many making the move to more remote areas of the island due to abusive prices.
As mentioned earlier, holiday-makers’ experience and their lasting impression of the Canary Islands is paramount so there are minimum requirements property owners must make sure are in place to ensure proper standards are met. Think of it as running a hotel to give you a better idea of what is expected of you. Besides that, there are obvious tax obligations to be adhered to, and furthermore, from January of this year, intermediaries such as Airbnb, Property Owners Direct, Booking.com etc., are required to declare all bookings they are involved in, so this will only strengthen the tax office’s position and means to catch those who continue to dismiss their fiscal obligations, so before applying for your own licence, either carefully read up on these requirements or consult with a professional so you do not fall foul of the law. The whole point of holiday lets is to earn an income, not to line the tax man’s pockets unnecessarily!
If you would like further information, I provide an information package that will soon be available for purchase on Canary Admin Services’ Victory Store, but in the meantime, it can be requested via email, admin@canaryadminservices.com
