License to let – holiday rentals in Mallorca…
Imagine you’re on holiday in Mallorca, staying in an apartment booked through the Internet or a holiday rentals agency. A knock at the door heralds the arrival of an official-looking person with some questions. Do you know the apartment owner personally? How did you book? Now imagine you’re the property owner, receiving an alarming letter stating (if you understand the language) that, without a licence, you’re letting your property illegally – and face a fine of anything from €3,000 to €30,000.
That’s how it feels to be on the receiving end of Conselleria de Turismo de Mallorca’s campaign to stamp out illegal letting of apartments. As a law-abiding citizen, you might think this sounds perfectly reasonable. But dig a little deeper and it’s easy to understand the frustration, anger and confusion suffered by those affected. Generating rental income from second homes abroad is a much-hyped subject, with enticing sums bandied around – so it’s not surprising that many purchasers here plan to let when they’re not using their property. But it’s vital to seek expert legal clarification first.
On Mallorca, the situation seems somewhat ambiguous. The letters sent by the Conselleria to “offenders” refer to the need for a licence for commercial holiday-lets. But how to obtain one? You can’t, according to one woman’s experience. Unaware she was breaking the law, she’d been letting her holiday home apartment in a residential complex in Bendinat, successfully managing her rentals on the Internet, and taking €2,000 a week in peak season. Income was declared and taxes paid. Then, she and five other owners in her complex received The Letter. Lawyers were consulted and steps taken to obtain the mentioned licence – without success. These owners understand that licensing ensures proper regulation of, for example, safety issues, and would pay the appropriate licence fee.
But they do question why the Conselleria de Turismo de Mallorca is determined to stamp out these holiday-lets. Popular opinion is that the island’s hoteliers – a powerful lobby group who pay huge sums for their own licences – see them as a threat. Carolyn Preston, whose company Mallorcastyle includes property management and rentals, argues that these hoteliers don’t understand the current market demand: “Affluent families don’t want to stay in a package hotel, and the local government is not thinking through the possible effects this will have on the economy. It’s a PR scandal.” Carolyn has seen a knock-on effect in her own business: “Some people are now looking at long-term apartment rentals as an alternative – and legal – means of income. Others now view their second home as too much of a luxury, and are selling up.”
The other Balearic islands also have problems. In the 1980s on Menorca, an owner simply applied for a licence and it was granted. In 1998 the island’s Conselleria de Turismo introduced strict standards and conditions for commercial rentals, making compliance almost impossible. Those without licences were sought out and fined.
In 2004, more realistic regulations were introduced and, although it was still an extremely bureaucratic process, owners of appropriately-sized detached villas and fincas – but not apartments – could apply for a licence. Anecdotally, the Conselleria was “flooded” with applications and seems under-resourced to handle them.
“It’s a disaster for Menorca, which has been losing tens of thousands of tourists over the past five years,” says Ken Toomey of Menorca Home Care. “Menorca’s tourism market is in holiday property rentals, which makes it even more perverse that the hotel sector is so powerful.” On Ibiza, Jesse Jackson of real estate company Stirling Ackroyd says that no new licences are being issued: you cannot buy to let on Ibiza. And, according to a report in El Diario de Ibiza last month, there’s an official campaign to carry out 2,000 inspections this year to detect “illegal offerings”.
Even the property journalist Mark Stucklin found it hard to get definitive answers, in his Sunday Times newspaper article last year about Spanish holiday rentals. For the record, as things officially stand on Mallorca, the only properties that can be licensed for commercial holiday-lets are detached villas and fincas, of the required specifications. The licence referred to in the Conselleria’s letter simply isn’t available to owners of apartments in complexes legally registered for residential use, so these places cannot be used for holiday-lets, other than to family and friends.
Owners who do let commercially risk being discovered by vigilant Conselleria inspectors – or denounced by disgruntled neighbours, keen to maintain the residential status of the complex. Community relations can suffer and bank balances too, with that potential big fat fine. The background to the subject of licences for holiday-lets is a murkily grey one, but what is clear is that many foreigners are potentially affected by an issue that’s contentious, potentially damaging to Mallorca’s image in the second home market, and unlikely to go away.