LETTING CONTRACTS

Holiday contracts

A holiday tenant renting a property from a company or person in say England, France or Germany will have a contract written in the language of that country, signed before leaving on vacation. This is perfectly acceptable. The contract should make provision for terms and conditions associated with a holiday letting, covering statements on the following:

• Payments: it is usual to request a deposit to secure a booking – usually a percentage paid in advance, with the balance payable at some specified date before arrival.
• Cancellation: people should be encouraged to take out holiday cancellation insurance.
• Policy statements on who are not welcome, for example children, pets and single-sex groups.
• Bed linen, table linen, towels – provision and charging.
• Facilities for children, cots, highchairs and fireguards.

• Smoking policy.
• Guests’ responsibility for their own belongings and cars.
• Arrival and departure times.
• Breakages and damages policy.

Temporada contracts

Short-term contracts are called Arrienda de Temporada. A straightforward, standard contract is written in Spanish and normally in the native tongue of the tenant. It is for a period of up to one year although most are for much less than that. Properties let this way are furnished and the contract should include a detailed inventory of contents with a returnable deposit required to cover any damages caused by the temporary tenant. The contract is for a specific period of time at a stated price. The renewal of the contract is only at the agent’s or landlord’s discretion. A standard contract is available from some tabacs (state owned tobacco shop that additionally hold a supply of stamps and stationery forms).

Vivienda contracts

A contract for a long-term rental is called Arrienda de Vivienda. The law provides for long-term rentals to be of up to five years’ duration, thus giving the tenant a degree of security. If a landlord offers a contract of three years’ duration, which is accepted, and then the tenant wishes to stay on for another two years, it is automatically renewed on the same terms. If the tenant leaves after three years as arranged, then the contract is terminated. Annual rent increases, in line with inflation, take place during the contracted term. A new level of rent is set at the commencement of a new contract. At the end of a five-year Vivienda contract the landlord is obliged to notify the tenant officially by a notarised letter, well before the end of the period. If the landlord does not notify the tenant officially, the contract can be renewed for two years at the same rent.

Which contract?

It is important to determine at the outset if a holiday letting contract, short-term letting or long-term letting is being asked, or offered. Legal advisors in Spain struggle to write individual Vivienda contracts because of their complexity and the need to cover every eventuality. They often advise the issue of successive Temporada contracts for a letting of more than one year, thus bypassing some tenant rights. In this case the lawyer is taking advantage of the tenant, denying them the right to a longer contract, and leaving the way open for rent increases beyond the level of inflation at the end of the year. Some tenants simply accept this practice, but others get legal advice and go to court. The tenant declares they signed a one-year Temporada contract, that he or she lives and works there, it is home, and perhaps says they signed a one-year contract under duress and ask the court to order the contract to be extended to the full five years. In many cases the court has ruled in favour of the tenant.

The law lays down the basic structure of rental contracts but they can vary in detail. It is important to make sure everything is understood prior to offering or signing a Temporada or Vivienda contract. Community charges and local taxes are the responsibility of the owner and an allowance for this may be included in the rent but not added as an extra. No matter the length of time a property is let it is the landlord who is a member of any Comunidad (the owner of a community property with shared common elements).

OBEYING THE RULES

The regulation of tourist accommodation is a matter for each Comunidad. This means tourist accommodation laws vary throughout Spain, with island hot spots on the receiving end of a number of directives. It is perfectly proper for the Spanish authorities to regulate accommodation in this manner, ensuring that visitors are not overcharged and facilities are of a recognised standard.

Registration

As an example, the Valencia government asks that owners register their accommodation with the Tourist Board. It may be in the city, a metropolitan area or in the country. It may be a simple property let out for a few weeks a year, a bed and breakfast, a guesthouse or a hotel. Either way it has to be registered if utilised for one day or 52 weeks per year. Over one year, which of course in letting terms is a Vivienda contract, free market forces apply with no registration necessary.

Registering letting accommodation appears to offer the owner few advantages since a copy of the ten-page application goes to the tax authorities. As a consequence, people conveniently ignore it. For a property in a city, or an upmarket villa on the coast available for a few weeks a year, this may be an acceptable risk. One advantage of having a property listed at the Tourist Office is local marketing assistance, but in many cases it is an inappropriate tool as clients will come from the UK. Since these properties are unlikely to infringe any minimum standard, policing from the Tourist Board too is a waste of their time. So registration is ignored by both parties. A registered property does however carry greater legal protection in the event of a dispute.

Renting out a property as holiday accommodation throughout the year and providing similar services to a hotel such as bed and breakfast means the property must be registered. It is now a business! This means that inspectors will be obliged to come and carry out an assessment of standards, including food preparation. There is another important distinction. A small investor will have the revenue from letting taxed in the normal way as income, but a business with a significant turnover is an altogether different matter.

Letting

It is necessary to check that letting is permitted under any community rules. Additional regulations apply in the Balearics and Canary Islands where letting is not encouraged. You also need to notify the insurance company.

Selling the property

If the landlord sells a property, they are required by law to offer it first to any long-term tenant. It is similar to the sale of rustic land which should be offered first to adjacent land owners. If a landlord sells the property without informing the tenant in advance, the tenant has the right to have this sale annulled.

Tax

Non-residents are liable for Spanish income tax of 25 per cent on all rental income even if a tenant pays in a different currency before leaving for Spain. Legally income arises in Spain because the property is in Spain. Owners letting their property occasionally for a few weeks a year may say nothing about this to the tax authorities and their chances of getting caught are slim. Nevertheless tax is due on any income arising in Spain. Residents on the other hand can reduce rental income by 50 per cent for tax purposes when submitting their annual tax return.