THE KEYS TO HOLIDAY RENTAL IN THE BALEARIC ISLANDS. Javier Blas, Guillermo Dezcallar & Guillermo Ramón

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1 THE KEYS TO HOLIDAY RENTAL IN THE BALEARIC ISLANDS Javier Blas, Guillermo Dezcallar & Guillermo Ramón Club Pollença, November 14th,

2 Sold by Exclusive to Put your trust in our team. Buy, rent, enjoy with Pollentia!

3 The Pollentia team were very helpful before and during our stay, good communication. Pollentia Rentals is a great find! -- Amy Adams o Experts in property rentals across the North of Mallorca. o A multi-lingual, highly committed team. Based in Pollensa all year round. o We rent townhouses, villas, fincas and all licensed properties.

4 They were so hands on, exceeding every expectation. We felt so looked after. Their local knowledge was invaluable and definitely fast-tracked the whole process. -- A. & J. Williams o Tailor-made management - we flex around your requirements. o Fast (24/7) response to clients and great local contacts. o Pollentia Management team is in Pollensa all year.

5 - Statute of Autonomy of the Balearic Islands: - The 8/2012 Law on Tourism in the Balearic Islands: 1.- REGIONAL REGULATORY FRAMEWORK It regulates the commercialization of tourist stays in residential homes. Typology: single-family homes semi-detached single-family homes single-family homes between party walls on a same plot of land. 31/07/2017 The 6/31 July 2017 Law is approved, relative to the commercialization of tourist stays in residential homes that amends the 8/2012 Act on Tourism in the Balearic Islands. Entry into force: 1 st of August, /08/2017 The 3 / 2017 Law Decree dated 4 August enters into force amending two articles of the 8/2012 Law on Tourism in the Balearic Islands. On 04/09/2017 it is ratified by the Balearic Parliament. 2

6 2.- CONJUNCTION OF OTHER FRAMEWORKS (EUROPEAN AND STATEWIDE) A) European framework: art 50 TCE and Services Directive 2006/23/EC B) Constitutional Competency Law C) State Urban Rental Law (LAU) D) State Law on unfair competition E) State laws on the protection of economic agents: 17/2009 Law or Umbrella Law. 25/2009 Law or Omnibus Law. 20/2013 Guarantee of the Spanish Market Unity Law 3

7 3.- ANALYSIS OF THE LEGAL NATURE OF THE PRIVATE ACCOMMODATION CONTRACT Absence of contractual legal definition. Definition of the subjects of this tourist activity: Art 49, They are entities commercializing tourist stays in residential homes, owned by individual persons or legal entities, for short duration periods, in terms of immediate use and for lucrative purposes, commercialization that can alternate with the ordinary use of the housing Implications: Non-application of the principle of exploitation unity. Non-application of the principle of exclusive use Doctrinal meaning. 4

8 4.- ANALYSIS OF THE CURRENT REGULATORY REGIME BASED ON THE AUGUST LAW AND DECREE EXPLANATORY STATEMENT: Exclusion of temporary free housing ("gift economy") and exchanges ("sharing economy"). home The LTB regulates stays in ALL TYPES OF HOMES (including the multi-family homes) Only those that CUMULATIVELY meet these requirements can be rented for tourist purposes: 1. They are commercialized by tourist companies (individual persons or legal entities) or the owner. It entails a business organization as well as professional and habitual tourist activity. The owner is understood as entrepreneur, being in the position to provide complementary services (directly or indirectly), and organizing a business activity. Subject to VAT: income from economic activities, if tourist services are provided; Terrace/swimming pools, home/garden maintenance and cleaning are not tourist services. Prescription period for claims: 3 years ( CC). 5

9 4.- ANALYSIS OF THE CURRENT REGULATORY REGIME BASED ON THE AUGUST LAW AND DECREE 2. Homes that are marketed as touristic through tourism marketing channels. Definition of tourism channels: Art. 3.n: All systems by means of which, individuals and legal entities, directly or through third parties, sell, advertise or provide through link or contents, booking of accommodation for tourist stays in housing (either by days or weeks always lower than a month (art ), or by providing some of the services described in article 51. By way of example, tourist booking channels are travel agencies, reservation centers, companies mediating and organizing tourist services, including intermediation through internet channels or new technologies information systems, REAL ESTATE AGENCIES as well as inclusion of advertising in social media channels. 6

10 4.- ANALYSIS OF THE CURRENT REGULATORY REGIME BASED ON THE AUGUST LAW AND DECREE 3. They following are in the condition to provide tourist accommodation which alternates between the housing s private use and residential use: Allowed typoplogies: - Detached and isolated single-family home in a single plot, isolated, in the sense that there are no other adjacent houses. - Detached single-family home between party walls, provided that this is the only house in the plot. - Semi-detached single-family house. - Two or more homes in a single plot of which an evaluation will need to take place to confirm an analogy among them and that they are of a traditional typology. - Independent homes in multi-family buildings and town-houses under LPH. 7

11 4.- ANALYSIS OF THE CURRENT REGULATORY REGIME BASED ON THE AUGUST LAW AND DECREE The problem: -There is a presumption iuris tantum on the subject of the accommodation contract in the Art of the LTB. Impact on the seasonal contract regulated in the LAU. 11

12 4.- ANALYSIS OF ITS CURRENT REGULATORY REGIME ON THE BASIS OF THE AUGUST LAW AND DECREE ZONING/MORATORIUM CONDITIONS FOR THE COMMERCIALIZATION STARTING , REGARDLESS OF THEIR TYPOLOGY: Zoning. Owners Community Authorization for multi-family homes ISLANDS COUNCILS AND PALMA CITY HALL MAXIMUM TERM FOR ZONING = 12 MONTHS. Until 01/08/2018 MORATORIUM: new DRIATS of any type may not occur until the zoning has taken place. 12

13 4.- ANALYSIS OF THE CURRENT REGULATORY REGIME BASED ON THE AUGUST LAW AND DECREE ZONING/MORATORIUM THE ROLE OF THE COUNCILS: - 1 month to issue a report. Art 75.b). Early They must declare if it is a suitable area or not. - Total or partial. - By building type: multi-family homes, single family homes (isolated, between party walls, semi-detached) and rent of primary residence. 13

14 4.- ANALYSIS OF THE CURRENT REGULATORY REGIME BASED ON THE AUGUST LAW AND DECREE ZONING / MORATORIUM AREA DECLARED SUITABLE by building type: multi-family homes, single family homes (isolated, between party walls, semi-detached) and rent of primary residence. These statements or constraints are modifiable at any time by the same procedure. Also they may be imposed, both by law and by territorial, urban or environmental regulatory instruments, or by new specific townplanning conditions for the exercise of the activity. º Homes which already legally exercise their activity at the time of the entry into force of this law, will not be affected by the zoning. 14

15 4.- ANALYSIS OF THE CURRENT REGULATORY REGIME BASED ON THE AUGUST LAW AND DECREE PIAT/AVAILABLE PLACES (PERSON/NIGHT) In the future the PIAT and PTI will establish by islands and areas the maximum number of sleeping/places likely to be commercialized as tourist residential accommodation. In Mallorca, it is estimated that there are more than 40,000 sleeping/places available. In the draft PIAT by the Island Council, they are 6 areas in Mallorca: Common rustic land Protected rural land Saturated coastal area (Platja de Palma, Calvià, Cala Millor...) Non-saturated coastal area Non-saturated urban interior areas. Saturated urban interior areas. 15

16 4.- ANALYSIS OF ITS CURRENT REGULATORY REGIME ON THE BASIS OF THE AUGUST LAW AND DECREE PIAT/AVAILABLE PLACES (PERSON/NIGHT) It is presumed that the zone qualified as urban core of non-saturated interior zones are the designated areas suitable for vacation rentals, both for single-family and multi-family homes. ATTENTION: NON OF THE 6 AREAS WILL BE LEFT WITHOUT PLACES (PERSON/NIGHT) BUT THERE WILL BE AREAS WITH A LIMITED NUMBER OF THEM. 16

17 4.- ANALYSIS OF ITS CURRENT REGULATORY REGIME ON THE BASIS OF THE AUGUST LAW AND DECREE CONDITIONS TO BUY AVAILABLE PLACES (PERSON/NIGHT) The price will be developed through the regulation. The price of the places (person/nights) corresponding to the residential dwellings subject to tourist stays marketing may be different from the corresponding tourist accommodation. Differentiation between the places/stays permanent transmission and the places/stays interim transmission. A differential and lower price will be established for the places/stays in the main residence rentals modality. For the places/stays corresponding to residential housing a higher and progressive price may be established, corresponding to the second housing marketed by the same company. 17

18 4.- ANALYSIS OF ITS CURRENT REGULATORY REGIME ON THE BASIS OF THE AUGUST LAW AND DECREE LIMITATIONS AND PROHIBITIONS Protected Rural Land. State-subsidized or price-controlled houses. Houses with serious or very serious infringement in urban matters. Number of properties limitation: a maximum of three properties by the same owner can be marketed. This policy does not apply to room rentals. 18

19 4.- ANALYSIS OF ITS CURRENT REGULATORY REGIME ON THE BASIS OF THE AUGUST LAW AND DECREE REQUIREMENTS AND CONDITIONS Current Certificate of habitability Comply with the rules of sustainability and accessibility applicated to dwellings. Energy performance certification. Individual water meter and also individual meters for other supplies such as electricity or gas. R.C. Insurance Policy (civil liability) 19

20 REQUIREMENTS AND CONDITIONS Extra beds for children under 12 years are not allowed. Any advertising must incorporate the tourist accommodation registration number. Without a presented DRIAT terms such as holiday, tourist / or similar cannot be used to commercialize accommodation. Offer/ Guarantee of tourist services Age of buildings 4.- ANALYSIS OF ITS CURRENT REGULATORY REGIME ON THE BASIS OF THE AUGUST LAW AND DECRE 24 h. telephonic assistance. Available to the owners community in the case of multi-family. Inform in writing of the community s rules and tourist registration housing number. 20

21 4.- ANALYSIS OF ITS CURRENT REGULATORY REGIME ON THE BASIS OF THE AUGUST LAW AND DECREE REQUIREMENTS AND CONDITIONS Provide ownership title, I.D. documents and proof of tax payment. Maximum length of a tourist stay: 1 month. Communicate data related to the stays to the General Directorate of Police. The regulations which develop the norm, or the PIAT, may establish additional requirements, conditions, limits and contents. 21

22 4.- ANALYSIS OF ITS CURRENT REGULATORY REGIME ON THE BASIS OF THE AUGUST LAW AND DECREE SPECIAL OFFICIAL REQUIREMENTS FOR MULTI-FAMILY HOMES Owners Communities: It is essential that the community statutes do not prohibit the holiday rental (in the sense that they do not determine that there is no other use possible other than that of the housing) And that, in addition, a favorable settlement by the majority of owners who constitute the majority of property shares authorize the tourism marketing of the housing. Although, on second call, it would suffice that most of attendees representing more than half of the present quotas (17.7 LPH) approve it. This agreement must be registered in the land registry. The Community agreement can be changed at any time and this automatically entails the obligation to cease the housing tourist marketing. 22

23 4.-ANALYSIS OF ITS CURRENT REGULATORY REGIME ON THE BASIS OF THE AUGUST LAW AND DECREE SPECIAL OFFICIAL REQUIREMENTS FOR MULTI-FAMILY HOMES Temporality: 5 years, extendable for periods of 5 years. To extend another 5 years, the conditions are: (1) continue fulfilling all legal or regulatory requirements including being in a suitable area; (2) communication by the owner or with the express permission of the owner; (3) that there is a certificate of the tourist places (person/night stays) manager(...) certifying that he/she can has temporarily control of the stays for five more years. 23

24 4.- ANALYSIS OF ITS CURRENT REGULATORY REGIME ON THE BASIS OF THE AUGUST LAW AND DECREE NEW TYPOLOGY: RENT OF PRIMARY RESIDENCE Natural persons. Owners of the property. Both in single-family and multi-family homes. "Main residence" (pending of defined regulation) 60 days / year default. In an area that it is considered suitable. 5 years, extendable for periods of 5 years with the same rules as the multifamily homes, plus the accreditation that it continues being a main residence. Exceptionally (if announced), it allows the coexistence between the owner and the user. 24

25 SANCTIONS Sanctions qualified as serious offences will be punished with fines from to 40,000 Euro. However, the infringement referred to in the letter g) of the 105 Article 1 will be sanctioned by a fine between and , if the sanction refers to non presentation of the responsible statement related to the commercialization of tourist stays in residential homes. Accessory sanction 4.- ANALYSIS OF ITS CURRENT REGULATORY REGIME ON THE BASIS OF THE AUGUST LAW AND DECREE The fines laid down by this article shall be reduced to an 80% if it s been credited, during the record s processing, that the purpose of the house s rental is a social purpose to an official body, for a minimum of three years. 25

26 4.- ANALYSIS OF ITS CURRENT REGULATORY REGIME ON THE BASIS OF THE AUGUST LAW AND DECREE RESPONSIBILITY With respect to the commercialization of tourist stays in homes, the owners and the commercial entities which commercialize the tourist stays are responsible for the violations, unless proven otherwise. Presumption IURIS TANTUM of joint and several liability: owners of the property + person having commercialized it. The owner of the advertising media entity and who inserts the advertisement are responsible for illegal advertising offer. Channels will be established to facilitate the complaints of citizens/neighbors. 26

27 5.- MARKETING SCENARIOS SCENARIO 1: HOMES WITH SUBMITTED DRIAT AND/OR TOURIST REGISTRATION NUMBER BEFORE THE They retain all rights, they can continue to operate with absolute normality. The new rules do not apply retroactively in regard the DRIAT requirements but they do in relation to the sanctioning regime and the communication to the police. SCENARIO 2: ISOLATED OR DETACHED HOMES NOT REGISTERED IN TOURISM BEFORE (THOUGH THEY COULD HAVE BEEN REGISTERED) They will have to be located in zones approved by the Council (zoning) and there must have the City Council Certificate. They must meet the conditions and requirements. More than 5 years old. 27

28 5.- MARKETING SCENARIOS SCENARIO 3: RESIDENTIAL HOMES AND APARTMENTS IN MULTIFAMILY BUILDINGS THAT WISH TO COMMERCIALIZE TOURIST STAYS FROM THE They depend on the zoning and quotas. They must meet the conditions, the technical and quality requirements. > 5 years old. 28

29 6.- SEASONAL RENTAL CONTRACT IN THE LAU (RENTAL URBAN LAW) Article 3.2 LAU Exclusion Art 5.e) LAU. The temporary transfer of the use of the totality of a furnished and equipped home in terms of immediate use, marketed or promoted through tourist channels and made for lucrative purposes, when subjected to a specific regime derived from its sectoral regulations. The Article 4 LAU. Applicable Regime: Urban Rental Law 2 months of rent (art.36 LAU) deposit. Peremptory norm versus the right s waiver: CC (art 6). Absurd consequence for seasonal contracts for less than 1 months ( 100 * 60 = 6,000.- ). The Balearic Islands Draft Law for housing specially provides that: " The deposit in season-long rentals exceeding one month is not applicable". If the property is rustic: the will of the parties and the civil code will apply. Security deposit is not required. 26

30 6.- SEASONAL RENTAL CONTRACT IN THE LAU (RENTAL URBAN LAW) Consequences of seasonal contract qualification: Prescription period: 5 years Irresponsibility by accident The tenant has the status of private individual Tourist marketing channels banned Complementary services are not provided Exempt from VAT Legal claim Inability to use advertising with the terms "tourist, vacation or similar" (Art 28 LTB) Non-touristic purpose: presumption of the LTB to contrary sensu (art 50.14) Duration > 1 month: presumption of the LTB to contrary sensu (art 50.14) Although there may be seasonal contracts <1 month. CONCLUSION: THE SEASONAL EX LAU CONTRACTS CONTINUE BUT THEY APPLY TO RENTAL RELATIONS WITH NON-TOURISTIC PURPOSES AND GENERATED THROUGH NON-TOURIST CHANNELS. 30

31 Thank you ROSER VELL, 5, POLLENÇA PALMA PORT D ANDRATX SANTANYÍ SÓLLER 31

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