Spain’s Regional Gov’ts Clamp Down on Tourist Apartments

28 January 2018 – El Economista

Spain is breaking records in terms of visitor numbers and, in the age of the globalisation of communications, many people are wanting to make money from renting out their homes. This trend has forced autonomous governments and town halls to introduce legislation so that the so-called collaborative economy does not end up turning into unfair competition.

The tourist housing sector has been calling for the homogenous regulation of its activity for some time now, but for the time being, it has had to make do with the regulations approved by certain autonomous governments and town halls, above all those in the most central neighbourhoods, which are seeing their resident populations emptying out in the face of rising rental prices.

The latest to join the regulation train is the Town Hall of Madrid, which has approved a one-year moratorium for the granting of operating licences for all kinds of accommodation in residential buildings exceeding 90 days.

The moratorium will result in the suspension of licences for the opening of new hotels in the centre, a paralysis that in the case of tourist homes also extends to the districts of Chamberí, Salamanca and Arganzuela.

The Community of Madrid is also preparing a decree to regulate homes for tourist use, which will require owners to have a certificate of suitability to guarantee that their properties fulfil the conditions necessary and which will define digital platforms such as Airbnb as “tourist companies”, liable to fines of up to €300,000.

One of the pioneers in regulating this activity was the Town Hall of Barcelona, which prohibits the opening of new accommodation of this kind in the centre of the city, but does allow the closure of existing ones in the outskirts to be compensated, provided the new units are located in exclusive buildings and have not been used for residential purposes.

Moreover, it has strengthened the detection and sanctioning of illegal tourist apartments and, in the application of Catalan law, has fined operators that publicise them.

The Balearic Islands’ Government is also fining people who let their apartments to tourists up to €40,000, and in the case of real estate agents, tourism brokers and the digital platforms that publish them like Airbnb and HomeAway, it is levying fines of up to €400,000.

In fact, last month, sanction files were opened against Airbnb and Tripadvisor for their illegal supply of rental apartments in the Balearic Islands.

Meanwhile, since 2016 in Andalucía, the Junta has obliged homes used for tourist purposes to be recorded in a register, in order to avoid fraud, intrusion and unfair competition against hotel establishments (…).

After a great deal of controversy with tourist associations, the Canarian Government regulated the use of holiday rentals in 2015, and although the High Court annulled the article that prohibited holiday rentals in tourist areas, the law is still valid because the Executive filed an appeal with the Supreme Court, which has not ruled yet (…).

Any apartment offered through a digital platform in the Community of Valencia must be registered with the Valencian Tourism Agency and is subject to governing regulations in terms of safety and quality.

Murcia, meanwhile, has implemented a specific plan to reduce the current mismatch between the regulated and unregulated supply, putting a stop to intrusion and reinforcing the fight against employment on the black market, which is typically precarious and exploitative.

By next spring, the Community of Castilla-La Mancha will have drafted a law that will put an end to the legislative vacuum in this regard and which, according to the regional Government’s calculations, will allow it to shed light on between 1,500 and 2,00 tourist homes that are advertised on several online portals, but which offer no guarantees for clients and generate no tax revenues for the administration.

In Euskadi, last month, the Basque Government approved a draft decree that seeks to regulate the most tourist aspects of homes, providing guarantees to advertisers, neighbours and tourists, given that the decision to grant licences lies with the town halls, such as those of Bilbao and San Sebastián, which account for two thirds of the almost 2,500 tourist apartments in the País Vasco (…).

In March 2017, the La Rioja Government approved a general tourism regulation, which distinguishes tourist apartments – those that contain three or more accommodation units in the same building – from homes for tourist use, including those that are advertised online.

Last year, a decree entered into force in Asturias to regulate tourist apartments and, according to the most recent available figures, 640 registrations have been recorded and 159 sanction files have been opened (…).

Finally, the Junta de Extremadura is working to reform Law 2/2011, dated 31 January, governing the Development and Modernisation of Tourism in Extremadura, which will materialise this year and which will offer new instruments to help in the fight against fraud involving tourist apartments.

Original story: El Economista

Translation: Carmel Drake

Spain’s Constitutional Court Abolishes CGT When Values Do Not Rise

23 May 2017 – Expansión

The Constitutional Court (TC) has abolished the municipal tax on capital gains when there is no increase in value, in the first case that applies to the country as a whole, after several sentences containing the same rulings were issued in autonomous regions.

The High Court unanimously considers that the tax, which raised €2,439 million in 2015, is unconstitutional in these cases, which have been very common since the outbreak of the economic crisis. In theory, the tax is levied on the appreciation in property values when they are sold but, in practice, it is always paid, even when the properties decrease in value. The TC has not abolished the tax per se, but rather has cancelled its automatic application in the event that there is no appreciation in prices.

The Court considers that the tax on the increase in the value of urban land violates the constitutional principle of economic capacity to the extent that it is not necessarily linked to a real increase in the value of the asset, “but rather to the mere ownership of the land for a period of time”. In other words, the mere fact of having been the owner of urban land for a certain period of time necessarily implies the payment of the tax, even when there has been no increase in the value of the asset and, furthermore, even when the asset value has decreased. According to the Court, this circumstance prevents citizens from fulfilling their obligation to contribute “in accordance with their economic capacity (Art. 31.1 CE)”.

For this reason, the Court has declared the unconstitutionality and nullity of Articles 107.1, 107.2 a) and 110.4 of the aforementioned law, but “only to the extent that inexpressive situations of economic capacity have not been excluded from the tax due to the absence of increases in value”. From the date of publication of the sentence, the legislator is responsible, in his freedom to set legislation, for carrying out the “relevant changes or adaptations to the legal framework of the tax that allow for the arbitration of how to not subject situations involving the absence of an increase in value of urban land to the tax”.

Original story: Expansión (by M. S.)

Translation: Carmel Drake

Is Murcia’s ‘Ghost Airport’ Finally Set For Take-off?

24 April 2017 – El País

The government of Murcia has made definitive steps toward reviving the region’s international airport in Corvera and is once again putting the management contract for this ‘ghost’ travel hub out to tender, despite the failure of other similar ventures in Spain to pay off and in spite of the fact that it is still embroiled in a long-running legal battle with the first company to win the concession back in 2007.

The new phase of this cripplingly expensive aviation saga began on March 25 with the bidders’ conditions released in the Official Journal of the European Union. Interested companies have until May 2 to register. After that date, those who can provide proof of financial buoyancy and experience will have two months to provide detailed technical and economic plans.

Corvera airport received an initial investment of €270 million and building work on it is all but finished. But the facility was never opened to the public and, in December 2015, the regional government was forced to cancel the contract with Madrid-based Sacyr on the grounds that the company granted the concession had exceeded its allotted time period.

The subsequent legal battle between Sacyr and Murcia’s authorities has become increasingly complex and is now headed for the High Court.

Corvera is the first regional airport to be put out to tender since the frenzy to open small airports across Spain began sapping resources and leading – in the case of Castellón and Ciudad Real, to years of disuse – or, in the case in Huesca, Lérida, Salamanca, León, La Rioja, Burgos and Albacete, to crippling losses absorbed by the airport networks. When it opens, it will replace the region’s San Javier airport.

According to estimates from Murcia’s Department of Development and Infrastructure, Corvera will be able to welcome 800,000 foreign tourists in the first four years, pushing total passenger traffic up to 3.5 million a year, a figure which could, in time, rise to 5 million. It will also create 20,000 jobs and raise regional GDP by 3.5 percentage points.

These passenger figures would mean revenue of €495.8 million (€600 million including sales tax) in the first 25 years. A complementary activities zone totalling 600,000 square meters is also on the cards, with profits from it remaining in private hands.

The successful bidder will be able to establish fees and negotiate with airline operators – a freedom which should improve competitiveness in the Alicante, Murcia and Almería regions and allow for more efficient management, according to the authorities.

Meanwhile, the regional government has introduced two conditions to recoup some of the taxpayer money that has been sunk into the project: the successful bidder will pump €0.73 per passenger into state coffers for the first 10 years, €2.09 per passenger in the five years following that, €2.27 in the subsequent five years and €2.56 for the last five years. A total of 10% of income earned by cargo airline companies on cargo weighing more than 50,000 tonnes will also be paid to the region.

There will also be incentives to increase passenger traffic; if there are more than 2.5 million passengers a year, the successful bidder will get a discount of 5%; another 5% discount will be applied if numbers exceed 400,000 in the winter months, or from November to February.

Original story: El País (by Ramón Muñoz)

Edited by: Carmel Drake

Supreme Court Places Thousands Of Homes In Legal Limbo

1 July 2016 – Expansión

The town plans for Gijón, Vigo and Marbella are the latest to join the long list of projects that the High Court has declared null and void, placing thousands of homes into legal uncertainty.

The real estate bubble is still causing problems years after it burst. In the last five years, the Supreme Court has ratified the annulment of several general town plans (PGOU) all over Spain, decisions that have continued in the last year with the High Court bringing down the plans in three other places, specifically, in Vigo, Marbella and Gijón.

These rulings make thousands of homes illegal, given that they were constructed in accordance with PGOU guidelines that are now considered null and void. What will happen to them now? Although the risk of demolition exists, it is minimal and the next step for the municipal companies is to draft and approve new PGOUs that include a process to normalise these buildings, which currently find themselves in a kind of legal limbo.

However, that is not the only negative consequence of this escalation in litigation, as reflected in the round table organised by two partners at Ontier, Jaime Díaz de Bustamante and Jorge Álvarez, together with Susana Rodríguez, Managing Director at the consultancy firm Aguirre Newman, and Antonio Pleguezuelo, Director of Town Planning at the same firm.

“The cascade of PGOU annulments is generating a considerable lack of legal certainty”, said Díaz de Bustamante, who insisted that this situation “deters international investors, who cannot afford to allocate their capital to an urban development plan that is subject to unstable regulation”.

But, what are the reasons behind all of these rulings from the Supreme Court, which are nullifying PGOUs all over the country? According to the experts consulted, one of the main reasons is the lack of communication and coordination between the different administrations involved in the preparation of the urban plans.

In this sense, Jorge Álvarez and Antonio Pleguezuelo requested greater coordination between autonomous communities and the central Government when it comes to defining the rules that are going to be applied, as that would result in greater certainty, in their view.

Delays in the process

Nevertheless, more concern and unease in the sector is leading to delays in the approval of urban plans, which, in some cases, is even resulting in changes in government.

For this reason, the experts at Ontier and Aguirre Newman insist on the importance of reducing the regulations relating to PGOUs. “The bureaucracy surrounding these plans need to be reduced so that they can be approved more quickly and adapted to the social reality”, explained Díaz de Bustamante.

Not surprisingly, most of the PGOUs that have been declared void by the Supreme Court in recent years had defects relating to the processing of the different reports required or to the sectoral processes, almost all of which are provided for by state law.

Original story: Expansión (by Laura Saiz)

Translation: Carmel Drake

High Court Repeals Andalucían Anti-Eviction Law

27 May 2015 – Expansión

The temporary expropriation by banks of homes in the process of eviction is unconstitutional. That was the ruling issued by the High Court (HC) following its in-depth analysis of the controversial decree law governing the Social Function of Housing, approved by the Government of Andalucía in June 2013, which was challenged by the Central Government.

Until the HC suspended this law, as a precautionary measure, 121 expropriation demands were filed, over a three-year period. The law was later reissued, although without any significant changes

According to the ruling, articles 1.3 and 53.1 of the regional law have been annulled. Previously, those articles imposed on the owner of houses “the duty to effectively use property for the residential purposes provided for by the law”, since the essential content of the rights of ownership pervade; an area “prohibited” for the decree law of the autonomous community. This law does not affect individuals.

For the same reason, the ruling issued by the HC declares the imposition of fines on financial entities that own uninhabited homes to be unconstitutional. To date, the Andalucían Government has imposed fines on various banks – including Popular for €5.8 million and BBVA for €1.6 million – for not putting empty subsidised (VPO) homes at the disposal of the municipal registries for claimants.

Encroachment of competencies

Alongside this ruling, the HC considers that the regional legislation deals with the state duties provided for by the Constitution, such as “coordinating the planning of economic activity”, whereby nullifying the second additional provision of the decree law “aimed at ensuring the right to adequate housing”.

The ruling also explains that “it constitutes a significant obstacle for the effectiveness of the measures taken by the central Government”, which issued legislation that provided for the possibility of suspending the introduction and promoting the creation of a social fund containing the properties owned by the entities to facilitate their lease to evicted persons.

In this sense, it is worth noting the agreement of disparate legal figures regarding the same reality – the suspension of the introduction of state legislation and the expropriation of the use under the regional legislation – “makes the joint application difficult”.

The HC also advises all of the regions that the State should determine “the extent of the public intervention” and indicate “certain guidelines in the mortgage market”, and should do so in such a way that “it is compatible with the proper functioning of that sector”.

As a result, this “prevents” the regions from “adopting provisions that affect this market in a more intense way”.

Original story: Expansión (by Lidia Velasco)

Translation: Carmel Drake

Supreme Court: Gains May Be Unfair If Banks Make Profits On Sale Of Foreclosed Properties

23 February 2015 – Expansión

The Supreme Court has established a doctrine and clarified the jurisprudence on the understanding that a bank may be unfairly rewarded in the event that it obtains a significant profit on the sale of a foreclosed home.

The High Court reached this conclusion after studying the case of a bank that launched foreclosure proceedings after the borrowers failed to meet their repayment obligations. The entity foreclosed the home for half of the value specified in the deed (escritura).

In this case, given that not all of the loan was paid off (following the foreclosure of the property), the bank filed a lawsuit against the borrowers and their two guarantors, for the difference between the debt and the value of the foreclosed property, plus interest and execution costs.

However, the borrowers had understood that, as a result of the action (the foreclosure), the debt would be considered to have been repaid, since the value of the property had been set by the bank itself on the basis that it would cover all of the debt relating to the mortgage. They argued, therefore, that the entity had obtained unfair gains.

Establishing doctrine

Although the (local) court rejected the claim and denied the existence of unfair gains, the Provincial Court of Córdoba upheld the appeal of the defendants and concluded that the foreclosure of the property at auction for a 50% discount was equivalent to a deed in lieu. Nevertheless, the Supreme Court did not share that ruling.

According to established case law, the Supreme Court Chamber, which has studied this case, stresses that “in principle, the exercise of the legal right to demand the unpaid part of the loan from the borrowers (following the foreclosure of the mortgaged property for 50% of its appraisal value) could not be regarded as a case of unfair gain”.

Nevertheless, the Supreme Court qualified its statement and noted that in the cases in which the foreclosure (of the property by the bank) is followed by a subsequent disposal (of the property) at a much higher price that the foreclosure price and for a very significant gain, then “it should match it with any outstanding loan and any claim made by the creditor to (share in) the profit”.

The Supreme Court Chamber insists that this clarification is supported by recent legislation introduced to strengthen the (legal) protection for mortgage borrowers.

Original story: Expansión

Translation: Carmel Drake