Tag: legislation

Andalucía’s Government to Approve New Hotel Regulations to Guarantee Investment in the Sector

The regional government estimates that 74 projects involving a total investment of €1.6 billion are awaiting the new legislation, which will regulate the classification of hotels in Andalucía.

Help the hotel sector by introducing legislation that will attract investors. That is the ultimate goal of the Andalucían Government, which has decided to continue to process new legislation for the hotel industry in the region.

According to the region’s Minister of Tourism, Regeneration, Justice and Local Administration, Juan Marín, the regional hotel regulation decree will not be affected by the cessation in rule-making due to the State of Emergency decreed as a result of the coronavirus pandemic. “We have managed to reactivate it remotely by recovering legal reports from the Ministry and by speeding up the launch for the approval of the hotel decree to guarantee significant investment in the sector over the coming years,” said Marín.

Town Hall of Madrid Approves Legislation to Close 10,000+ VUTs

27 March 2019 – El País

On Wednesday, the Town Hall of Madrid approved a special plan to regulate the licences required to operate tourist apartments (“viviendas de uso turístico” or VUTs).

To obtain a licence, a VUT must now have a separate access from the other homes in the building, which means, in practice, that 95% of the establishments of this kind in Madrid will have to close. More than 10,000 VUTs will be affected, according to municipal calculations. The legislation applies to those properties defined as VUT by the Community of Madrid, which are effectively those that are leased for 90 days or more per year.

The new legislation, which was supported by Ahora Madrid and the PSOE, will enter into force within the next few days. Non-compliance will trigger a process to cease the activity in that property, like in the case of a bar operating without a licence, rather than the imposition of a fine.

It was in January 2018 that the Town Hall of Madrid established that VUTs – homes that are leased for three months or more – represent an economic activity and, therefore, require a licence. At the same time, a moratorium was declared on the granting of licences whilst the new legislation was drafted, which has now been approved.

The impact on the more than 40,000 reservations that have been made in accommodation of this kind for the Gay Pride celebrations in July 2019 is far from clear.

Original story: El País (by Gloria Rodríguez-Pina)

Translation/Summary: Carmel Drake

New Urban Planning Law Permits Legalisation of 350,000 Illegal Homes in Valencia

18 January 2019 – Valencia Plaza

Last Wednesday, the plenary of Les Corts approved a modification to the law governing ‘Territorial Planning, Urban Development and the Landscape’ in the Community of Valencia, better known as Lotup (‘la ley sobre Ordenación del Territorio, Urbanismo y Paisaje’), with votes in favour from the PSPV, Compromís and Podem. It is an update to legislation that, amongst many other issues, will allow the situation of around 350,000 homes constructed illegally right across the region to be legalised, according to figures published by the Generalitat Valenciana itself.

It is a controversial but necessary state of affairs, in the opinion of the Executive, which is supported by three political parties and which defends the need to give some order to a scenario inherited from previous legislatures through this initiative, as reported in Thursday’s edition of La Razón in Valencia.

When asked about the details, sources at the Housing Department explained to Valencia Plaza that these “homes, which were constructed on the margin of administrative approvals on non-developable land”, are characterised by the fact that “they lack certain basic urban services, in particular, sewerage systems”.

“After these buildings had been constructed, the passage of time since their construction gave rise to the expiry of the period for the Administration to act against them. And the legislation is lacking in terms of its ability to respond to this reality (…)”, they indicate.

According to their warnings in this regard, “the existence of these homes has an effect on the environment: the clear deterioration of the landscape that they generate and the dumping of wastewater into the subsoil without any controls or treatment, which is affecting the underground aquifers, the elimination of plant species (…) and the fragmentation of habitats”.

Individual processes for homes built prior to 2015

As a result, they highlight that “beyond safety, health and public aesthetics considerations”, the buildings and land “on any kind of land and whoever the owner”, must be conserved and maintained”, in accordance with the environment in which they are located and in accordance with the rules established by the urban planning legislation for them”.

For this reason, the reform of the law allows these residences to be legalised, although it limits itself “to buildings completed before the entry into force of Lotup (in 2015) (…)”.

According to the Housing Department, the legalisation of these homes “could be performed on an individual basis”, and they may be eligible for it “in all cases regardless of whether or not they have a file open”. Of course, provided they fulfil the requirements stipulated for it.

Solution to the ghost PAIs

Beyond that question, the update to Lotup seeks to provide a solution to the ghost PAIs. The reform reflects that in the case of urban planning projects that have been started but which have been suspended and which may have some viability, Town Halls have the option of dividing the sectors into smaller execution units so as to carry them out, step by step, and it extends the term to 10 years.

For those PAIs that are “anti-economic”, and which may be reversible, an inverse Reparcelation may be applied to return the plots to the previous legal situation and, therefore, remove the burdens on owners (…).

Original story: Valencia Plaza (by Dani Valero)

Translation: Carmel Drake

Sareb Sells its Socimi & its 3,300-Asset Portfolio to TPG

4 December 2018 – El Independiente

Sareb, the Company for the Management of Assets proceeding from the Restructuring of the Banking System, is closing the final details of the sale of its Socimi Tempore Properties to the private equity fund TPG.

The company, which is in the middle of a non-monetary capital increase amounting to €150 million and which will soon manage 3,300 real estate assets worth €325 million, received several offers at the end of November, including from the fund Apollo. In the end, the proposal from TPG has proved victorious, according to sources speaking to El Independiente.

The US group TPG, which has USD 94 billion in assets under management, is the shareholder of companies such as Spotify, Airbnb, Burger King, Lenovo, Ducati, Saxo Bank and Grohe, amongst others.

The so-called bad bank, in which the State holds a 45% stake, hopes to close this operation before the end of the year, in order to improve the appearance of its accounts, which will again feature losses.

The Tempore portfolio sold by Sareb is concentrated (80%) in the metropolitan areas of the major capitals, with the remainder located in regions with significant demand in the rental market, such as Valencia, Sevilla, Zaragoza, Málaga and Almería.

Azora is responsible for the management of the portfolio – it performs the administration and marketing activities for the assets directly. The company is led by the Director of Rentals at Sareb, Nicolás Díaz Saldaña. Before his arrival at Sareb, Saldaña was at the helm of the international department at Metrovacesa during the most complicated period of the real estate crisis.

Sareb is selling its Socimi at a time when these types of companies are in the Government’s spotlight, in light of the insistence of Podemos to toughen up the beneficial tax regime that has facilitated the expansion of the vehicles in recent years.

The Bank of Spain has also started to monitor the Socimis as a potential focus of instability for the financial sector and links the rise of these vehicles to the sharp increases in the prices of offices and commercial premises.

Original story: El Independiente (by Ana Antón)

Translation: Carmel Drake

Spain’s Large Socimis are not Perturbed by Podemos’s Proposed Tax Legislation

14 October 2018 – La Información

The Socimis, one of the great tax regimes currently booming in our country, suffered a serious blow on Thursday after an agreement was published between PSOE and Podemos to push ahead with the State’s General Budgets. As a result, the Socimis are going to have to pay tax (at a rate of 15%) on any profits that they do not distribute as dividends, in other words, the funds that remain in the companies to increase their capitalisation. But, which companies are going to be most affected? Only the smallest ones.

In recent months, the large real estate companies on the Ibex and the Continuous Stock Market have been distributing significant dividends, in some cases even exceeding their accounting profits by two or three times. Therefore, the new measure will not affect them, given that only undistributed profits will be taxed. By contrast, the small entities that are listed on the Alternative Investment Market – where they have their own segment – barely exceeded the obligatory dividend distribution of 80% of the profits for that type of company in most cases.

If we take Merlin – a giant in the tertiary sector –by way of example. Last year, it obtained a profit of €114.5 million (after discounting the appreciation of its assets) and it dedicated 205% of its profits to dividends. Even high figures were recorded by Colonial, which distributed 267% of its profits to its shareholders, and Lar España, which is listed on the main stock market, and which distributed 236% of its results after taxes to the owners of its shares.

By contrast, the small companies on the MAB complied with the law in a comprehensive way but without distributing such significant figures. Such was the case of AP67, a Socimi whose assets are primarily residential, commercial and office-based, which distributed just over €240,000 of its total profits of €300,000.

Why do the small companies only distribute the legal minimum? Most of the companies listed on this market are owned by a small number of shareholders, normally those who have been with the entity since the beginning and, therefore, they have no commitment to the owners of those shares. In fact, the movement in shares is so small in the majority of cases that the volume is almost nil.

By distributing 80% of their profits as dividends, they pay tax of up to 25% on those earnings, whilst the remaining 20% is posted to reserves and, previously, there was no requirement to pay any tax on that. With this proposal, the money that is not distributed to the shareholders (in other words, that 20%) would be subject to a tax rate of 15%.

For tax experts, these measures may scare off foreign investors, especially funds, which regard Spain as a good opportunity for investing after the framework for Socimis was brought into line with those governing REITs in countries such as France and Germany. Moreover, “other countries have an advantage over Spain going back many years and they offer more beneficial tax frameworks”, something that the new tax will only serve to dent in the Spanish system.

In light of the possible approval of the draft presented on Thursday by Unidos Podemos and PSOE, the Socimis “will distribute all of their profits as dividends to avoid the double taxation of the same money”, said a high-profile tax advisor consulted by La Información.

Original story: La Información (by Lucía Gómez)

Translation: Carmel Drake

Castilla & León Reclassifies 28,315 hectares of Buildable Land Back to Rural Use

6 October 2018 – El Confidencial

Torquemada in Palencia has 989 inhabitants and sufficient buildable land on which to construct 162,000 homes. Coca in Segovia has 1,863 inhabitants and sufficient buildable land on which to construct 114,000 homes. Valladolid capital has 299,715 inhabitants and sufficient land on which to construct 217,293 new homes. They are just three simple examples of the urban planning absurdity seen in recent decades that is still present in almost every municipality in Spain.

Since the 1980s, and especially since the beginning of this century, town halls, in particular those in rural areas, have reclassified thousands of hectares of rural land to buildable land, on mass, in the hope that, during the boom times there would be a bureaucracy saving for the property developers, which would encourage them to invest, in both homes and industry. But the bubble burst (…) and thousands of buildable hectares were left over, converted today in a kind of weird joke.

Now, the Junta de Castilla y León wants to recover all of that land to return it to what it always was, agricultural and forestry land without any pretensions of being home to long rows of terraced houses or enormous industrial estates. The regional government has established three phases for the change of its land uses on mass.

It undertook the first phase in 2016, converting 10,000 hectares, and on 18 October this year, it will undertake the second phase, affecting 28,315 hectares, equivalent to half of the island of Ibiza or more than half of La Rioja. In total, 87 municipalities including several provincial capitals with capacity for one million potential homes that will now never see the light. The final mass change is planned for 2022. Goodbye then to the reckless optimism of the past; hello to a different future, one characterised by depopulation, which threatens to erase thousands of towns from the map (…).

“This is not Marbella, it was never realistic to think that large companies or property developers were going to come here to build homes. We have an industrial estate with five companies and we have lost 100 inhabitants in the last five years. A town cannot work miracles”, explains Jorge Domingo González, mayor of Torquemada, the rural municipality most affected by this second wave, which will modify 208 areas in Castilla y León (only 45 of them are industrial plots of land) on the basis of the urban planning law approved in 2014. “All of that land was reclassified not to build homes but to facilitate investment (…)”, explains the mayor of Torquemada.

Even so, many mayors did take advantage of the change to approve large residential developments, always under the suspicion, and sometimes rightly so, that they were going to be built with the sole objective of speculation and receiving an illegal bonus. That is where hundreds of ghost urbanisations in the middle of nowhere stemmed from; many are half-built, some even lack roads, but all have now been converted into a burden for municipalities, which do not have enough money to demolish them (…).

The town halls will not see any great benefits from this measure, but the owners of the land will do, since they will save a decent amount by no longer having to pay IBI (property tax) on urban land but having to do so on rural land, which is much cheaper. “In this way, we avoid uncertainties that have no sense in being maintained”, said Marinero…..

There is no record of any owner submitting claims against this change of use, although they have had four years to do so. That in itself is a clear sign that times have changed and that no one in the towns expects to win the lottery. If anything, they now just dream of not disappearing, to avoid being dragged away by the rural exodus.

Original story: El Confidencial (by David Brunat)

Translation: Carmel Drake

The Countdown Begins to Energy Efficient Social Housing

14 September 2018 – El Mundo

The revised Technical Building Code (CTE) is going to be published soon in Spain, in line with similar developments in other European countries. In addition to standardising a new way of building, the revised code is going to incorporate the definition of nearly zero energy buildings (EECNs), which will introduce much more demanding parameters than are currently in place.

Private property developers know that from 31 December 2020 onwards, all of the new properties that they build will have to comply with those guidelines. They are demands that come from Europe and that also affect new buildings that are occupied and publicly owned, including social housing. Those buildings must comply with the energy requirements from 31 December of this year.

But, are the Public Administrations prepared? According to Inés Leal, Director of the Nearly Zero Energy Building Congress, “the large cities are better equipped to handle the implementation of nearly zero energy buildings than the smaller towns, which may find it harder to achieve the objectives”.

Although there are not many constructed EECN public housing projects, the buildings certified under the Passivhaus standard have become the closest example of nearly zero energy buildings.

Adelina Uriarte, President of the Passivhaus Building Platform (PEP), believes that the different administrations have the capacity to adapt to the guidelines of European legislation in this regard. What’s more, she adds that “those with the greatest predisposition have already done so ahead of the established deadline”.

One of them is the Town Hall of Madrid, which wanted to set the example and anticipate the 2019 deadline. Thus, at the Municipal Plenary on 25 May 2016, an agreement was unanimously adopted which assumes that all new buildings that are planned, and even those that are already standing that have to undergo an extension or a comprehensive renovation, must be positive from an energy perspective (…).

Financing and costs

In terms of financing, the experiences involving public housing already undertaken in Spain are demonstrating that EECNs are economically viable. In fact, according to Germán Velázquez, Partner at VArquitectos, a public building can be made nearly zero energy efficient with the same budget. And he justifies it: “The current legislation demands several issues that no longer represent an extra cost for developing ECCNs; the key is in the drafting of a good set of plans to ensure that the euro ratios per square metre are equivalent to those of a conventional building”. In his experience, the average cost per square metre amounts to around €650/750 in a conventional public building compared with €700/800 that it costs to construct a public EECN (…).

Original story: El Mundo (by Juanjo Bueno)

Translation: Carmel Drake

Palma de Mallorca to Ban All Tourist Apartments From July

24 April 2018 – El País

From July onwards, homeowners in Palma, on the Balearic Island of Mallorca, will not be allowed to rent out their apartments to tourists. The capital of the popular Mediterranean destination has adopted a pioneering measure, which will see the definitive prohibition of tourist flats right across the city. The local government team – a leftist alliance between the Socialist Party (PSOE), the local group Més per Mallorca and the anti-austerity Podemos – has taken this decision after commissioning several studies on the matter, which revealed that the supply of unlicensed tourist flats increased by 50% between 2015 and 2017 to reach 20,000 beds across the city. In Palma, which is Spain’s eighth-largest city by population, only 645 properties used for short-term vacation rentals have proper licenses.

The government team will approve initial holiday rental zoning plans at a meeting on Thursday, which will then be subjected to public scrutiny before being put to a final vote at a council session in July. At that point, tourists seeking this kind of accommodation will no longer be allowed to rent apartments in multi-family residential housing. Instead, they will only be able to stay in detached, single-family homes, which are being left outside the ban. Yet even these properties will be off limits if they are located on protected rural land, near the airport, or in non-residential areas such as industrial estates.

The move follows a reform of tourism legislation by the regional parliament of the Balearic Islands in August last year. That reform banned vacation rentals in apartments but left it up to local authorities to decide which neighbourhoods to apply it in. In the end, the city of Palma has decided to consider the entire municipality a “single zone” and so the ban will apply in all parts of town. The decision is meant “to protect residents,” said mayor Antoni Noguera.

Studies commissioned by city officials show that 48% of tourist apartments are offered for seven to eight months of the year, meaning they are not available for long-term residential rentals. “There is a parallel between the evolution of vacation rentals and the rise in rental prices,” said José Hila, the local chief of city planning. Rent in Palma has soared by 40% in recent years, making it the second most expensive Spanish city after Barcelona for residents who rent.

“Tourist accommodation affects the makeup of buildings and neighbourhoods, and it also affects social harmony,” said Hila. A report by the Citizen Ombudsman’s Office shows a rise in the number of complaints filed by residents due to problems with tourists who use these apartments, typically related to noise. There were 42 complaints in 2014 and 192 in 2017.

Pioneering initiative

Mayor Noguera is convinced that this measure, which is pioneering in Spain, will set the standard to be followed by other cities. “Palma is a bold and decisive city. We have agreed this on the basis of the general interest, and we believe that it will create a trend in other cities when they see that finding a balance is key.” said the mayor. “All European cities are being transformed from one day to the next by this type of offer,” said planning chief Hila.

Currently, in the Balearic capital, there is a supply of around 11,000 tourist rental beds, of which 645 have licences, all for family homes. Before the new regional legislation was approved in August, the number of beds amounted to 20,000 but the high fines established by the law – of up to €400,000 – led to the withdrawal of adverts from users of many of the large platforms (…).

Original story: El País (by Lucía Bohórquez)

Translation: Carmel Drake

Property Developers & Banks Forecast Bullish RE Cycle Until 2022

8 February 2018 – Cinco Días

The official results just keep on giving to the property developer sector and, therefore, to the banks as well. Sales are growing, the cranes are multiplying and credit is flowing; and best of all, according to the experts, all of these things are happening in an increasingly more homogeneous way, in other words, in more places around the country.

Since we are dealing with a market in which the laws of supply and demand apply, house prices are also moving upwards, but in a much more moderate way than in the past. Moreover, there are no signs whatsoever of a slow down. So much so that the property developers and banking experts agree that, unless we are hit by an economic catastrophe, the current cycle may continue for another five years, until 2022.

Currently, the most worrying thing is that this rally in prices may come to an end and lead to a situation involving the reemergence of the ghosts of the past. According to the Executive Director of Companies at CaixaBank, Luis Cabanas, speaking yesterday in Madrid, “We cannot allow another bubble to occur in the real estate sector”.

Cabanas made that reflection on Thursday in the context of the third edition of the Meeting of Real Estate Financing in Madrid (Efimad), organised by the property developers of Madrid’s trade association (Asprima) and CaixaBank. In addition, the President of that business organisation, Juan Antonio Gómez-Pintado, regretted that during the years of crisis, the legislator did not take advantage of the opportunity to reform the legislation in order to avoid the problems inherited from the former boom.

Above all, he highlighted the slowness of the process to develop land, the inefficient management of licences and the excessive “judicialisation” that exists in the sector, which increases legal insecurity in an alarming way. Carlos Casanovas, Corporate Director of Real Estate at CaixaBank, insisted that the fundamentals of the economy are solid and expressed his desire for players to continue being cautious “even though things are now going better”.

In terms of the challenges ahead, the property developers Aedas and Aelca agreed that the professionalization of the sector is now a reality, as is the industrialisation of the construction process. The risks include making the same mistakes again, such as buying very expensive land because of expectations of future house price rises.

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake

The ECB Demands Higher Provisions For Doubtful Debts From 2018

10 October 2017 – Cinco Días

The ECB has proposed a tightening of the provisions required by banks for any loans that they classify as doubtful from 1 January onwards. The ECB has subjected the draft legislation, currently posted on the body’s website, to public consultation. The standards that the supervisor is preparing complement those published in March of this year. In this way, banks will have to set aside more money from 2018 onwards to cover 100% of the loans that they reclassify, in other words, those that go from being standard to doubtful. The ECB will establish different terms depending on the type of loan: those that are secured by a real estate asset may be provisioned at 100% over seven years from the date of their reclassification. For loans without any type of guarantee, entities will have just two years to constitute the 100% provision.

The provisions will be applied on a linear basis from the date of recognition of the doubtful debt until the date the coverage ratio equals 100%, but national supervisors may require the recognition of provisions more quickly in certain cases. Moreover, loans that are partially covered by real estate assets must be provisions in two parts and with two doubtful rates.

In March, the ECB published a handbook for doubtful loans to be applied to portfolios of doubtful loans already in existence. It demanded that entities undertake procedures to reduce this load that, in its opinion, is restricting banks’ ability to grant new loans. The handbook is not binding, but banks will either have to “comply or explain”. In other words, they will have to comply with the handbook or explain why they are not complying with it. It also requires that they set specific objectives to reduce their existing portfolios.

Based on the response from entities and the evolution of doubtful balances, the supervisor will present new proposals,at the end of the first quarter of 2018, to attack the excess volume of toxic loans in the banking sector. According to the supervisor, the so-called “significant entities” (almost all of the banking system in Spain and 130 in total in Europe) held €865,000 million in doubtful assets during the first quarter (after that balance decreased by almost €100,000 million in one year). “Many entities have made significant progress and have submitted credible strategies that include reduction plans, but others still have a way to go to improve”, said the ECB.

In March, doubtful loans accounted for 47.05% of the total bank loan book in Greece, 17.75% in Ireland, 19.82% in Portugal and Italy. Based on this criteria, the figure for Spain amounted to 5.86%, but its level of foreclosed assets was very high.

Original story: Cinco Días (by Nuño Rodrigo Palacios)

Translation: Carmel Drake