Government & Podemos Agree to Allow Town Halls to Regulate Rental Prices

11 October 2018 – Eje Prime

The Government has said yes to public control of the rental market in Spain. The Executive led by Pedro Sánchez (below left) has agreed to the regulation of rental prices by Town Halls, according to explanations provided in a Budget agreement reached on Thursday by the PSOE and Unidos Podemos. The measure is established provided its application is “temporary and exceptional” and is carried out only in those urban areas where there has previously been an “abusive increase” in rents.

Rent has formed the focus of the new Government’s action plan in terms of housing. In parallel to the regulation of prices, the Executive has announced that it will advocate the extension of the minimum term of lease contracts from three years to five, and, in those cases where the owner is a legal entity, the lengthening of the commitment between landlords and tenants to seven years. Moreover, the tacit renewal of contracts will be increased from one year to three, provided the intention to not renew the agreement is communicated by either of the two parties at least six months before it is due to terminate.

In addition, the PSOE and Unidos Podemos have agreed that damage deposits (fianzas) to enter rental flats will be capped at a maximum of two months and that the signing of bank guarantees will no longer be demandable by landlords. In the event that an owner wants to recover his home before the term agreed with the tenant, then that scenario must be formally explained in the contract in force.

More funding for the development of rental housing

The agreement, which will now have to be approved by Congress, includes a measure that supports the development of public housing. In the event that it receives the green light from the chamber, the Government will increase the housing budget for next year to €630 million. In 2020, it will increase that pot further still to €700 million and in 2021, to €1 billion. According to the text, in ten years, Spain will invest between 1% and 1.5% of its Gross Domestic Product (GDP) in public housing.

One of the objectives of the public housing plan is “to avoid “homes” from being sold to vulture funds or sold for a profit”, so as to ensure that “particularly vulnerable people” have the possibility of accessing a rental home.

Original story: Eje Prime

Translation: Carmel Drake

Carmena to Outlaw 95% of Madrid’s Tourist Apartments

27 July 2018 – Expansión

The days are numbered for tourist apartments in the centre of Madrid. Yesterday, the Town Hall of Madrid gave the green light to legislation that will put a limit on holiday rentals: 90 days or three months, is the maximum term that a person may rent their home for those purposes. From day 91 onwards, owners will need to have a commercial lodging licence, just like hotels.

Yesterday, the Spanish capital’s Governing Body approved the Special Plan for the Regulation of the Use of Lodgings, which will apply to the city’s most central neighbourhoods. The plan is expected to enter into force at the beginning of 2019, after being approved by the plenary session in October.

The Town Hall led by the mayor Manuela Carmena is also going to prohibit the operation of all homes destined to tourist rental that do not have an independent entrance, like in the case of hotels. According to the Town Hall, with that requirement, “95% of homes that operate as tourist apartments will no longer be able to do so”.

“Specifically, the affected radius will span 52.7 km, distributed in three concentric rings, depending on the massification of the ads. According to the Town Hall, in the rest of the municipality, “the existing legislation will be maintained”. Madrid is, in fact, the European capital where the number of adverts on these platforms has grown by the most, up by 67% in 2017 with respect to 2016, according to a report from Colliers International.

With this legislation, Madrid’s Town Hall is opening a new chapter in the fight between public administrations and tourist apartments. Its intention is to outlaw almost all of the tourist apartments that are advertised on platforms such as Airbnb in the centre of the city.

The prohibition is tacit. The trick is that 95% of the homes advertised on these platforms in the capital do not have an independent entrance. That limitation will only exist in the case of homes that are leased for more than three months. The 90-day limit draws a line between what is considered a home for tourist use and a property in the collaborative economy.

Obtaining a licence is not going to be easy. It will be subject to zoning, following in the footsteps of cities such as Barcelona. Once the Special Plan comes into force, it will not be possible to change the use of a home located within the inner two rings from residential to tertiary, given that those properties account for the majority of the regulated and unregulated tourist supply. Together with this new plan, the Town Hall has approved a moratorium that prohibits the granting of tourist licences of any kind for one year.

Putting a cap on rents

The objective of the plan is to preserve residential use in the central areas of the city that, with the tourist boom and rise of online platforms, are seeing rising rental prices.

In this vein, the Town Hall wants to establish maximum rental prices. To that end, and as it already did in the case of the request for the tourist tax, the delegate for Sustainable Urban Development, José Manuel Calvo, yesterday asked Sanchez’s Governments for the necessary powers.

Original story: Expansión (by I. Benedito)

Translation: Carmel Drake

Bank Of Spain Plans Provision Changes From June

16 January 2016 – El Confidencial

The Bank of Spain wants credit institutions to incorporate new accounting standards, prepared by the European Commission with a view to 2018, into the presentation of their results from June onwards. The change represents the further tightening of the multi-million provisions that the sector has been recognising in recent year, given that, from now on, the banks will have to adjust their accounts to take into account expected losses on each one of their loans rather than incurred losses. The measure will result in significant volatility, which may affect banks’ results for the first half of this year.

As a result, the accounting legislation known as Circular 4, which was first published in 2004 and established public information standards for financial entities, will have to be adapted to the new criteria presented by the International Accounting Standards Board (IASB). That body that has worked on the definition of the standards captured within IFRS 9, which, in turn, will replace those currently in force across the whole of Europe under the definition of IAS 39. The adaptation of the entire accounting system comes at a particularly critical time for the Spanish banking sector, which has had to undergo a restructuring process in recent years under the local anaesthetic of a rescue, which was requested in June 2012. (…).

The first drafts of the legislation being managed by the institution led by Luis Linde include apparent relief for credit entities given that the Bank of Spain plans to try and eliminate the infamous and onerous category of sub-standard risks. This classification forces banks to recognise provisions in successive phases within a pre-determined calendar against loans that may be affected by a subjective incidence of default. (…).

Sub-standard loans, which are unique and exclusive to banking regulations in Spain, will move onto a better life, but in exchange, a new index is going to be created, known by the title “special monitoring”. This will have, where appropriate, a greater impact on the financial statements of credit institutions. In its future circular, the Bank of Spain is going to require that banks put strict calculation models in place to ensure the expected loss of all of their loans from the moment they are granted and over the whole life of the investment. When a loan becomes doubtful, the entities will have to recognise the entire provision in one go, with the resulting momentary hit to the income statement.

Another novelty arising from the accounting changes will be the disappearance of the generic provision, which has been one of the main hallmarks of financial regulation in Spain. The generic provision will be substituted by a collective provision, which…must forecast expected losses on the entire loan portfolio up to one year ahead. The reform will be cushioned by a transitory process, which is currently being subjected to consultation with the financial institutions themselves, which must have their own business models in order to classify the quality of their investments. (…)

Original story: El Confidencial (by José Antonio Navas)

Translation: Carmel Drake

Málaga Accounts For 53% Of Andalucía’s Holiday Homes

11 December 2015 – La Opinión de Málaga

The province of Málaga may account for more than half of the supply of holiday homes for rent in the autonomous region of Andalucía – specifically, 53% – at least, that is according to the calculations performed by the international firm Homeaway. The company is one of the market leaders in a segment that is causing a lot of controversy at the moment, with hoteliers, through groups such as Exceltur, accusing its participants of unfair competition given that they operate in a legal vacuum and are not subject to tax charges. The spokesman for Homeaway in Spain, Joseba Cortázar, who was speaking at a conference about the collaborative economy held yesterday in the Andalucía Lab de Marbella, said that the region, which has 14,600 properties advertised on its website (7,800 in Málaga) accounts for 16% of its total holiday rental supply in Spain (around 88,000 properties). Homeaway, together with Airbnb and Niumba, is one of the most representative companies in this sector, accounting for almost a quarter of all activity in Spain.

Homeaway, which cites that the Costa del Sol is one of its main markets, says that, at the global level, rented holiday homes have generated an economic impact of €793 million in Andalucía over the last two years, of which €761 million was spent on leisure and food during visitors’ stays, “impacting directly on businesses in the region”. The data is presented in a report compiled for the company by the Marketing Department of the University of Salamanca. In its conclusions, it says that rented holiday homes “are not competition, but are actually complementary to hotels, given that 81% (600,629) of the 740,000 visitors (resident in Spain and aged between 18 and 65) who leased tourist accommodation in Andalucía during the last two years, also stayed in hotels and only 19% (140,088) exclusively leased holiday home accommodation.

Homeaway’s report also says that the people who rented both holiday homes and hotels for leisure and holidays are the ones who take the most trips per year (6.57 times), a higher number than those that have stayed in a holiday home in Andalucía at least once in the last two years, independently of whether they have complemented their stay with nights in a hotel (5.84 times). According to this data, families (47%), couples (28%) and groups of friends (23%) are the main users of holiday homes in the autonomous region, whilst couples (49%) and families (34%) are most prevalent in hotels, with groups of friends taking a smaller share of the market (10%). For Homeaway, the report demonstrates the “complementarity” of the two accommodation types.

Cortázar did acknowledge that holiday homes in Andalucía are still in a “lawless” situation given the lack of specific regulation beyond that afforded by traditional rental guidance. (…).

On the flipside, Exceltur published a study in Málaga a few weeks ago, which showed that holiday homes do not represent a complementary offer, but rather are an invasive, substitute product, which offer no real capacity to attract new or different tourist besides the ones who typically use regulated hotels and apartments. Exceltur indicated that the majority of the visitors opting for that formula do so primarily for price reasons (…). Its report also denies that holiday homes can be defined as part of the collaborative economy: only 7% of homes advertised on digital platforms – the real driver behind the sector – involve free exchange and are offered in return for no payment. The rest, according to Exceltur, represent “a huge business”.

Original story: La Opinión de Málaga (by José Vicente Rodríguez)

Translation: Carmel Drake

Fortress Dismisses Most Of The Lico Staff After The Failed Sale To Apollo

4 September 2015 – El Confidencial

Fortress dismisses most of the Lico staff after the failed sale to Apollo.

The American fund has announced the third record of employment regulation in the financial holding company which it bought from the savings banks to compete in granting credits.

Fortress admits defeat in Spain in its attempt to compete with banks in lending to small and medium enterprises. US fund, which requested a license from the Bank of Spain to operate as a credit institution, following the purchase of the financial holding company from the savings banks, announced this Thursday its plans to dismiss most of the staff in the face of inability to make Lico Leasing Division profitable.

Several sources have confirmed the announcement made by Fortress to about 130 employees  still working in this subsidiary, which was part of Lico Corporation, the financial group controlled by the Spanish Confederation of Savings Banks (CECA) until its demise due to bankruptcy and absorption of these entities left this company in the hands of banks.

Opportunistic fund bought the holding in 2013 for about 220 million euros, keeping all business and staff, in order to take advantage of economic recovery and the new demand for credit. But the investment has not gone as expected, that is why Fortress commissioned N + 1 to search for a buyer among others of the distressed funds who also had landed in Spain looking for bargains.

Opportunistic fund bought the holding in 2013 for about 220 million with the objective of taking advantage of economic recovery and of the new demand for credit.

In July, Fortress and Apollo reached a preliminary agreement for the transfer of the business. But at the time of the final signing, the entity that manages the NPLs of Banco Santander, Bankia’s Finanmadrid and part of the office network Abanca (renamed to Evo Bank), backed down. Apollo’s refusal has led to the start of the extinguishment of employment procedure, which will now begin negotiating with the workers.

Other sources indicate that this decision means the prelude to the liquidation of this subsidiary, an extreme step denied by those close to the fund. At the same time they assure that Fortress will continue in Spain with its business recovery of Geslico, which already applied for another record of employment regulation earlier this year, real estate and alternative investments.

The recent history of Lico Leasing demonstrates how these opportunistic funds work. Fortress bought it in 2013 for about 220 million euros after its shareholders – BBVA, La Caixa, Bankia, Unicaja, Sabadell, BMN and Kutxabank, among others – put it on sale after inheriting it from CECA (Confederation of Spanish Savings Banks). Soon, the fund presented a record of employment regulation (ERE) for 174 of the 450 employees of Lico Corporation.

Subsequently, it sold the credit portfolio to Goldman Sachs, which it had bought for a knockdown price, and handed over the local landmark office in Barcelona, located in the Windsor building on Avenida Diagonal, to Miguel Durán, the former president of the ONCE .

 

Original story: El Confidencial

Translation: Lee La