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Property Letting

Spain - Property Letting

Many people choose to buy a property as an investment with the plan to move permanently into it upon retirement. Letting out the property in the meantime is a good way to create income enough to support the maintenance of the home. It is also a good idea as it means the home is not left standing empty for long periods.

Anyone who is buying a property for it to be rented out to holiday makers must be registered with the local tourism board (Consejeria de Turismo de la Comunidad Autonoma) if it will be let out more than once a year. Each region has different requirements and arrangements can be made by contacting the tourism board local to the area where the property is located.

However, there are several things you can do as a landlord for both your own and your tenant’s peace of mind, and these are standard requirements throughout Spain. A written agreement should always be in place between tenant and landlord. If you wish to you can have a formal agreement drawn up by a notary or solicitor, but the agreement should be signed by both parties to show that any terms and conditions set out in the contract are understood and will be adhered to. Those terms and conditions should include who is responsible for utility bills on the property, when and how rent should be paid, for example on the 1st of the month to be collected in cash, or to be paid into a bank account. It should also state who would be responsible for damage to the property. As a general rule of thumb the landlord will be responsible for general maintenance of the home and any damage caused by reasonable wear and tear. All other damages either caused by the tenant or friends of the tenant visiting the property will be the responsibility of the tenant. A full inventory of items in the property (if it is being let fully furnished) should also be included.

A credit check of the potential tenant is also a good idea if this is possible to do so. It is not unreasonable to ask the tenant to provide references from other landlords they have rented form also. You will be renting your home to a complete stranger and you need to ensure that you are covered for any potential none payment of rent. Someone with checkable references or a good credit rating is less likely to default on the monthly payment.

The Urban Leases Act of 1994 now regulates all urban properties to be let out in Spain. The act covers holiday and seasonal lettings as well as domestic and commercial lettings. There are several important items covered within the act and one of those is the early resolution of the contract with low penalties, another is the automatic extension of the lease duration. Any landlord with an urban property should have a copy of this act to ensure their agreement does not violate any laws as set out in it. There are also region specific rules including that for the Canary Islands. The rules state that anyone leasing a home as tourist accommodation should use a registered agent. The professional agent must hold an official licence. Any homeowner not complying with the rules will face very heavy fines.

Any rental income is subject to tax. This amount can vary between 25% and 35% depending on if the landlord is classed as a permanent resident of Spain or not. The tax is paid by the tenant, which may appear odd to those from other countries as this is not a standard practice. They deduct the tax from the rental payment before making it to the landlord. As a landlord you must insist on proof that the tenant is paying the tax, and ensure the amount being paid is correct. Non-residents pay 25% tax regardless of whether the property is being rented or not. Even if the property is not occupied an assumed amount of 2% of 20% of the property’s official value will be subject to tax. Those who are resident in the UK will need to pay income tax on any rental income paid for their Spanish property; however the Spanish taxes can be offset against this.

Finding a tenant is usually really easy particularly during the summer months. You need to decide if you want to rent long term, meaning all year round, seasonally meaning just for the tourist season (summer months) or as a holiday let meaning you would charge on a weekly basis. Once you have decided on the terms you can get the word around about your property just by telling people that you have one available. You can use the services of a property management company but there will be fees to be paid if you choose this option. Sometimes these fees can be high.

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