Renting / Letting in Spain

Long term letting in Spain

There is only one type of official letting contract in Spain for long term tenancies. It is called a "Vivienda" contract, which is renewable for up to five years. It is seen as "residence" contract and it is meant for long term lets where the tenant wants to make the property their home.

The contract will normally last for one year, but by law the tenant has automatic right to extend this for up to five years.

The rent can be revised each year by an inflation factor only

After five years have elapsed and assuming that both parties wish to renew, then the rental price can be changed provided both parties agree.

If the landlord does not wish to renew after this time period, the tenant must be officially notified well before the contract is due to end, if this is not done, the contract is regarded as renewed for a further two years.

If a landlord is not prepared to let out a property for the minimum of five years, you can use a "Contrato de Arrendamiento Vacacional". This is a contract that states that the property is let as a temporary residence only. Under Spanish law, only one permanent residence is allowed, by inserting another permanent address for the tenant into the contract, makes it clear that the property being rented is only temporary.

Once this has been established the tenant/s do not have the rights of a Vivienda tenant and so do not have the right to renew or extend up to the five year period.

A letting agent should ensure that proof of the name and address by means of a proof of residency like a current utility - telephone bill.

The contract has to be created by an Abogado (lawyer ) who full understands the Spanish rental laws and includes the relevant applicable law.

It should be stressed that it is very important to use a reputable letting agent and also ensure the tenancy contracts are between the agent and the tenant and not between the landlord and tenant. In this way the agent is fully responsible and not the landlord.

The landlord/owner should also sign a contract with the agency that proves the landlord is the legal owner of the property and gives the agent power to act on behalf of the landlord with a third part tenant.

Anyone wanting to let out their property should check out the agent thoroughly to ensure that the agent has a sound knowledge of both types of rental contracts and has an Abogado who specialises in rental law.

Source: Living Spain magazine summer 09 edition

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FACT File - Property Taxes in Spain

So you are about to purchase that ideal property - If you require finance or don't you still have to take into account the payment of property taxes. In Spain.

You have to pay an income tax "Impuesto de la renta" and a wealth tax -"Patrrimonio". This is arranged on a sliding scale climbing to 2.5% on properties over €10.7m. The base rate for the tax"Impuesto de la renta" - income tax is 1.1% of the cadastral value of the property. This determined by the size and location. Non residents pay 25% of the tax base.

If you are renting out the property the tax rate you have to pay is 25% of the annual rent. You are not allowed to make deductions for expenditure.

When you sell the property a non-resident is subject to 35% capital gains tax, however you can take off the costs for improvements during ownership.

There is also a local tax"Impuesto sobre bienes inmuebles" This based on the cadastral value of the property.

It is probably worthwhile using an accountant to assist you with these tax returns.

The above information is given without responsibility of accuracy. ©jml Property Services 09/05

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Insurance in Spain - Home and Household property Insurance in Spain

Information below is provided in good faith, but as conditions are always changing, professional advice should be sort before arranging insurance.The information should not be relied on for accuracy.

Building and contents insurance (continente y contenido) . Contents insurance (contenido)

Insurance Policy options you should check include the following:

Household insurance (seguro del hogar) in Spain generally includes the building, its contents and third party liability. Insurers do not have to be based in Spain and as such an Insurance company broker based in the UK with a policy written in English can be beneficial. Click Here for further information. Some of the Spanish based companies also offer the policies written in English. Insurance policies often appear confusing in any language, so unless you are fluent in Spanish it might well be beneficial using a provider based in the UK.

Contents Insurance (Contenido)

Home insurance policies in Spain are generally on a "new for old" basis (this means that in the event of a claim insurers will settle the claim based on the value of a similar but new item to the one lost or damaged). It is therefore important that the contents sum insured reflects the replacement value.

In the UK bathroom and kitchen fitments are usually covered under the buildings section of a policy. In Spain this is not always the case and the value often has to be included under the contents sum insured. This is worthwhile checking out when you take out your insurance cover.

Building's Insurance (Continente)

As in most countries, the building sum insured should represent the rebuilding value for the property and not the market value. Rebuilding costs have risen dramatically in Spain over recent years; it is important that the rebuilding sum insured is realistic or any claim may be reduced for underinsurance. As a rough guide the rebuilding sum insured should be about €1,500 per square metre of a constructed property. (This approximate amount being quoted in 2009, but you should not rely on this figure)

Another consideration when arranging your insurance, is that quite often with an insurance company based in Britain, your insurance value e.g. cost of rebuilding or contents would be in £ sterling. In the last few years when the £ has got weaker and the € euro stronger it has meant that you might not be adequately insured.

Inflation is accommodated by index linking which covers standard inflationary increases. This is reviewed automatically annually by insurers. Market forces can cause variations locally and the insured should request advice if unsure that the sum insured is adequate. Generally, standard policies do not have any excess although a reduction in the premium can be obtained if an excess is taken. If you are using a UK provider, you might find there are excesses and again check this out before purchasing.

If the owner has a mortgage on the property, the lender will usually insist on building insurance with a clause on the policy noting their interest.

Holiday Homes

The owner of a self catering holiday property that is rented out as holiday accommodation must make sure that the insurers are aware it is let for holidays. You should check that there is adequate public liability cover as a landlord. Liability limits of Spanish insurers tend to be fairly low, although some Spanish insurers do offer higher limits and this should be checked with the adviser or insurer.

If the property is a holiday home insurers must be advised of the periods of non-occupancy. If for example you need to keep the electricity on during periods of non occupancy for heating, alarms, garden irrigation etc, you should let the insurance provider know.

People who live in a domaine, should be aware that their community policy may not provide cover in the event of damage to the buildings. Advice on this point should be sought from an insurance adviser.

Making a property insurance Claim

Claims must be reported to the insurers or insurance adviser as soon as possible. Policies usually have a time limit for claims of seven days (check on the policy). Contact the adviser or insurance provider by telephone, fax, letter or email. Although it is written in the policy that claims must be reported within seven days, if there are circumstances, which prevent the client from doing this, then insurers will normally take this into account when dealing with the claim.

In the case of a robbery, malicious damage or arson a police report (denuncia) must be obtained and sent to the insurer with the claim.

N.B. This information should not be relied on for accuracy and is presented here without the responsibility of jml Property Service and the website it is being displayed at. ©jml property Services 12-05 / 12-09

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