Real estate regulations in Spain

New aspects of buying property in Spain (2020)

There have been a number of changes in Spanish law relating to property and finance over the last year. While they won't necessarily affect your property transaction, it's worth knowing what they are, so that you don't get caught out.

What about mortgages in Spain?

The March 2019 law on mortgages was intended to protect borrowers. However, it has had some unintended consequences.

For instance, if your income is generated in a currency other than the euro, and your home currency weakens, you now have the right to ask for your mortgage to be changed to one in your own currency.

Sounds good? Particularly to Brits who have seen sterling weaken 30% over the past few years? Unfortunately, it has meant that many banks simply don't want to lend to anyone who aren't eurozone residents. That could make financing difficult for British, Russian, Ukrainian and Chinese buyers, within the top ten nationalities buying in Spain. But it's worth pointing out that the effect will probably be limited to areas with a large number of foreign buyers - overall, Spaniards make up 94% of the property market.

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spain rentalsRent controls

A new Royal Decree on housing sets in place a system of benchmark prices and rent controls. It's been strongly advocated by Podemos, though the Socialist party isn't such a believer.

The controls are not intended to be applied across the entire country, or permanently. They are, instead, intended as a temporary measure for 'hot markets' where spikes in rental prices have sidelined locals.

The controls can be applied by local councils or by regional governments using the benchmark system. That's not good news if you have an investment property, as it creates uncertainty about when, where, and how the controls might be applied.

On the other hand it seems likely that short term corporate lets won't fall into this category. If you have a property in Madrid or Barcelona, that might now be a better style of rental than either tourist rents or a long term lease.

A further spanner in the works comes in the shape of a moratorium on tenant evictions. If a tenant doesn't pay the rent, you might not be able to throw them out.

The idea is simple. As a reaction to the credit crunch, Spain ordered a moratorium on evicting those who couldn't pay their mortgages. That has simply been extended to tenants.

But this is a disaster, isn't it? Actually, no - because there are conditions that mean it won't apply to a large number of rents. Only 'vulnerable' tenants - unemployed, single parents, disabled - are involved, and only if they're living in a 'hot' market where they won't easily find other accommodation.

And the rules only apply to landlords who own ten or more properties. So if you only have one or two rental apartments, you don't need to worry.

andalusia regulationsRegularisation in Andalusia

The government of Andalucia has now created a law enabling owners of 'illegal' properties to regularise their homes. This problem arose when municipalities granted planning permissions that were later found to be illegal. Even though buyers had done all their due diligence, some faced the demolition of their houses, without compensation. Others have been unable to connect basic utilities. This law is an attempt to put things right.

The law gives local authorities the ability to change their town plans to accommodate irregularly built housing. It won't apply to homes built less than six years ago, to homes already under a demolition order, or to homes built on protected land such as nature reserves. Councils can also choose whether they want to take advantage of it or not. So it's not a no-questions-asked amnesty.

However, the national government doesn't like it one bit, and has now appealed in the Supreme Court. With the national and junta governments at loggerheads, it's difficult to guess what's going to happen. If you're buying resale property in Andalucia, be very careful not to rely on this law if you're shown an 'irregular' or 'illegal' property.

catalunya regulationsCatalunya

The Generalitat of Catalunya has introduced new laws on squatting and empty houses. Decree 17/2019 gives squatters who have occupied a property for more than six months the right to occupy the property for a further seven years - free of charge.

It's aimed at banks holding 'bad assets', but it hasn't been well drafted. It's likely that it will hit landlords who are engaged in finding a new tenant, as well as absentee owners.

It seems that the Generalitat is aiming to rebalance housing legislation in favour of tenants and social housing. The social housing quota for developments has been increased from 30% to 40% and new rental price controls were also introduced last year.

The rent controls only apply to properties under 150 square metres, limiting rent rises to between 10% and 20% of the benchmark price. (15% applies if a property benefits from a shared pool or private garden, 20% if it is new or newly renovated.)

Will this affect your property? In the short term, probably not; in the long term, it could mean the kind of rent rises that have been seen recently - at least 50% over the last five years - will be headed off. What is rather worrying though is that there doesn't seem to be much representation of builders or property owners in Barcelona - or if there is, it's not being listened to. That might make Catalunya one of the less property owner friendly regions in Spain.

Holiday rentals rules have also been changed in Barcelona, and across the rest of Spain. Many areas have found the growth of sites like AirBNB leaves locals unable to find a place to rent - and they're beginning to crack down on tourist rentals. These rules are made at region or municipality level, and sometimes at both, so there's a huge amount of detail that needs to be gone into - we have a separate article on this issue, and you can read it here.

To buy or not to buy?

Spain is definitely becoming a tricky place to buy property. You need to inform yourself properly before you take a decision, and we'd recommend you take expert advice.

That said, Spain is definitely not losing its place as one of the biggest tourist destinations in the world; the sun still shines on the costas, the sangria is still tasty, and the country's relaxed lifestyle is as much an attraction as it ever was. Just make sure you and your lawyer check out all the relevant legislation before you commit yourself.