As we have already mentioned, in previous articles, the decision to invest in buy to let property in Spain is not to be taken lightly. Careful market research, independent expert advice and legal support are essential for a successful investment. We believe it is fair to say that the horror stories the newspapers and TV shows like to portray are of people who have invested in buy to let property in Spain who have not followed those steps! Nowadays the Spanish property market is better regulated than in the past and contracting an expert and independent lawyer eliminates any risk when purchasing. (Please remember that we only offer our bespoke property finder service to purchasers who enlist the support of a suitably qualified lawyer).
Let’s have a brief look at a few legalities you need to be aware of before investing in buy to let property in Spain…
Licence of First Occupation (LFO):
If you are wanting to rent out your property as a short term or holiday let, it is essential it has a licence of first occupation. Any reputable lawyer will advise you not to purchase a property that does not or cannot obtain an LFO, no matter how much of a bargain it may appear!
AFO Certificate (Asimilado Fuera de Ordenación):
This licence is particular to inland/campo properties. It is a document that officially declares a property to be assimilated in the planning regimen of ‘fuera de ordenación’ – a category assigned to properties that do not conform to current planning regulations but are accepted by the authorities. Introduced by the Andalucian government, the certificate helped regulate many inland properties that had previously been considered “illegal”. It also provides advantages in terms of greater legal certainty for prospective buyers. If a property you wish to purchase does not currently have an AFO, negotiations will be required to ensure the certificate is acquired before the purchase is completed.
Building Restrictions:
It is important to understand what can and cannot be done to a property before you sign on the dotted line. Due to a large amount of illegal and unauthorised building in inland and campo areas, it is practically impossible to obtain permission to extend or make structural changes to inland properties. Your lawyer will be your saviour here. Do not be sold a possibility that does not exist! This includes swimming pools. If a country property does not have a pool, you cannot install one. A temporary one yes, but if it has to be removed …
Energy Certificates:
It is illegal to rent or sell a property in Spain without having an energy certificate, (Real Decreto 235/2013). Buyers and tenants must have access to an energy efficiency certificate providing objective information on the energy characteristics of the property. This allows potential buyers or lessors to assess and compare the energy characteristics of different buildings in their decision prior to procurement or signing of a lease should they wish to do so.
Rental Property Registration:
Short-term rentals in Andalucia are governed by regulations and you must register your property with the Junta de Andalucia (regional government), who will issue you a licence to rent your property. Without a licence, you will not be able to advertise your property on portals, such as Airbnb and HomeAway, and if you are found letting to tourists without one you will receive a hefty fine. The application procedure is not a complicated one however fines for not doing so are hefty! Long-term rentals are covered by the LAU (Ley Arrendamientos Urbano – Urban Rental Law). Although there is no requirement to obtain a specific licence, you will need a legal contract, in Spanish, agreed and signed by both tenant and landlord. The rental contract must include statutory points that protect both parties. Your lawyer will assist with this.
Tax Obligations:
Understanding your tax obligations is essential to accurately calculate the potential return on your investment. Ask your lawyer, accountant or gestor to explain taxes such as IBI, Basura, non-resident income tax and irpf. Late payment or non-payment of taxes in Spain carry hefty fines!
Spanish Wills & Inheritance:
Before investing, it is important to understand local death and inheritance law in Spain. Spanish law states that, in the event of the death of a property owner, the property automatically passes to children, rather than a spouse. If you wish your spouse to inherit the property you must make a Spanish will, stipulating your chosen distribution of your Spanish assets. This will does not cancel out any will you have for assets in other countries.
Remember, if you are thinking of buying property in southern Spain, we are here to help YOU!
- We help you save time and money.
- We eliminate risks and stress.
- We help you avoid the all too common pitfalls.
This is our promise to you.
To read next: How to Calculate ROI on Spanish Rental Property
Lisa Sadleir
