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PROPERTY

Spanish property news roundup: New laws, taxes and rental benefits

Spain’s government has proposed a series of major changes to the country's housing laws, from price freezes to €250 rental allowances, big tax hikes on empty homes and more.  

Published: 6 October 2021 12:18 CEST
Spain's Prime Minister Pedro Sanchez announced on Tuesday young mid-income workers will get a €250 monthly rental allowance if his government's new housing law is approved. Photo: JOHN THYS / AFP / POOL
Spain's Prime Minister Pedro Sanchez announced on Tuesday young mid-income workers will get a €250 monthly rental allowance if his government's new housing law is approved. Photo: JOHN THYS / AFP / POOL

Spain’s left-wing coalition government of PSOE and Unidas Podemos on Tuesday agreed on the country’s Housing Budget for 2022 and with it big changes to the country’s property laws.

The proposed new legislation still has to be approved by the Spanish Cabinet, with no date set yet, lots of questions still to be answered and so far plenty of opposition from right-wing parties PP and VOX. 

The Bank of Spain has also warned that studies conducted in the US, UK and France have shown that measures such as state rental subsidies end up increasing prices.

But if Pedro Sánchez’s government gains the support of the Basque Nationalist Party (PNV) and the Republican Left of Catalonia (ERC), these new laws signalling increased regulation of Spain’s property market will come into force in the near future. A win for some, a loss for others. 

Here’s a round-up of the main proposed changes to property laws in Spain:

Price freezes with some benefits

Spain’s future housing law has a clause focused on the regulation of rental prices for large property holders, those with more than 10 homes. 

If the measure is approved by the Spanish cabinet, they must by law lower rents based on the reference index drafted for all contracts in property markets that are under pressure. 

Regional governments will be responsible for informing the national government of where rental prices are spiking and if they want to introduce the rent cap.

In addition, smaller property holders who are letting out real estate in neighbourhoods where prices are ballooning will also have to freeze rents.

If they’re willing to draw up a new contract with a lower monthly rent, tax credits of up to 90 percent on their personal rental income (IRPF) could apply to these landlords.

As explained by Spain’s Minister of the Presidency Félix Bolaños, the new law will “freeze and reduce rental prices “, with “a very powerful package of tax credits for property owners to willingly introduce price reductions”.

Tax on empty homes 

Spain’s potential new housing law will include a tax on empty homes through an IBI surcharge of up to 150 percent with some exceptions.

IBI stands for Impuesto sobre Bienes Inmuebles in Spanish, which translates to tax on property goods, but it also goes by the name SUMA.

It’s a local tax which has to be paid once a year by all property owners in Spain, and it serves as a benchmark to calculate all other Spanish property-related taxes.

As the IBI amount is decided by the town hall in which your property is located, there can be differences of hundreds of euros between municipalities, and there’s also likely to be opposition to the proposed new tax on empty homes. 

Madrid’s PP mayor José Luis Martínez-Almeida has already promised that authorities in the capital will introduce all the necessary measures so that people in Madrid “aren’t affected by this unjustified increase of the IBI by Spain’s national government”.

READ ALSO: How to pay less Spanish IBI property tax

A young couple and their two infant children at the window in an occupied building in Sanlucar de Barrameda, near Cadiz. Photo: AFP PHOTO/ CRISTINA QUICLER
According to a September survey by Spanish property engine Fotocasa, 62 percent of under 35s in Spain face financial obstacles when buying or renting a property. Photo: Cristina Quicler/AFP

More public housing 

Thirty percent of new builds will have to be social housing projects meant for rental, Spain’s new housing law states, a decision which still has to be approved by the Spanish cabinet. 

Spain has the lowest amount of social housing in the EU with 290,000 units, only 1.1 percent of all properties in the country. 

To put it into context, 30 percent of homes in the Netherlands are social housing, 24 percent in Austria, 20.9 percent in Denmark, 19 percent in Sweden, 17.6 percent in the United Kingdom, 16.8 percent in France and the EU average is 8 percent. 

€250 monthly rental allowance

Spain’s Prime Minister announced on Tuesday that as part of his government’s wave of proposed changes to housing laws, 18 to 35 year olds who earn below €23,725 gross per year will be able to get a monthly discount of €250 off their rent.

Tenants would be able to claim a maximum of €6,000 in total over a two-year period whilst vulnerable families will receive extra state aid to cover “up to 40 percent” of their monthly rent.

READ MORE: Spain to give young mid-income earners €250 monthly rental allowance

Property price hike in Malaga 

In other property news, Malaga province has seen the biggest real estate price increases of all 50 provinces in Spain over the past year, up 9.2 percent compared to 2020 and 13 percent higher than in 2019. 

The average price of €2,433/sqm makes the coastal province the most expensive in Andalusia and the sixth most expensive in Spain after Guipúzcoa, the Balearic Islands, Madrid, Barcelona and Vizcaya, new figures from Idealista show. 

According to data from Spain’s Ministry of Development from the first quarter of 2021(the latest figures available), the average price of a home in Málaga province is €240,238.

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PROPERTY

Q&A: What to do if you buy a property built illegally in Spain

Buying an illegally built property in Spain is fairly common but can have several consequences down the line. Here's what you need to know, how to make it legal, whether you can sell it, and the benefits of doing so.

Published: 25 April 2024 09:35 CEST
Q&A: What to do if you buy a property built illegally in Spain

Unfortunately, over the years, many properties have been built illegally in Spain, not adhering to local rules and regulations. Foreigners who don’t know the legislation can easily fall into the trap of buying one of these properties, only to find out later down the line.

Maybe it’s when they come to sell or perhaps it’s when they want to do works or improvements on the property.

There are several reasons a home could have been built illegally in Spain. Firstly, it could have been built on the wrong type of land. This is it could have been built on suelo rústico, rural land where residential properties are prohibited, also called no urbanizable. 

READ ALSO:

It could have also been built too near the coast. This is down to the Ley de Costas or Coastal Law, which was brought into force in December 1989 in order to protect the costas from overdevelopment and high rises spoiling the landscape. 

The law defines different areas of the beach and dictates which is public land, owned by the state and which parts can be owned privately and built on.

If you buy or own a house in one of these non-buildable zones, there are many problems you could face down the line, often sooner rather than later. This is because there are several rules you have to abide by concerning works, reforms and extensions. In some cases, they may not be allowed at all and everything must be approved first by the local government by providing a detailed project.

Because of coastal erosion, this issue is getting worse as some shoreside homes that were once built outside of these areas are finding that they’re now illegal.

READ ALSO: 

The house may have also had extensions made to it that were built without a license, meaning that the extra parts are illegal.

Q: How do I know if my home is legal or not?

A: Unfortunately it can be difficult to know if your property is legal or not. You could have bought and signed for it with a notary and it could be inscribed on the Property Registry, but this still doesn’t mean it was built to the correct specification and on the right land.

The only way to truly tell is to find out if your home ever had a Licencia de Primera Ocupación or First Occupation license, also referred to as a Cédula de Habitabilidad or Certificate of Habitability. This means that according to the authorities, it is suitable to live in and has the correct licenses.

READ ALSO: How to get Spain’s certificate of liveability for properties

Q: What happens if my property doesn’t have a habitability certificate?

A: If your property has never had a Certificate of Habitability, you must regularise the legal situation. First you’ll need to start a legalisation file (expediente de legalización) and contact the town hall. Depending on the seriousness of the case (ie. where exactly it was built, if there’s any structural danger, whether the entire property is illegal or just an extension) the cost of making an illegal property legal can be considerable. As such, each case must be studied individually with the help of an expert to determine whether it is even feasible or worth the investment.

The next step is to bring in an architect and check whether the property complies with all the building regulations. If it does, you simply need present the expediente de legalización to your local town hall, who will confirm whether or not the property adheres to building regulations and can be made legal.

If it doesn’t, you’ll need to consider whether it will comply with the regulations after some renovations. If that’s the case, you’ll need to draw up a renovations project document (proyecto de reforma) outlining the proposed changes and how they will adhere to building regulations. It must be presented to the town hall along with your expediente de legalización.

According to law firm Acal, the legalisation process can be broken down into steps as follows:

  • Contact the town hall.
  • Begin with the expediente de legalización when the town hall confirm whether or not the property can be made legal.
  • Pay the corresponding fees and taxes (in this case it will be IBI) depending on your municipality and region.
  • If you need to make renovations, obtain the proyecto de reforma and hire an architect.
  • Obtain a building permit from the town hall.
  • Once completed, register the property in the Land Registry.

READ ALSO: What is Spain’s IBI tax and how do I pay it?

Q: Do I really need to make my property legal?

A: Yes, because it will benefit you in the long run. It doesn’t matter what the previous owner told you when you were originally buying the property, owning a property that isn’t fully legal (or legal at all) can create problems and even lead to fines worth up to 20 percent of the property’s value in extreme cases.

By going through the legalisation process and making the relevant renovations, if necessary, you gain a legal property for all purposes and with all the benefits that entails.

You will not have problems setting up, paying, or cancelling electricity, water or gas utility services. You won’t have to undertake reforms and renovation work unofficially, avoiding the eyes of the authorities. Instead you’ll be able to register your property in the Land Registry, which will make things much easier when you decide to sell it or pass it on.

In terms of selling it, perhaps that is the biggest benefit of legalising your illegal property: by registering it properly, you will be able to benefit from its full value when selling it. When a property is illegal, the appraised value will probably be no more than 40-45 percent of its real value at best.

The renovations needed to get your property in shape to meet the building regulations could be costly, but will they cost you half of the total value of your property? 

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