Recent Legislation

Of course things had to change and revised rental laws were passed in 1985 aimed at rectifying this situation. The new law provided all contracts ended when they said they would without provision for a forcible extension. The law also ended any restrictions on rent increases. So the pendulum swung! Rents began to rise and short-term contracts, with little protection for the tenant, were offered. Now it was the tenants who suffered.

Enter the last piece of legalisation. The 1995 law called the Ley de Arrendamientos was designed to provide a better balance between the rights and needs of tenants and landlords and to bring a final solution to the generations of sitting tenants under the 1964/85 laws that all but ruined the rental market. The law ends the forcible extension of rental contracts by the tenant, allows a landlord to raise the old low rents and to recover their own property.

It provides tenants with more security than the 1985 law, obliging landlords to renew residential rental contracts for up to five years. It also establishes a landlord’s right to a deposit of one month’s rent for an unfurnished property and two months’ rent for a furnished property as a guarantee against damages.

This chapter also looks at other ownership schemes as an alternative to rental. They fall somewhere in between purchase and rental. Miss-sold timeshares, imaginative low-cost leasebacks and co-ownership schemes complete a varied picture of property ownership.

Rental Owners

While the situation differs in large cities, in coastal areas the vast majority of available lettings are from people who have bought homes according to their needs for size, price and location. They have bought holiday homes and are not so much looking to make a profit from renting, as hoping to cover some or all of the costs of purchase, through rental income, by letting them casually to family and friends. They are holiday homes for their own use, with owners ready to compromise on business issues, thus reducing potential income, in order to maximise their own enjoyment.

A smaller number of people see property exclusively as an investment and want to rent on a serious basis. They want to make money by letting their property and will try to find the maximum number of tenants each year. Decisions taken about where and what to buy, and what facilities to provide, will be governed by a wish to maximise profit.

They put themselves in the position of a person who may wish to rent their property and consider which part of the market they expect to appeal to: whether it is couples wanting to enjoy rural Spain or families wanting a traditional beach holiday, or groups on a golfing break. They choose an area, a location, buy a property and equip it solely with their prospective tenants in mind.

Lastly there is a breed of people who ‘Buy to Let’ for fun and profit. They seek a balance between casual letting and serious letting. They want to enjoy the property and make money too!