Regulation and Reward…

There is no denying it, the second home/holiday rental market has changed beyond recognition. The days of just relying on network referrals, local press, own website listings, shop window advertising and repeat bookings to fill your holiday rentals to a moderate occupancy level, have long gone. Moderate occupancy levels are no longer acceptable and competition is fierce. The horse has bolted and the stable door has been left swinging wide open.

In addition, property owner and holiday rental expectations and demands have changed. Technology is a double-edged sword for all of us working in this industry. On the one hand, we get exposure, contacts and presence on a global scale even with our limited budgets, along with the vast efficiencies that we just take for granted now. But on the other, we are fighting for marketing position to advertise our rental properties, we have to be contactable 24/7 to cope with the expectations of immediate response to bookings and maintenance issues, along with the requirements for much greater levels of transparency. Excuses of “Well, this is Spain” just don’t cut it any more.

It is of no great surprise that the local authorities and tax offices have been running to catch up with all of this. The industry and income being generated from it, is huge. Paperwork and documentation is upon us all and it is highly unlikely to end here. 2019 has seen the introduction of yet more requirements in Spain, with many of the responsibilities to ensure that this is done properly, being laid squarely at the doors of the Holiday Property Manager.

We have been talking to a number of local Holiday Property Managers recently about all of this and views are mixed. We have to ignore the ones that would rather go back to the times when cash was king, paperwork was non-existent and standards or ethics were simply not on offer. These “Holiday Property Managers” are still happily misleading their property owners with “advice” that a Holiday Rental License is not obligatory with holiday rentals. But their days are numbered and the net is closing in.

However, this does offer a great opportunity in the future for the Holiday Property Manager that has chosen to take a professional approach to running their business, when all of this comes crashing down for the non-professional ones.

The vast majority of the Holiday Property Managers that we have spoken to are stoically putting in place the necessary requirements. Confusion and a need for clear guidance on what exactly is required is evidently an issue, but the intent to comply is definitely there.

This does not come without its challenges however, as not only does the workload increase, there is a huge cultural shift underway and we as Holiday Property Managers, have been given the job of the defacto enforcers. Most property owners understand the need to comply with the requirements and pay their local taxes. But there are a number who have owned second homes here for many years and are resistant to the enforcement that is now in place. So what do we do with our property owners who do not want us to notify the authorities of who has rented their property and those owners that are not going to declare their rental income?

The complaints of “I pay my taxes in my home country, I do not want to pay them here as well” can no longer be ignored and silently responded to in your head with “I suppose you will call the fire brigade out from your home country, if your property catches fire here then?!”. A decision has to be made. Continue to rent their property and advise the owner that you will be notifying the tax authorities of all holiday rental guests that have stayed at the property (by completing your Modelo 179) and deal with the fall out when your owners receive their tax demands, or, no longer rent the property? Not fulfilling your obligations is not an option as the guidance on where any liability will fall is pretty clear if you do not do this.

Both of the workable options above will affect you. If there is a claim from the tax authorities against the property owner, you will have an irate owner to deal with and get dragged in to the mess, even though you have completed your obligations and told your owners what you were doing. We have all experienced the temporary amnesia that property owners can suffer when things go wrong!

If you choose the hard line of not renting the property at all, this will have an immediate effect on your rental income and possibly your Property Management fees as the owner will no doubt look for someone who is happy to ignore the regulations. All of this could have an effect on your ability to continue to operate as you have been, with the staff and overheads that you have in place.

These are not easy decisions to make.

The resounding message that we are getting from Professional Holiday Property Managers is that, even though the additional paperwork, documentation and requirements can not exactly be described as being gratefully received in terms of the hassle and extra workload, the opportunity to expose the non-professional “competition” for what they are, is definitely welcomed.

Feelings of resentment towards the non-professional operators who are quite happy to compare themselves to Professional Holiday Property Managers “but cheaper”, are commonplace. Why should they get to sit in a bar with a laptop hooked in to the free WIFI, with no overheads, insurance, contracted staff, social security payments etc. and work under the radar? It’s not on!

So where does this all go in the future?

The logical way forward is to continue on the path to cleaning up the market and introduce official and obligatory (not voluntary) regulation to Holiday Property Management and Holiday Rentals Management. Most Professional Holiday Property Managers that we speak with locally in Spain have standards and processes in place that would more than likely satisfy most requirements, provided consultation with the local industry and the people who are at the front end of how it all works, is sought by the authorities.

This would have an immediate effect on those that devalue and tarnish the reputation of the Professionals that work hard and try to do the right thing. In addition, regulation would provide clear transparency to property owners so that they know who is a serious and professional operator and who is not. So when they hear “Oh yes, we are just like that Holiday Property Manager, but cheaper”, this claim is evident for all to see as exactly what it is – not true.