Category: Industry News

What is considered as “tenant insolvency”?

Tenant insolvency is a failure to comply with the obligation to pay the rent and other fees included in the property rent receipt (IBI Spanish: IBI – Impuesto sobre bienes inmuebles- English: Real Estate Tax, repairs or conservation works) by the tenant. This obligation is communicated in advance, usually at the beginning of the month.

What can a landlord do when the tenant fails to pay? Is there a way to seek justice in cases of tenant insolvency? The most common solution would be to make a pre-trial claim by means of a service allowing to prove that the payment has been made. The most common public postal company which offers such service is called “burofax”. There is also an option to make it with a help of notary; however, it’s less frequent and much more expensive.

If none of the above works, the owner can always file a claim in the court having jurisdiction over the rented property. This procedure is called an “oral judgment” and is regulated by the Civil Procedure Law. In order to that, it is necessary to hire a lawyer or a solicitor who will file a demand for eviction due to the lack of rent payment and claim the pending amount with the monthly interest on receivables.

Essentially, two things are requested from the court: ordering the tenant to pay the amount due (the amount of the claim) and hand over the property.

If the judge acknowledges the economic debt and the tenant doesn’t pay voluntarily after receiving the order to pay, they can resort to the usual means of execution: the seizure of tenant’s bank accounts, wages, other real estates, etc., until the debt has been collected. For this procedure, which is separate from the previous one, you also need a lawyer and a solicitor.

If the judge decrees the eviction, it is carried out on the day which is indicated at the beginning of the procedure, if necessary, with the assistance of the public force. However, it may even take a year- from the moment of filing a claim until the eviction comes into force.

In the next post, we will discuss two special situations which a real estate investor should be prepared to face: renting a property to a company which has declared bankruptcy; and the “squat” phenomenon.

Is there a reason to worry?

For a change, we will now focus on a rental crisis in Spain- a dispute between the owner and the tenant which may be initiated by both parties: the owner and the tenant.

Any investor should have in mind that disputes related to lease agreements are not unheard of in Spain. Property owners often complain that legal procedures are long and unsatisfactory. Occupants are also not free of worries due to the current housing situation. Spain, as opposed to other European countries, doesn’t offer a social housing system.

The Spanish Constitution of 1978 recognizes as a general principle the right to decent housing, but it is not one of the fundamental rights that can be enforced in court. It is a declaration of intentions, not a tangible right. The public authorities have no means, or no will to find them taking advantage of the situation when establishing the SAREB at the beginning of this decade (Spanish: Sociedad de Gestión de Activos procedentes de la Reestructuración Bancaria – English: Company for the Management of Assets proceeding from Restructuring of the Banking System) to respond to that legitimate social demand. This causes a visible and notorious clash of interests between occupants and property owners, especially in large cities.

The rent price is now the biggest problem in many districts of Madrid, Barcelona and their influential areas. During the last 3 years, the rent price has gone up by 10% per year, while the average income of families in the same period has remained the same or has been lowered.

Every long-term investor should acknowledge this fact, which requires a very careful analysis. The problem of the rental crisis does not seem to be interim or temporary and soon it will be the first improvement in the agenda of the municipal political parties if it’s not already. Planning a long-term investment based on questionable economic fundamentals (the average rent constitutes 50% or 60% of the family income) is quite risky. And whoever buys a flat for rent should be aware that the tenant who signs a contract with these economic parameters, may become insolvent. This is the issue that we would like to outline here.

Newspaper “El Mundo” May 18th 2018

The tenant may take a case to court if the rented property doesn’t meet their expectations (if there are faults or defects) or in cases when the owner doesn’t comply with the lease terms (fails to perform works, repairs). However, it is the owners who seek justice in court more often. Especially on the market where those who possess set up the rules.

The owners, in turn, usually file a court case due to improper or other than agreed use of the rented property by the tenant (for example renting an office for residential purposes); subletting rooms without the owner’s consent); but above all due to non-payment of the rent. Tenant insolvency is the queen of all causes for which the owners go to court in Spain.

In the next post, we will continue the topic of rental crisis and will explain what happens when the tenant fails to pay the rent.

We have finally reached the end of this series of articles summarizing the topic of lease agreements signed before 1995 in Spain. This section, however, will be devoted to lease agreements signed after January 1, 1995, when the current Urban Lease Law (LAU in Spanish) came into force and the compulsory extension became illegal. It was actually when the law forbade to sign new contracts for an indefinite period.

a) Residential Lease Agreements

Before we continue the topic, it is important both for the landlord and the tenant to understand what the term residential lease means, according to the Urban Lease Law (Spanish: “Ley de Arrendamientos Urbanos- LAU”). It Is said, that the LAU doesn’t apply for the contracts signed for less than a year, but the truth is that if the tenant proves that the leased property is their place of stay (for example in the municipal register or at the children´s school), the court recognizes that the LAU is applicable with all the implications.

The rule leaves the parties to set the term of the lease, although it imposes a minimum duration of three years (until 2013 the minimum duration was 5 years).

Likewise, the rent amount may be freely agreed by the Parties and may be updated annually (more or less) in accordance with the change of The Consumer Price Index, provided that the contract expressly states it.

Regarding the housing, it is worth mentioning that it is the obligation of the owner to make the repairs that are necessary to keep the house inhabitable conditions and all repairs, required by ordinary wear and tear, should be made at their cost. Also, the law grants the lessee a right of preferential acquisition in a case when the property is put on sale, although it can be excluded by agreement in contracts which agreed lease duration is longer than three years.

In 2003, there were various modifications to this provision, some of them are especially important and adopted in favor of investors and, obviously, with the detriment for the tenants. The first one refers to the contract duration- the change from 5 to 3 years as the minimum contract duration. The minimum contract duration of 3 years is for many tenants not long enough and causes many problems especially in countries like Spain where the concept of social housing hardly exists.

The second and very important amendment is that the lease agreement expires when the owner puts the property on sale. Until 2013, the buyer was supposed to take care of the tenant and respect the contract terms. After introducing the reform in 2013, the contract will only be respected if it’s registered in the Property Registry. However, not even 5% of the contracts in Spain are inscribed in the register. In practice, it means that in a case when the owner wants to sell the property, the tenant is completely unprotected.

b) Commercial Lease Agreements

When it comes to the rest of the contracts, which the law describes as use other than residential,” which applies to contracts for commercial purposes such as locals and offices, the will of the parties is of particular relevance. It is the parties who can agree the terms, rent amount and decide who will cover the conservation or the repair works. It is also possible to exclude the preferential acquisition right or regulate the assignment of the contract.

There has been a significant change in the lease agreements signed after 01.01.1995; which, as it was mentioned in the last article, is a key date in the Urban Lease Act. This fact should be especially important for real estate investors interested in buying houses or residential apartments as you can still find contracts similar to those signed before 1995.

The main feature of lease agreements signed before 1995, which were subject to the Urban Lease Act of 1964, was a mandatory contract extension. Mandatory for the owner and optional for the tenant. As if this was not enough, there was a system of subrogation of the lease in favor of the widowed spouse and their relatives in case of death of the tenant.

The Law of 1964 continues defining the rights and obligations of the contracting parties but with some amendments. In 1994, the Transitory Provisions of the new Law were adopted limiting the contract subrogation to the most direct relatives (spouse and children); but, generally speaking, it could be assumed that these contracts expired in the moment of death of the tenant or their spouse.

Another characteristic of lease agreements signed before 1995 was that the rent amount agreed by the Parties wasn’t updated during the lease, which oftentimes brought the owner or the property manager a financial loss. After 1995, it was possible to increase and update the rent under certain conditions as well as transfer the property tax and supply costs on the lessee. The limitation of subrogation, the possibility of increasing the rent amount and transfer of particular costs on the lessee made the investments more reasonable and interesting.

The last but not least, the rule of 1985 established the freedom of choice with respect to the term agreed in the lease agreement, thereby eliminating the legal obligation to a mandatory contract extension, which from then on, only applied in cases where the Parties expressly requested it. Now, it’s obligatory to specify a date of the contract duration and the mandatory extension is no longer legal.

What happened in cases when the contracts where signed by a legal person? If the tenant was a legal person, the contracts were automatically extinguished in 5, 10, 15 or 20 years, depending on the rate paid for the Economic Activities Tax in 1994, which generated considerable controversy. On 01/01/2015 all such agreements for business purposes whose tenants were legal entities extinguished.

What you should know before signing a lease agreement in Spain

Spanish cities constantly attract foreigners driven by their vision of starting a business activity, investing in real estate or simply those who come to Spain in pursuit of better living conditions. However, as easy as it may seem, buying or renting a property may entail some difficulties especially for those who are not familiar with the Spanish law and the prevailing formal procedures, which will be discussed in this series of articles.

In addition to a serious shortage of housing for rent especially in bigger cities such as Barcelona and Madrid, there are also legal obstacles which every investor or a private person should have in mind before signing a lease agreement in Spain. The lease contract can be defined as an agreement, regulated by the Provisions of the Civil Code, that grants the lessee the rights to use the property owned or managed by the lessor for a specific period.

There are two main types of contracts- residential and commercial lease agreement. The key difference between these contracts is their purpose. The first type, as its name indicates, is restricted only for residential use while the other is signed for commercial purpose which may include a business activity, for example, sale or manufacturing of goods to generate profit.

There is a significant date in the legal rent regulations in Spain which is January 1, 1995. It is when the act on urban lease came into force establishing the right to change the term of the contracts and its extensions as opposed to contracts signed prior 1995 (which are still in force in many places). Such contracts had a very protective regulation for the lessee and limited for the lessor obliging him to extend the lease contract on the same conditions.

Both types of contracts will be taken under scrutiny in the next article together with the implications which they entail on the owner and the tenant.

How will the new hotel regulation affect the tourism industry in Barcelona?

After hearing and debating all the allegations, suggestions and complaints, the Plenum of the Municipal Council of Barcelona’s Town Hall has approved and published in a final form the Special Urban Plan of Tourist Accommodation (acronym “PEUAT” in Catalan) with a new hotel regulation. The agreement dates from January 26, but it has not been until March 6 (a month and a half later, an unusual situation) when it has been published in the Official Newsletter of the Province of Barcelona (BOPB). The new PEUAT is in force since March 6, 2017. For 2 months, it can be challenged through the contentious-administrative jurisdiction.

The PEUAT regulates the implementation and expansion of tourist accommodations in Barcelona, which include: youth hostels, collective temporary housing, houses for tourist use and hotel establishments. Special urban plans do not usually please the entire population given the diversity of political and economic ideas, but they do contribute to the organization of one of the fundamental activities of Barcelona: tourism.

There is a current debate on this matter in which it is difficult to position. Even so, in our opinion, the decongestion of the urban center and the consequent expansion of hotel activity to the periphery is a good public policy objective. But the method chosen to achieve this goal is probably not the most appropriate. From our point of view, we understand that the way of stimulation and encouragement are stronger and more logical than the way of prohibition. Citizens and businesses in Barcelona bear the greatest tax burden in Spain by far, while the city is the least indebted of Spain, also with a large difference. This political objective of moving hotel business to less dense areas could be achieved with tax benefits on land tax, commercial tax, construction tax, and license fees for the hotels to be established in these areas and create jobs. In fact, that movement de facto is already happening with the adjoining town of Hospitalet de Llobregat, where there is no moratorium or restriction, and where they are incubating hotel projects for customers whose destination is Barcelona. The Catalan capital is a reference city in terms of investment, which has contributed to attracting foreign capital for the security, liquidity and profitability offered in investment operations, including the tourism sector. At this point (as in many others), the data contradict the political discourse: 2007 1Q Catalonia has attracted the larger chunk of real estate investment in Spain, overpassing even Madrid.

For years, the international hotel operators have mobilized their expansion teams to establish their flagship hotels in Barcelona. But with the definitive approval of the Special Urban Plan including the new hotel regulation, the hotels’ companies will face a new problem to install their establishments in the urban center of the city, since these are areas of negative growth or maintenance. Therefore, these areas would only allow the implementation of a new hotel in the case of purchasing an entire building that was previously dedicated to the same activity: tourist accommodation. Consequently, if we refer to the plan made public, the central area and the ring adjacent to the city is paralyzed in what new projects concerns.

As a summary, we could highlight the following main ideas about what the PEUAT establishes about the hotel regulation:

• Different areas are defined per their capacity to host new tourist establishments, based on four aspects: the intensity of the current offer of tourist accommodation, the ratio of places offered in relation to the resident population, the saturation of public space and the urban morphology.
• The installation of tourist establishments can only be located in buildings in which none of its entities is been destined to the use of housing since July 1, 2015. In addition, it is required that the entire building is intended to the touristic accommodation, with the only exception of the ground floor that can be used for other activities, as long as it is not used for housing.
• The establishments of tourist accommodation in its different modalities that have a capacity of more than 350 places, must redact and approve an integral Special Plan for its urban implantation.

With respect to the various delimited areas, there are different objectives and limitations:

• In the ZE-1 zone, defined as a natural decrease area, no new establishments can be implemented and the expansion of the existing establishments is restricted.
• In the ZE-2 zone, configurated as a maintenance zone, the extension of the existing establishments will not be allowed. But, if an establishment is dropped from the census, another can be implemented with the same number of places.
• Zone ZE-3 is configured as a zone of contained growth, so it will be possible to implant new establishments and expand existing ones, as long as the maximum density of places is not exceeded. In any case, a new establishment may be opened when there is a drop in Zone 1 or Zone 2.
• Zone ZE-4 is in the process of development, so it intends to increase the number of tourist establishments, but fulfilling some requirements. This zone is divided into three sub-zones: ZE-4a comprising the Marina del Prat Vermell area, ZE-4b comprising the Sagrera area and ZE-4c comprising the 22 @ Nord area. All of them have a number of tourist places that give space to new projects.

Barcelona, as happened in other world cities (London, NYC, Paris …) should grow in terms of tourism using their peripheral neighborhoods, that today still seem marginal and commercially not attractive for tourist. These areas are called to become neighborhoods with their own personality in the city. It is a new stage for risky visionary and disruptive entrepreneurs wanting to invest in these new areas.

The Catalan capital, due to its frenetic pace of constant evolution, is being a constant challenge for the current city administration. It is a huge challenge to satisfy all parties involved in this puzzle: on the one hand maintain the balance between the welfare of local citizens and stress caused by the sustained increase in tourists visiting the city; on the other hand, not slow down the biggest economic activity of the city (in GDP contribution and employment); all together combined with a change in the economic model in the city.

For more information, you can visit the following link developed by the Barcelona City Council which provides more information about the new hotel regulation in a very useful and visual way:

City Council guidelines- PEUAT

Caveat Emptor – “Let the buyer beware”

In this article, we will describe the principle in contract law called caveat emptor which excludes the seller of property from the responsibility for damage on the property after closing the transaction unless it has been provided for in a warranty.

The macro figures in Spain indicate an incipient recovery in home sales in 2015. In certain tourist areas and in some areas of the largest cities the recovery is very noticeable. In that context, a very relevant change in the protection of consumer rights in off-plan purchases has been passed.

A Final Provision of the Law 20/2015 of July 14 of Solvency Regulation and Insurance institutions introduces a fundamental change in the Law of Construction Planning (Law 38/1999) of the entire system of consumer rights protection for off-plan payments and canceling the current Law 57/1968 on down payments in building and selling homes. The law 57/1968, despite being pre-constitutional, was praised for its simplicity and for the protection of consumers. That law implied also a very clear doctrine of the Supreme Court on this matter. However, this 2015 reform is going in precisely the opposite direction and against the consumer’s protection rights. We wonder whether it makes sense to change a reasonable legislation which contradicts the very clear interpretation of the Supreme Court and is against the consumers’ rights.

There have been some important changes in this aspect:

1. The necessity of a bank guarantee or insurance for the down payments is no more a condition sine qua non. A contract off-plan without insurance or guarantee is perfectly valid now. It wasn’t before.
2. The deadline for claiming the money back, if the apartment is not delivered is reduced from 15 years to just 2 years, which isn’t long enough to perform construction especially as it requires so many administrative steps to be taken.
3. The obligation to take out insurance or guarantee (if it is agreed) arises only from the moment the building permit is granted. Many of the off-plan purchases are made in the pre-marketing phase before being licensed. These amounts will not  be covered automatically by the insurance or guarantee.
4. The direct enforceability of the guarantee or insurance policy disappears. Now, it will require prior recourse to ordinary courts and  accredited formalities and deadlines in the prior claim to the developer.
5. The amount covered by the guarantee is not objectively listed in the insurance policy but the consumers need to have evidence of what they have paid. The burden of proof is reversed.

This new regime does not come into force until January 1, 2016, and it is still unclear what will happen with the contracts signed between July 2015 and January 2016.

This change may require seeking legal advice even more necessary that it was before signing any property acquisition: caveat emptor.

Lo que vamos a explicar en este artículo no es ficción. Es un caso real de injusticia del sistema de administración tributaria español al calcular el impuesto de la plusvalía municipal en casos de venta de propiedades con pérdidas. Un sistema que carece de lógica y viola los derechos constitucionales de los contribuyentes. Para demostrar lo absurdo de la administración tributaria dirigida a la recaudación implacable de impuestos en la venta de propiedades, adjuntamos un documento administrativo de uno de nuestros casos. Hemos borrado los datos personales del cliente para proteger la seguridad y privacidad de sus datos.

Plusvalía Municipal- Uno de los impuestos inmobiliarios en España

En España existe un impuesto que recaudan los municipios. Todo el mundo lo conoce como “plusvalía municipal” (su nombre técnico es mucho más largo). Cuando alguien vende un inmueble, debe pagar un impuesto que depende del valor del terreno y según los años pasados. El impuesto se inventó pensando que el precio de los inmuebles siempre sube. Nadie pensó (¿increíble verdad?) que cuando alguien vende un inmueble también pueda perder dinero.

Todo eso cambió a partir de 2008. Muchos contribuyentes españoles y extranjeros vendían sus casas, pisos o terrenos por un precio menor del de compra. O sea, perdían dinero con la venta. Pero como la ley no lo decía expresamente, los ayuntamientos seguían exigiendo el impuesto. Es iba en contra de los derechos fundamentales de los contribuyentes, recogidos en la Constitución Española. La Constitución dice que sólo se deben pagar impuestos cuando se ha ganado dinero, cuando existe “riqueza”.

Pérdida de valor de la propiedad- ¿Se aplica la plusvalía municipal?

En este caso, lo lógico hubiera sido que la administración fiscal hubiera respetado los derechos fundamentales de los contribuyentes. La Constitución le obligaba a hacerlo. Pero, “lógicamente”, siguieron pidiendo el impuesto a personas y empresas que habían pedido dinero. Pronto los casos fueron miles. Algunos contribuyentes y sus abogados empezaron a oponerse. EXNOVO fue uno de ellos.

En el año 2012 un cliente de EXNOVO vendió unos terrenos con una fuerte pérdida económica, en una localidad cerca de Barcelona. A pesar de perder dinero, el ayuntamiento le exigió pagar 2.000 € en impuesto de “plusvalía municipal”. Le recomendamos pagar y después reclamar la devolución del impuesto. La devolución se pidió en 2012. La administración no contestó hasta 2015, negando la devolución. Tres años (3) para decir que no respetaba los derechos constitucionales de los contribuyentes.

El siguiente paso, en 2015, fue acudir a los tribunales de justicia. Se presentó la demanda, y el juzgado contencioso-administrativo (una división específica de los tribunales dedicada sólo a controlar a las administraciones públicas) fijó la fecha para el día 30 de octubre de 2018: tres (3) años después.

El día 29 de octubre de 2018 (1 día antes del juicio), la administración tributaria ha notificado a nuestro cliente que tiene razón y que le devuelven el dinero que pagó. Este es el documento que se adjunta. Seis (6) años después, se reconocen los derechos del contribuyente. Pero se le priva de la posibilidad de reclamar los gastos judiciales de seis (6) años de abogados e informes de expertos, ya que si no hay juicio, no puede haber obligación de pagar gastos judiciales. 

Desgraciadamente, esta es la actitud que cualquier inversor debe esperar de la administración tributaria española, y estar preparado para afrontarla.

Enmiendas a la ley del impuesto de plusvalía municipal

En 2017 y 2018, el Tribunal Constitucional ha dictado sentencias que dicen que, si se vende la propiedad con pérdidas, el vendedor queda privado de la obligación de pagar el impuesto. Aquellos que sufrieron una pérdida debido a la venta de bienes inmuebles cuatro años antes de esa fecha todavía podrían reclamar un reembolso completo. En la actualidad está en proceso una modificación de la ley que recoja esa interpretación del Tribunal Constitucional.

¿Cualquiera puede solicitar una reclamación de devolución?

Desafortunadamente, el procedimiento no es tan sencillo y requiere la contratación de un abogado y peritos que preparen un informe de valor que pruebe la pérdida de valor. A veces, sin embargo, los costos de los servicios legales pueden superar el impuesto, por lo que es mejor hacer un cálculo breve antes de referir el asunto a abogados profesionales.

¿Cómo se calcula el impuesto plusvalía municipal?

Como he mencionado anteriormente, la plusvalía municipal se calcula con base en el valor catastral de la propiedad y los años de su posesión. Al hacer clic en este enlace pueden encontrar una calculadora que le ayudará a evaluar la cantidad de impuestos que se debe pagar. Por favor, recuerde que los resultados obtenidos no tienen valor legal y son solo para fines de orientación.

¿Es solo el vendedor quien puede pagar el impuesto de plusvalía municipal?

Dependiendo del acuerdo entre las partes, puede ser el vendedor o el comprador quien pague el impuesto de plusvalía municipal. Sin embargo, es recomendable que el proveedor asuma la responsabilidad total de la obligación de pago porque, si el comprador no lo hace, el proveedor tendrá que lidiar con las consecuencias. El pago debe realizarse dentro de los 30 días posteriores a una transacción exitosa.

Más información sobre plusvalía municipal, en el caso del Ayuntamiento de Barcelona, puede encontrarla en la página web del ayuntamiento.

What are tourist apartments in Barcelona (referred as “habitatge d’ús turístic” in the Catalan legislation that regulates the subject, “HUT”)?

All regional governments, as holders of competence in the field of tourism, can regulate what is meant by tourist apartment in each region. So did the Balearic Islands or Andalusia, for example. In Catalonia, the regulation is in Decree 2012 of tourist establishments (Article 66) and configures a HUT as one complete house (not spare rooms) which is assigned by its owner, directly or indirectly, to third parties repeatedly and in exchange of an economic consideration for a continuous period of time not exceeding 31 days. It is considered “repeatedly” when it is done two or more times in the period of one year.

As we explained in our last post on the hotel moratorium in Barcelona, the situation of the tourist apartments appears to be returning to normal, after spending a few years living in limbo.

Same as with the hotel moratorium, there will be supporters and opponents of the latest decisions taken by the council, but sooner or later the lines of action had to be defined. Those who wanted to consolidate the regulation of tourist apartments in Barcelona, are moderately satisfied with the last decisions; on the opposite side, those in favor of limiting the proliferation of this type of accommodation in the city are not happy, because they see it as a threat to the model of coexistence that promotes “gentrification” of important parts of the city. In any case, the (stricter) regulation of this subject was an essential part of the program of the ruling party at the City Council. None can be surprised by this position taken.

Early this April the city council held an urgent session to address this issue. The session ended with measures prohibiting the growth of this type of accommodation in the ZE1 and ZE2 areas, with the clear intention to decompress the downtown area and limit the opening of this accommodation in the less touristic dense areas.

One should not forget that the HUT represents 35% of the places of tourist accommodation in the city (at least those that are licensed HUT).

This is how the situation will look like from now in terms of general principles:

1. HUT zero growth throughout the city. It will be possible to group disperse HUT in a single building, according to the current plan uses in each district. Beware the Special Plans in some districts on that respect. Ciutat Vella Special Plan states that those HUT licenses that are not grouped in a single building (building also 100% for HUT) by 2019, shall become extinct in 2019.
2. In order to ensure a balanced distribution of tourist places, the plan provides that whenever it happens a HUT cancellation in the most congested areas, it will be allowed the opening of one HUT at the uncongested areas.
3. In no case, a HUT can replace a dwelling.

This will be the situation in the different zones in details:

1. ZE-1. No more tourist apartments are allowed. Any drop in this area may be replaced in other less congested areas (ZE-ZE-3 and 4), but never in the same area to relieve congestion.
2. ZE-2. New openings only are permitted if there are equivalent deregistration, and always placed in a single building.
3. ZE-3. New licenses to be authorized only when there is deregistration. Remember that in no case can replace a dwelling, nor may be located in buildings where there are other dwellings. It should take into account the density in each area (block) and cannot be located on the ground floor.
4. ZE-4. The same case as in the ZE-3.

Thus, it is clear that the city has reached its limit in tourist places, at least in the centre, and it seems that this situation will not change in the short term.

The city should develop, touristic speaking, areas not yet popular for visitors. A chance for visionaries.

But the biggest challenge still remains. It is caused by the fact that many consumers are looking beyond current legal corsets. There is no solution for Airbnb and other sites that connect tourists and accommodation owners in the city. The constant change in the habits of tourists, who increasingly travel more like a family and groups of friends, causes stays in apartments or rooms are becoming more popular than the stay at the hotel. Whether authorities and hoteliers please it or not, that’s what people want to buy. Ignoring it, or putting it outside the law, will not help to solve it.

A final remark: when it comes to tourist apartments, the interests of the hotel lobby and left-wing government of the city run, paradoxically, through the same path.

The EXNOVO team

After 8 months of waiting and much speculation, the council has made public the PEUAT (Special Urban Plan of Tourist Accommodation) aimed at regulating tourism establishments in the city of Barcelona. This plan will remain on public display for the relevant claims for 3 months after its publication in the BOPB (Official Newsletter of the Province of Barcelona) on 14 March 2016. That is, until 14 June 2016. It is important to note that the published is not definitive. Any interested party may make claims, and then must be debated and approved by the full council, where the party “Barcelona en Comú” (who drafted the plan alone) does not have the majority and must necessarily seek support. Therefore, by pure logic of political majorities and the lobbying potential of the sectors concerned, it appears that the final version will be different from today.

This type of special plans never quite pleases to all parties involved. However, it contributes to organizing an essential activity for the city of Barcelona and responds to a lively debate between those who live in it. In our opinion the goal of “spin” the hotel business to the periphery and decongest the city center, is a good public policy objective. But we do not agree with the method chosen to achieve that objective: the prohibition. We believe that a way of stimulus and encouragement would have had much more logical. Citizens and businesses in Barcelona bear the greatest tax burden in Spain by far, while the city is the least indebted of Spain, also by far and large. This political objective of moving hotel business to less dense areas could be achieved with tax benefits on land tax, commercial tax, construction tax, and license fees for the hotels to be established in these areas and create jobs. In fact, that movement de facto is already happening with the adjoining town of Hospitalet de Llobregat, where there is no moratorium or restriction, and where they are incubating hotel projects for customers whose destination is Barcelona.

Undoubtedly, Barcelona has become a reference worldwide city, and this has helped to attract foreign capital due to the safety and returns offered in investment operations, also in the hotel industry. This fact has not been ignored by the major international hotel operators who have mobilized their expansion teams to establish its flagship hotels in the Catalan capital. According to the progress of the Special Plan, it appears that international chains that have not yet closed their management contracts with any of the projects approved and licensed will have to search through the already built and running hotels settled in the city because if we refer to the plan made public, the centre and the adjacent ring the city is to be frozen as far as new projects are concerned.

Let us summarize the scenario raised by the city council who, we should remember that it took unilaterally last summer 2015 (as advanced in the party political program) the decision to freeze the city hotel licenses.

Although the wording of the 2016 advanced plan is relatively large, the most important issues to consider on future projects regarding the tourism establishments are:

• The downtown area, adjacent area to the center, contained growth area and special area: 4 different areas with different ranges of limitations and define objectives
• The transformation of residential buildings into a hotel becomes prohibited. This is an important point because, therefore, there could only be a hotel in places that were previously used as offices, commercial or retail areas.
• Zero growth policy for tourism establishments throughout the city (HUT-Habitatge Ús Turístic). Read: business Airbnb and similar platforms. It still exists the possibility to group them together in a single building if the current Use Plan (Ciutat Vella) allows it.
• The Special Plan does not include student residences provided they do not operate as a hostel and are linked to an educational institution (universities and training centers).

Each of the four areas defined by the Special Plan (see picture) establish, as we noted, different restrictions and/or regulations. So in the ZE-1 zone (red) no more hotel projects or expansions of places are allowed. It is intended by the municipality a decrease in tourist places. Canceled bed permits cannot even be replaced.

In the ZE-2 zone (yellow), comprising the contour of the central zone (ZE-1) it provides for zero growth of tourist beds and no new licenses will be given unless equal beds are canceled.

In the area ZE-3 (green) there is flexibility in handling tourist licenses (Hotels, Residences …) since they are less stressed areas for tourism establishments. 4,000 growth of hotel rooms is permitted, but minimum distances between establishments have been determined.

Finally, a fourth defined ZE-4 special area (blue), with specific regulations. These are areas that are undergoing transformation and growth. The area 22 @, La Sagrera (where there is projected the urban transformation due to the high-speed train station) and Zona Franca. Each area has a quota of tourist beds to accommodate new projects. In these areas, the policy is a “kick-forward” and not fixing the issue today, but in other future special plans.

Barcelona, as happened in other world cities (London, NYC, Paris …) should grow in terms of tourism using their peripheral neighborhoods, that today still seem marginal and commercially not attractive for tourist. These areas are called to become neighborhoods with their own personality in the city. It is a new stage for risky visionary and disruptive entrepreneurs wanting to invest in these new areas.

The Catalan capital, due to its frenetic pace of constant evolution, is being a constant challenge for the current city administration. It is a huge challenge to satisfy all parties involved in this puzzle: on the one hand maintain the balance between the welfare of local citizens and stress caused by the sustained increase in tourists visiting the city; on the other hand, not slow down the biggest economic activity of the city (in GDP contribution and employment); all together combined with a change in the economic model in the city.

We will closely monitor the situation of the tourism establishments and will keep you informed.

The EXNOVO team